La protesta social en el marco

Enterprise Development and Social Exclusion: The Role of Inclusive Businesses

Small and medium-sized enterprises (SMEs) are recognised crucial actors in raising social inclusion and combating social exclusion in poor and marginalised communities in both advanced (Blackburn and Ram, 2006) and low income countries (Prahalad, 2005). This is because market-based approach such as those pursued by SMEs have the potential to address extreme poverty suffered by the billions of poor people (McMullen, 2011). Accordingly, the term inclusive business is being used to describe a ‘profitable business that helps low income societies to overcome poverty and ensures long-term business profitability if effectively implemented’ (Golja and Požega, 2012: 23). Compared to all other SMEs, inclusive businesses are distinctive because they have an explicit intention tackle social issues by targeting poor and marginalised communities (as customers, suppliers or employees) and/or facilitating access to essential goods and services to low‐income groups in financially and socially viable manner (Dalberg, 2012; Golja and Požega, 2012). The entrepreneurship literature suggests that for inclusive businesses to effectively combat social exclusion, the owner-managers must be able to integrate the needs of BoP communities (e.g. as accessibility, affordability and availability) in their business strategies (Blackburn and Ram, 2006; Hall et al., 2012; Prahalad, 2005). Inclusion can therefore be defined as the explicit intention to prioritise the varied and wide- ranging needs of BoP communities when creating and operating an SME. In the case of the agricultural sector in Africa, such needs include opportunities and challenges facing small farmers (and their households), who represent the largest proportion on the lowest scale BoP communities (Brooks et al., 2013). As micro businesses, farmers have to deal with limited access to affordable financing due to the lack of collateral security (Kimbu and Ngoasong, 2013; Robson et al., 2013; Walther, 2012) and complex due diligence processes (Naudé et al., 2008). In addition complex business registration processes and high taxes, which restrict them to informal operations (unregulated, off-the-books entrepreneurial activities) and expose them to government sanctions when caught (Amoako and Lyon, 2014; Williams, 2010; World Bank 2014). Furthermore, infrastructure challenges (access to information, logistics, modes of transport, poor manufacturing base) restrict farmers’ access to locally relevant equipment and raw materials for production and channels for

60

distributing products to domestic and foreign markets (Bischoff and Wood, 2013; Cho et al., 2008; Christ and Ferrantino, 2011; Franz et al., 2014; Porter, 2014; Smallbone and Welter, 2012).

The above factors also increase the costs of raw materials, farming activities and sales of farm produce, as well as hinder the creation of small agri-businesses that can enable such farmers to gain access to non-bank financing, farm equipment/methods and markets for their products. Unsurprisingly, inclusion into the formal financing and market architecture is seen as not only crucial for farmers, but for economic growth and development as a whole (Allen et al., 2012; World Bank, 2014). From a country-specific perspective the responsibility for addressing these challenges belong to a range of stakeholders, including central/local government authorities, investors, local enterprises and individual citizens in a country (Söderbaum and Teal, 2000). While some scholars see government as the key (e.g. through enterprise policies) (Blackburn and Ram, 2006; World Bank, 2014), others point to highly educated and/or motivated adults as those who have to develop innovative solutions the barriers to development (Herlau and Tetzschner, 1994). This latter group are entrepreneurs and/or owner-managers of SMEs and are the focus of this study. Although increasing numbers are tacking up entrepreneurial activities in BoP communities in Africa (Adeboye, 1996; Ngoasong et al., 2015; Robson et al., 2013), the strategies they use to incorporate social inclusion in their business models have received relatively little, if any, attention in SME research.

Creating Inclusive Business Models in Agribusiness Value Chains: A Focus on SMEs

The theoretical underpinning of this study is the inclusive business models developed by agribusiness SMEs to combat social exclusion, while remaining competitive in the challenging business settings in Africa. According to Baden-Fuller and Morgan (2010) a business model describes different kinds and types of actions that a firm undertakes to ensure that there is strategic fit across its value chain activities and to satisfy all key stakeholders. By demonstrating that many businesses cannot describe what their business model really is, Baden-Fuller and Morgan (2010) suggest that research can focus on studying the extent to which a firm consciously or unconsciously has a business model. Thus, rather than prove and/or evaluate the business models of inclusive businesses, the focus here is on the linked value chain activities undertaken by small agribusinesses and how this relates to the needs of BoP communities described in the preceding section.

