Connecting Corporations and Social Enterprises
Kenya-focused entrepreneur Moka Lantum, Founder and Managing Director of Microclinics, is preparing for pitch to a large pharmaceutical company. The Nairobi-based healthcare management company provides patient and clinic management systems to peri-urban and rural clinics. The software developed by his company, tracks commodities in clinics and enhances, availability, accessibility, quality and affordability of medicines in low income markets. The network of clinics and pharmacies as well as his “Blue Angels”, a network of trained youth that promote the service, can be an interesting distribution channel for healthcare and pharmaceutical companies and can potentially lead to cost savings of 30-60% for 2.5 mn customers.
Unfortunately not many small and growing businesses have the opportunity to pitch to a large corporate and explore the potential of a partnership like Microclinics. While it is widely accepted today that partnerships between corporates and small and growing businesses can bridge scaling challenges and help to co-create innovative service offerings for low income markets or develop impactful delivery and distribution channels, establishing these partnerships is a challenge. There is an information asymmetry on both sides, as a result of which it can take up to a year to form a meaningful partnership. The information gap is even larger for corporates interested to enter into a new market and looking for partners.
“The platform that we have created can provide a lot of value to corporates. However, it is difficult for us to find an entry into corporates. Establishing a winning partnership can therefore sometimes take up to a year.” - Moka Lantum, Managing Partner, MicroClinic Technologies
The potential for partnerships between corporates and small and growing businesses is huge. While low-income families at the so called “Base of the economic pyramid” have many unmet needs and aspirations, they lack access to affordable and high quality products and services. Excluded from mainstream markets, they find it difficult to access and nutritious foods, affordable healthcare, quality education, clean water or reliable energy. Despite progress in recent years to reach out to those living in underserved markets, there are 3 billion people living on less than US$2.50 per day—nearly half of the global population. Similarly, East Africa with its current population of 280 million people with growth predictions of 182% by 2050 and an annual consumption of US$49million with low income consumers comprising 90% of the total expenditure, make it an interesting market for corporates and start-ups alike.
Although low-income consumers represent an attractive market for both corporates and social businesses, the reality is that reaching them is often difficult. Corporates have extensive financial and human resources and existing sales and distribution networks which can enable them to reach scale quickly in these low income markets. However, the markets are riskier and more long-term and the opportunity costs for corporates are too high. Further, corporates lack insights into the aspirations, incentives, disincentives, and daily behaviours of the poor and have limited internal resources to test innovative new approaches.
Small and growing businesses, on the other hand, have a nuanced understanding of customers and on-ground challenges and are able to building innovative products and services for low-income market contexts. They are nimble with testing, improving, and iterating and can learn fast and cheaply. However, they lack capital to support scale-up or attract talent, do not have access to a sizable customer base and distribution networks which makes it difficult for them to penetrate the market.
To fill the gap in the current ecosystem and create a market infrastructure for corporates and small and growing businesses looking for partnerships, Intellecap and USAID have recently launched the Collaboration for Impact Facility during the Sankalp Africa Summit, a new initiative that facilitates innovative partnerships between corporations and small and growing businesses in East Africa. Stefanie Bauer, Associate Vice President at Intellecap explained how the facility will help corporates and small and growing businesses during the launch. The facility will:
The initiative will help to structure partnerships that help small and growing businesses and their impacts reach scale, while ensuring that the interest of the enterprise are protected ( e.g. intellectual property rights), especially in places that have weak contract enforcement. Besides offering strategy and implementation support to corporates and small and growing businesses, the facility aims to become a knowledge hub for partnerships between corporates and small and growing businesses.
“We are interested in learning and collecting lessons from corporate-enterprise partnerships through this facility that can help others to replicate these kind of partnerships,” said Matthew Guttentag, Partnership Advisor at USAID, who is supporting this initiative under the Partnering to Accelerate Entrepreneurship (PACE) Initiative. To endorse the facility, Jumaane Tafawa, Group Director Strategy and Partnerships at Equity Bank highlighted the need for partnerships for Equity: “We have more than 200 partnerships. However, finding the right partners takes time. We are therefore excited about this facility.”
Recent success stories demonstrate the power of partnerships in East Africa: With a 300% growth in the last three years with 1.37 million products sold in Sub Saharan Africa, the solar industry offers some interesting case studies. Companies such as Greenlight Planet or MKopa have emerged as market leaders in Kenya whilst simultaneously creating impact, making solar products for accessible and affordable, while creating health and environmental benefits by replacing kerosene lamps which emit on an average 370kg of CO2 each year per lamp.
The success is partly related to the ability of Mkopa and Greenlight Planet to build impactful partnerships: Mkopa partnered with Safaricom, a leading telecommunication, and leveraged the Safaricom’s network to ensure financing of innovative solar products via Mpesa. Similarly, Greenlight Planet has formed partnerships with Orange Sunny Money all over East Africa to facilitate financing and scale.
This article first appeared on www.p3.co and is reproduced with permission.