Private sector development has proven to be a real catalyst of change when it comes to creating the opportunity for low income people to lift themselves out of poverty. Additionally, low income markets represent a large business opportunity: the four billion people living on less than $8 USD a day constitute a global consumer market with a shared purchasing power valued at 5 trillion USD. The low income population provides the potential to increase labour, supplier and distribution channels that can support expanded production and market supply. This offers significant scope for entrepreneurship and private sector development to make a positive impact on low income people’s quality of life.
Innovation and risk-sharing
By thinking innovatively, companies can develop business ideas that solve social and environmental issues while at the same time maximizing their competitiveness and profitability. However, many of these initiatives are exposed to commercial, technical and financial risks, and have limited access to markets. Most companies initiating an innovative Inclusive Business idea traditionally lack the technical support required and are too large for micro-finance, and too small and risky for mainstream commercial debt and venture capital, making them part of the so-called “Missing Middle” gap.
In this context, the Swedish International Development Cooperation Agency (Sida) launched the Innovations Against Poverty Fund (IAP) to stimulate private sector development initiatives which otherwise would not have taken place. The IAP fund functions as a risk sharing mechanism, with the specific mandate to identify and support innovative Inclusive Business models that deliver both commercial benefits for the private sector and developmental benefits -such as the creation of jobs, income increase and access to basic goods and services- for low income people, prioritizing women and youth.
Background of IAP
The IAP fund was initially launched in 2011, taking on a pioneering role in promoting innovations and social entrepreneurship aimed at the low income population. During the pilot phase from 2011 until 2016, 66 projects have received funding, 34 large grants and 32 small grants, and a total of €5,4m has been invested in various sectors across 30 developing countries in the world.
Following the success of the pilot phase, Sida launched the second phase of the IAP fund in 2016, managed by SNV Netherlands Development Organisation in collaboration with Inclusive Business Sweden (IB Sweden) and BoP Innovation Center (BoP Inc.) active in one of the following sectors. The second phase is designed for innovative inclusive business ventures in Cambodia, Ethiopia, Uganda and Zambia.
Agriculture and food: including, but not limited to, achieve food security and improved nutrition; promote sustainable agriculture.
WASH: including, but not limited to, availability and sustainable management of water and sanitation for all.
Energy: including, but not limited to, access to affordable, reliable, sustainable and modern energy for all.
ICT: including, but not limited to, access to technologies and services that help deliver solutions in the sectors above or other basic needs.
IAP advisory and financial support
IAP will provide a mix of advisory and funding to selected innovative Inclusive Business cases as a result of competitive open calls. The support provided by IAP is defined as follows:
IAP will provide non-reimbursable funding ranging from €50 000 up to €200 000 not exceeding a maximum of 49% of the total required investment to implement the innovative Inclusive Business idea.
The advisory support offered by IAP will be provided through training and coaching, covering areas such as Inclusive Business development and innovation, to enhance and efficiently achieve the targets of each Inclusive Business initiative. In addition, IAP will select and train a number of local consultants that will be available to support the businesses on a fee for services basis.
IAP secures a transparent evaluation and selection process by working with a multi-player independent appraisal process so that no single person can influence the process and/or the final outcome in any way. Applicants can contact directly the IAP Executive Manager at firstname.lastname@example.org to denounce any corruption practice or case.