The Challenge
The private sector is an engine of economic growth and creates opportunities for people along the product and services value chains. Companies across the world create and distribute products and services. They involve people as employees, entrepreneurs, suppliers, or customers. In doing so businesses create opportunities for income generation, employment creation and improved quality of life. However, most low-income people remain excluded from these value chains due to barriers such as lack of infrastructure, regulatory hurdles, information asymmetry and capacity gaps. Ecosystem Development Approach aims at co-creating solutions to resolve these challenges and therefore including low-income people into value chains. Integrating this group into value chain can only be achieved through collaboration, but effective collaboration requires solid facilitation with a systematic, deliberate, and practical approach.
The Practice
The Ecosystem Development Approach (EDA) is a 5-step approach to strengthen business ecosystems in emerging markets centered on principles of collaboration with elements of learning and adaptation.
The EDA provides tools that identify factors preventing businesses from growing and reaching scale as well as serve as a convening platform for cross-sector actors (e.g. government, impact investors, banks, civil society actors) to effectively drive the development of Inclusion. EDA, formerly known as IBEI was piloted by UNDP in the three African counties: Lesotho, Senegal, and Uganda.
The approach builds on UNDP’s strong track record and expertise in ecosystem building, multi-stakeholder collaboration and inclusive business over the last decades as well as on insights from the collective impact on communities. EDA is based on the concept of collective impact which depends on the idea that social problems are a result of multiple and complex actions and can be solved by coordinated efforts (The Ecosystem of Shared Value, Harvard Business Review, 2016). Collective impact has emerged as a powerful and innovative approach to solving social problems and is a paradigm shift for how to create social change. Complex social problems are affected by large and interdependent systems that no single organisation can change singlehandedly. As such, UNDP in Africa has supported the establishment of the EDA in three sub-Saharan African countries and provided catalytic funding to 21 inclusive businesses through innovation challenge awards.
Results
The following are piloted sectors and countries with key outcomes:
- The EDA in Senegal aims at improving access to solar energy services for low-income populations through the creation of a supportive ecosystem for inclusive businesses in the solar energy sector.
- The EDA on mobile money in Lesotho aims at transforming Lesotho into the first African nation with a fully digital payment system where mobile money is a key tool for financial inclusion of low-income populations.
- The EDA in Uganda aims at transforming the tourism sector by increasing competitiveness and realizing benefits for all.
Insight/ Advice to Peers
The message to all development organisations is to act now. The EDA is effective where sustainable business solutions to development challenges are possible, but currently precluded by constraints in the business environment. By improving the business ecosystem in specific sectors or sub-sectors and creating incentives for impact, it reduces risk and increases potential financial and social returns for public and private impact investors. From the beginning, the EDA has been designed for replication and the AFSH provides a comprehensive training document and standardized tools for use along the way.
Further Resources
- Report on Building Inclusive Businesses for Shared Prosperity in Africa, May 2013
- UNDP Private Sector and Sustainable Investments Team & Africa Finance Sector Hub (AFSH) CoLab Award Submission
Contacts
Tomas Sales, Special Private Sector and Sustainable Finance Advisor
Africa Finance Sector Hub, Pretoria, South Africa