Achieving economic inclusion is a global priority, as evidenced by the African Union’s Agenda 2063 and the Sustainable Development Goals (SDGs), which call for inclusive and sustainable economic growth with the underlying ambition of expanding access to economic and social opportunities to all.

The principle of inclusivity can be traced back to the 2002 World Summit on Sustainable Development, which called for policies that improve inclusivity, sustainability, and private sector involvement and that build community-based entrepreneurial capacity. The emphasis on private sector involvement in sustainable practices was articulated at the Third International Conference on Financing for Development in 2015, where one of the resolutions was ‘to develop policies and, where appropriate, strengthen regulatory frameworks to better align private sector incentives with public goals, including incentivizing the private sector to adopt sustainable practices, and foster long-term quality investment.’

Kenya’s demographic landscape reveals the presence of many people at the ‘base of the pyramid’ (BoP), largely young people seeking work. People under the age of 35 account for 76% of Kenya’s population, with about 1.6 million seeking work. This represents a majority (62%) of the population seeking work, of which women represent 44%, half of whom are from rural areas. In addition, 2% of the population lives with various forms of disability, 55% of whom report facing difficulties in engaging in economic activities.

Hence, from an economic policy point of view, Kenya yearns for opportunities to engage the low-skill and economically excluded segment of the labor force. The private sector has a key role to play in achieving inclusion, which will enhance sustainable development.

Inclusive business approaches in Kenya

Inclusion among Kenyan businesses is undertaken at four levels: suppliers, distributors, employees and consumers. The inclusion approaches that have been adopted largely target BoP youth between the ages of 18 and 35, followed by women, who benefit from improved incomes, and enhanced capacity and productivity.

As suppliers, BoP people provide inputs to firms: largely farm to industry. This is mainly in the agricultural sector where farmers are identified, trained, and supported by firms to provide quality inputs through mechanisms such as contract farming or building on the cooperatives approach.

BoP people are also engaged in distribution through three common models: 1) the micro-franchise model of distributing products such as health products, 2) the agency model where local small businesses offer services such as mobile banking, and 3) the market-based model through market segmentation using, for example, small packaging of products targeting BoP consumers.

The market segmentation approach has led to the growth of the ‘kadogo economy’ (kadogo means small), where the BoP are consumers. What makes this approach even more relevant in Kenya is the fact that the country has retail shops, known as kiosks, which, through innovative business models, link manufacturers to consumers at minimal cost.

Service providers including banking and health services have also adopted similar market segmentation models targeting the BoP, thus benefiting from high volumes often in densely populated low-income areas. These distribution models are anchored in local knowledge and strong social networks.

Another inclusive approach adopted by businesses is through employment. There is evidence that on average over 60% of BoP employees are young people, engaged either on a permanent or temporary basis. Women are also engaged as employees, more often on a non-permanent basis. Generally, the monthly earning of the young beneficiaries seems to have doubled in the last three years. Women involved in inclusive business have also recorded on average an increase in income over the years and contributed to household monthly expenses.

International support

The interventions in the OECD and G20 frameworks for promoting inclusivity seem relevant for a developing country like Kenya where inclusive businesses face technology, financial, and skills constraints, particularly when BoP people are engaged as suppliers or distributors. These frameworks provide guidelines on how to promote inclusivity while also mitigating the constraints.

The OECD Framework for Policy Action on Inclusive Growth, for example, establishes policy responses and policy instruments that governments can adopt to enhance inclusive growth. Some of the policy responses include investing in healthcare, education, housing, infrastructure, and natural resource management for all. They also include promotion of inclusive labor markets to enhance access to quality jobs, especially for underrepresented group, as well as integration of equity and inclusion into policy design.

Similarly, promotion of inclusive policies under the G20 Inclusive Business Framework is a role for government. Other roles of the government in the G20 framework include promoting pro-poor targets in government contracts such as the use of incentives and regulations to promote inclusive business approaches, as well as strengthening vocational training opportunities. Furthermore, the G20 framework establishes the role of inclusive businesses as expanding business engagement with the BoP, enhancing access to financial resources for BoP people and developing their capacity.

In summary, inclusive businesses offer crucial and sustainable solutions to social challenges. But there are some constraints that can be addressed innovatively by both the government and the private sector.

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One of the Sustainable Development Goals (SDGs) is to ensure decent and productive work for all, particularly women, youth, and people with disabilities – all of whom tend to be ‘economically disadvantaged’ or ‘excluded’.

In Kenya, for example, where the informal sector accounts for 85% of total employment, women are more likely than men to operate smaller informal enterprises. A 2016 survey of micro, small and medium enterprises shows that women own nearly two thirds of unlicensed establishments but under a third of licensed establishments. In fact, only 17% of licensed companies owned by women are registered.

Informality typically translates into low and inconsistent wages, poor working conditions, low productivity, insecurity, and limited access to credit and other economic resources. Informal enterprises are also faced with high levels of risk as a consequence of limited social and investor protection.