The value chain activities of a business model consists of the linked set of value-creating activities that the firm engages in to ensure successful delivery of end-use product to the final consumer (Theyel, 2013) and the mechanism for collecting and capturing payments/revenue/profits (Zott et., 2011). This value chain perspective complements existing research on supply chain in that, while the latter ‘concentrates on the efficient and cost-effective transformation of raw materials into products and the flow of products and services from the supplier’s perspective, a value chain approach focuses on the value offered by products and services from a demand perspective’ (Theyel, 2013: 259). From this context, the business models of small agribusinesses can be examined by focusing on two sets of variables. The first is whether it target business-to-business (direct sales to other businesses), business-to-customers (e.g. direct sales of products/services to end consumer) or both and the combination of contractual types – ‘service contracts, performance contracting, pay on production models, third-party logistics’ (Freiling and Dressel, 2014: 3), buy-sell digital platforms (Javalgi et al., 2012), supply chain finance model for addressing working capital constraints (Fraser et al., 2013). The second is the infrastructure that enables the business to manage interactions and linkages among key stakeholders within its value chain (Baden-Fuller and Morgan, 2010; Zott et al., 2011). This infrastructure is crucial for leveraging the opportunities and resources embedded in the value chain and for responding to challenges in the operating environment of the business (Tolstoy, 2014).

An inclusive business model in the case of agribusiness therefore consists of a combination of linked value chain activities created and operated by owner-managers in ways that enable the businesses to deal with the constraints to social inclusion for small farmers. Value chain activities include the sourcing of start-up capital, identifying and working with farmers (e.g. as customers/suppliers) and other key stakeholders (e.g. government authorities, business partners) (Hall and Matos, 2010), building an infrastructure for creating and capturing revenue and for managing stakeholder relationships. Using this framework, this article explores how owner-managers of inclusive small agribusinesses develop and operate inclusive business models and how this enables

61

them to contribute to promoting the inclusion of diary and food crop farmers in the formal (regulated) agribusiness value chain. Studying Africa-based inclusive businesses whose primary activities are not farming improve knowledge of alternative innovative approaches to engaging in agricultural value chain inclusion to facilitate the sourcing and sales of products and services from farmers, small-scale processors and middlemen in domestic and foreign markets.

METHOD

A qualitative research method utilising three case studies, namely Africa Felix Juice (Sierra Leone), UMATI Capital (Kenya) and AGRO-HUB (Cameroon) is adopted. The cases have been selected from the author’s ongoing research in these countries, which facilitated ease of access. Selecting cases from multiple countries ensures broad generalisations about inclusive business models in comparison/contrasting BoP communities: Sierra Leone as a low income country undergoing post- war rebuilding, Cameroon a lower middle income country experiencing a stable economic growth and Kenya fast growing lower middle income economy (Ngoasong et al., 2015). A qualitative approach based on purposive sampling is useful for articulating the context-specific relevance (Chetty et al., 2014) and for ‘combining the existing theoretical knowledge with practitioner behaviour’ by taking ‘advantage of primary and secondary data sources’ (Javalgi et al., 2012: 741; Eisenhardt and Graebner, 2007) to gain an understanding of value chain inclusion. The case method ‘enables research to be conducted in emerging markets where the sample base is too small to allow statistical generalisations’ (Javalgi et al., 2012: 741).

Secondary data was collected from the websites of the three firms, media and magazine articles that reference the activities of the firms. To corroborate this data, primary data was collected through semi-structured informal interviews, informal discussions and email exchanges with the co- founders and managers of the three SMEs during weeklong visits to the three countries during April- August 2014. During the country visits informal discussion were also conducted with other stakeholders (farmers, logistics providers, government officials, and employees of the three SMEs) and recorded as field notes. The combination of primary and secondary data was useful to ensuring the triangulation the data. Questions asked were informed by the themes developed in the literature review (e.g. the extent to which diary/food crop farmers are excluded from the agribusiness value chain due to the determinants of social exclusion and how this provided market opportunities for inclusive businesses; the process of creating and operating an inclusive business model – sourcing financing, creating linked activities, the business model infrastructure, contractual relationships with key stakeholders).

The data was content-analysed through an inductive qualitative process. The starting point was to sift through all the secondary and primary data (e.g. Javalgi et al., 2012) and selecting the most important sections (Eisenhardt, 1989).This process reveals the situations in which the study participants and their respective SMEs are immersed and allows the researcher to create a picture of ‘what is really going on’ (Lockett et al., 2013: 847) when developing and operating an inclusive business model in an African country. This process was repeated for each of the three case studies after which comparison was made to clarify the emergent themes and select possible sections of data to use as direct quotations to support the analyses. Although the names and websites of the three SMEs are mentioned, it was agreed to preserve the anonymity of all the participants who contributed to the study, either through interviews, email exchanges and informal discussion during week-long country visits.

FINDINGS