Inclusive Business Corporate Engagement Working Group May 19 th, 2014 Hanoi, Vietnam Prepared by: Miguel Angel Mendez, Country Director SNV VIETNAM

SNV Overview. Market-Based Solutions for Poverty Reduction

The low-income population is characterized by: Inclusive Business Lower income, quality of life and welfare Not integrated to markets, neither benefited from them Basic and normal needs unmet Reliance on informal means of subsistence Affected by "sanctions to the LIP“ Basic knowledge and skills

Social Benefits (inclusion) Economic Benefits (profit) Business Philanthropy Non-profit Commercial Venture Profit-making InclusiveBusinessInclusiveBusiness An inclusive business is a core business model within a company´s business strategy that integrates the low-income segment within its value chain as suppliers, consumers, distributors and/or employees in such a way that it creates shared value (win-win). Suppliers Consumers Distributors Employees Core Business Initiative Business Need Include the BoP Short-term intervention, not self- sustainable Does not provide sufficient opportunities to low income segments Inclusive Business This initiative creates growth, productivity and new opportunities for the company, at the same time generating income and wealth for the poorest

B066 – Centralized Water Purification and Distribution 5

B066 – Centralized Water Purification and Distribution (cont.) Inclusive Business Model Commercial feasibility: Growing demand for access to sustainable source of drinkable tap water in sub-urban and rural areas in Long An province where local people have been using water that highly polluted with chemicals. Innovation: Developed a centralized water treatment facility and distribution system that effectively supplies clean drinking water that meets quality standards at an affordable price Expected results:  Financial:  Social: supply tap water to more than 2,500 new households; provide more than 10,000 people with access to clean water at an affordable price; create jobs and improve income for some 70 low-income individuals.  Environmental: utilizes a non-chemical water treatment process that is safe for human health and the environment. General Information The project engages low-income individuals: As employees: creates new jobs (for in plant construction, installation, and operation, as well as long-term employment for its agents and distributors). As consumers: sells clean drinking water at an affordable, regulated price; provides 24/7 water supply service VBCF Investment: GBP 180,647 (37.1% total investment ) Distribution agents Agents’ own distribution network Direct distribution Howaco -Groundwater collection -Processing and storage in resevoir -Pumping station Environmentally friendly purification with no chemicals Low- Income households

C278 – Affordable LED Lighting Solutions 7

C278 – Affordable LED Lighting Solutions (cont.) Inclusive Business Model Commercial feasibility: Low income segment account for more than 50% of Vietnam’s market for LED products which are cost efficiency, energy saving with long-life cycle. Innovation: Developed a high quality line of LED products that are affordable for low- income communities nationwide General Information The project engages low-income individuals as: Employees: low-income workers employ in its factories. Distributors: Sale agents of The Company will distribute the new LED products and earn an income from their product sales. Customers: Low-income consumers will be able to purchase high-quality LED products specifically designed for their needs. They will save money by reducing their usage of electricity with the conveniently purchased bulbs. VBCF Investment: GBP 419,918 (32.2% total investment) Nationwide Distribution Agents Leading Lighting Company Have designed quality LED product for low- income consumers Market development and consumer education Low- Income Consumers Demonstr ation models Retailer Expected results:  Financial: competitive profit  Social: facilitate access to affordable LED products for hundred thousand, if not million, low-income customers; create jobs for 300 people and increase income for over thousand households  Environmental: over 24,000 tons of CO2 emission can be avoided by the end of 2015

C393 – Waterproof CFL Lighting for Off-season Dragon Fruit Farming 9

C393 – Waterproof CFL Lighting for Off-season Dragon Fruit Farming (cont.) Inclusive Business Model Commercial feasibility: Estimated millions of energy efficient light bulbs are needed for off-season dragon fruit production in Vietnam in substitute for 60-75w incandescent bulbs. Innovation: Developed a compact bulb specially for dragon fruit farming with energy efficient, waterproof and certified by international standard IT65 General Information VBCF Investment: GBP ….. (…..% total investment) Low-income people engage as: Primary customers: aims to educate farmers in using the product to increase productivity during off-season. Lighting Company Have designed waterproof compact bulb for offseason dragon fruit production VBCF and Company funding and oversight Dragon Fruit Farmers Revolving fund EVN Farmers Union Distribution Agents Expected results:  Financial: competitive profit  Social: increase in net income for approximately 6,500 households, create over thousand of part-time job during off-season and 120 full-time jobs for factory.  Environmental: contribute in CO2 reduction and industrial waste generation.

A119 - Innovative F1 Hybrid Seed Production 11

A119 - Innovative F1 Hybrid Seed Production (cont.) Inclusive Business Model Commercial feasibility: Growing demand for agricultural products domestically and abroad. Develop profitable business model in rural areas, increase market share & venue. Innovation: Address the market opportunity. Engage farmers in highland areas of Vietnam as producers. Expected results:  Financial: competitive profit  Social: Create jobs for thousands of farming households mainly from ethnic minorities. Generate income for farmers 3-5 times higher than traditional farming. General Information Low-income population engaged as Producers: being provided with training, fertilizers and equipment for growing F1 hybrid seeds. Farmers receive stable income from sale contract of seeds with the company. VBCF Investment: GBP 211,422 (15.9% total investment)

A055 – Japonica Rice Seed Development 13

A055 – Japonica Rice Seed Development (cont.) Inclusive Business Model Commercial feasibility: Vietnam has an increasing demand of Japonica rice while it’s been still imported at high cost. Innovation: Developing a closed Japonica rice production cycle from seeding in deltas & mountainous areas to distributing finished products. Expected results:  Financial: highly profitable  Social: over 1,000 farm households get new jobs and improve income. 100,000 farmers could be benefited from better seeding, and higher selling prices of Japonica rice.  Environmental: reduce the use of pesticides & chemical fertilizers by applying System of Rice Intensification (SRI) methods. General Information Low income people engaged as: Producers: cooperatives specializing in seeding are established. Consumers: The company sells seeds to farmers and sells high- quality rice to consumers. VBCF Investment: GBP 272,031 (37.9% total investment ) Vinaseed Distribution Company Seed Production Cooperative Farmers Rice Production Cooperative Farmers Inputs and Support Distribution Agents Farmers Consumers NSC Seeds Rice Contract sale of rice Contract sale of seeds

Remarks The IB works IB model drives innovation Need to have ethic and neutral actors High commitment at CEO level The IB must be within the core business of the company Trust is very important Need for initial investments to achieve sustainability

Miguel Angel Mendez Country Director SNV Vietnam Thank you!