These challenges contribute to business closures. For women entrepreneurs in Kenya, limited social protection is a particularly important contributor. According to the Kenyan survey, pre- and post-natal obligations of women owners are among the key reasons for closure. Women-led businesses also face constraints that are intertwined with their other family obligations.

Women are at the heart of food production – literally from the farm as part of the agricultural labor force to the plate as cooks. Those from low-income households often experience additional vulnerabilities due to the choice of cooking fuel. It is estimated that 60% of cooking energy in Kenya is from biomass, and women-headed households are more likely to use these energy sources, which are associated with risks from pollutants.

How can women’s livelihoods be enhanced?

The private sector seems to be responding. For example, there are some successful approaches in the energy sector. A number of companies are now offering energy-efficient cooking stoves across Africa. There is evidence that such technology contributes to efficiency and safety, reduces household time spent in preparing food, and addresses environmental, health, and safety concerns. The stoves have also been associated with increased household savings.

Ensuring access to basic goods and services – particularly water, sanitation, education, and healthcare – is a key mandate of any government. Here again, there are private and other non-government organizations playing significant roles in addressing the challenges, where the government fails to meet its commitments fully.

One example is the Hippo Water Roller, which by targeting women as consumers, aims to enhance access to water. This innovation was developed in 1991 by South Africans who, though male, appreciated the challenges facing communities, particularly women, in transporting water. The technology is a 90-litre barrel container with a steel handle, which is used to push or pull the barrel hygienically and with ease over the ground from the water source to the household.

Other innovations in this sector include water purifiers – such as ceramic, UV, and solar water filters – which eliminate bacteria found in water, rendering it safe to drink. In Japan, for example, a water purifier has been designed for bicycle users whereby the rider can purify water through the action of pedaling.

Developments in healthcare by the private sector have enhanced accessed to health services across Africa. In Uganda, for example, the Living Good organization was launched to distribute healthcare by delivering drugs, fortified foods, consumer goods, and health education. This is achieved through a micro-franchising model, in which health entrepreneurs, who tend to be women, go door-to-door selling items to other women. Strikingly, the founder of this organization is male.

In Kenya, a number of private healthcare providers – including Access Afya, Jacaranda Health, Miliki Afya, Viva Afya, and City Eye Hospital – provide low-cost healthcare services in densely populated low-income areas, building on high volume and economies of scale.

These organizations, though non-governmental, are responsive to social needs. They fall into three broad categories:

• Social Entrepreneurship – innovative, social value-creating activities undertaken by the non-profit, business or government sectors.
• ‘For-Benefit Organizations’ – those that generate an income through the sale of goods and services that improve consumers’ quality of life.
• Inclusive Business – a private sector approach that engages the ‘the base of the pyramid’ through the provision of commercially viable goods and services for low-income people as consumers or as suppliers, distributors, or employees.

According to the World Resources Institute and the International Finance Corporation, globally, the base of the pyramid accounts for four billion people, 486 million of them in Africa, roughly 40% of the continent’s population. They are typically categorized as rural, often women, with low earnings, engaged in low-skill semi-regular, temporary jobs. They are dominated by the informal economy, which in itself presents challenges that introduce inefficiencies.

Inclusive businesses that incorporate the base of the pyramid into their value chain are in many sectors of the economy:

• Agriculture, where inputs are sourced from farmers at the base of the pyramid, who often receive support aimed at improving quality and production.
• Telecommunications, where service delivery is channeled through a distribution network that includes consumers at the base of the pyramid.
• The manufacturing sector, which is largely producing household consumer goods aimed at the base of the pyramid. Business interest in the base of the pyramid is said to have led to the market expansion of multinational corporations into developing or emerging markets, all offering affordable products targeted at low-income consumers in terms of design, packaging and/or distribution.

In summary, people at the base of the pyramid face challenges that limit their access to decent housing, water, sanitation, healthcare, and education. Inclusive businesses, social entrepreneurs, and ‘for-benefit-organizations’ target and/or support the base of the pyramid, thereby addressing some key social and environmental challenges.

The role of the private sector has been recognized globally, as established in the UN Global Compact, which calls on companies to take actions within their business operations to advance social goals: the Business Call to Action, which supports companies in developing inclusive business models that engage the base of the pyramid, and the SDGs, which acknowledge the role played by all stakeholders in achieving the goals.

Other institutions that are playing an increasingly important role in promoting inclusive businesses include investors who seek to support initiatives with a ‘social impact’, and global movements, such as B Lab, which promote ‘using business as a force for good’.

Going forward, key policy questions that governments should start asking include how they can support entrepreneurs to enhance their economic inclusion to improve livelihoods while contributing to the economy. Policies, research, and innovation that can nurture the inclusion of people at the base of the pyramid, especially women, should also be made a priority.

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