Addressing Poverty and Indigence through Inclusive Ventures

Poverty and indigence may be eliminated with a comprehensive effort; an effort that, though planned for the long term, should begin right away. This article sets a paradigm change entailing a challenge that is hard to resolve: that the efforts to fully integrate the poor and the indigent be implemented in conjunction with experiences of productive insertion into promissory ventures and sectors. What is the rationale of this approach? What is its viability and its greatest possible efficacy? How can this type of initiative be materialized?
Poverty is not a homogeneous universe, as a superficial glance might lead us to infer; to the contrary, it is a heterogeneous universe, indigence being its most critical level. In that extreme situation, families are unable to meet their bare essentials regarding food, health and dwelling; the physical and psychological suffering they endure is enormous. To some, poverty and indigence are an ever present part of the social orography and, although their existence worries them, they believe they are there to stay. Others, including us, think that for ethical, political, economic and social reasons, poverty and indigence must and can be eliminated. Yet, for them to be eradicated, a comprehensive effort is required; an effort that, although planned for the long term, should begin right away.

The fundamental solution consists in fully integrating poor and indigent families into the communities they are a part of, ensuring them the same benefits, rights and obligations the other social sectors have, including taking part in sustainable production activities, and having access to existing education, health and social security systems. This goal is not easy to attain, but it should be always present as a guide to orient efforts, ruling out anything that may end up reproducing the tough circumstances of poverty and indigence.

On many occasions, actions taken in relation to the poor or the indigent are aimed to mitigate their needs and deprivations, which –in the best case– is only partially accomplished. It is true that poverty and, most particularly, indigence, are emergency situations and, hence, the actions implemented to address them admit no delay. Even in an emergency, however, it is possible to come up with solutions that seek to transform the conditions causing poverty and indigence to reproduce and perpetuate.

Almost every program geared at tackling poverty and indigence includes some kind of subsidy. One possibility is to allocate those resources to meeting urgent needs while another one, quite different indeed, is to also finance an economic, psychological and socio-organizational transition. In the latter, part of the training, assistance and funding is devoted to mobilizing the poor and the indigent so that they can find jobs or carry out activities on their own. If they are well designed, programs aimed at abating poverty and indigence can help not only to acquire working tools but also to productively become inserted in sustainable activities. If poorly designed, these programs can do harm because, without meaning to, they install a gift culture based on receiving without participating in solutions aiming to change the situation of need.

Here there is room for exploration and innovation. The risks are high; multiple the tensions that will need to be resolved. As running subsidies to a great extent can lead to relationships of subjection, it is equally dangerous to tackle productive activities without counting on the experience and management capacity that are required. Formulae enabling to overcome these harsh restrictions will have to be found.

Strengthening the Human Being

The critical point in any intervention is to strengthen the poor and indigent people’s will to transform their situation. This is an indispensable though not sufficient condition, as support factors are required in other fields; some of them are detailed later here. Strengthening people and their families implies covering their bare essentials, working on their self-esteem and confidence in their own capacity, transforming nihilist attitudes into willpower to face changes, training to ensure a promising productive insertion, encouraging the adoption of sustainable development values. Poor and indigent people development programs should include some of these components. This article proposes that, to the greatest possible extent, those efforts should not be made in isolation but, rather, integrated to concrete productive insertion experiences. Let us see the rationale of this approach and its greater possible efficacy.

Promoting a Promising Productive Insertion

This has to do with encouraging the productive insertion of the poor and the indigent into promising ventures and sectors; not leading them into staying at low-profit niches. This involves a most significant paradigmatic change but also an enormous challenge as it is very difficult, almost impossible, for them to do it on their own.

In fact, it would be naive to believe that through their own effort, the poor and the indigent might be able to get out of their destitute status, and join promising activities. Their deprivation is further manifested as a huge gap concerning knowledge, management capability, access to information, contacts, assets, credit support, and entrepreneurial experience. These constitute liabilities that are impossible to overcome in isolation, or by merely partnering with their peers as there are other players operating in much more advantageous conditions. We must devise another type of venture, one that is capable of integrating small producers coming from the universe of poverty and indigence with strategic partners who are knowledgeable about the market, about how modern business organizations, competitive production units, are formed and led. It is of no use to launch the poor and the indigenous into pitiful productive adventures, nor in isolation or associating only with their peers. It is not a matter of reproducing poor and indigent people’s ghettos.

Today, there exists modern business engineering that can be applied to mobilize poor and indigent individuals into medium-sized economic organizations capable of accessing good market opportunities. Such business engineering includes franchise systems, cooperative holdings, marketing consortia, locomotive agribusinesses, community supermarkets, among many others. All of them may be of use when establishing inclusive ventures.

Characteristics of Inclusive Ventures

In an inclusive venture, small-sized producers share its ownership and related results with a strategic partner that contributes technological development, access to contacts, markets and modern ways of structuring and managing production units. Nowadays, in a knowledge-based economy, non-financial value added weighs as much as or more than financial capital.

The ownership of an inclusive venture should be structured in such a way as to allow for it to capitalize, secure the rights of its small-sized producer members, not to block but rather facilitate its effective economic management and secure respect for sustainable development values. The interests and participation of small producers should be reconciled with the venture’s economic and organizational feasibility, making sure that its management is agile enough for efficient decision-making.

In an inclusive venture, the contact of dissimilar cultures and the existence of diverse interests present challenges and tensions that are required to be properly addressed. The outlook of small production, where the executive functions are taken on by a person or a family, is not the same as the one of a larger economic organization, where a specialized division of functions is necessary. Likewise, values, attitudes and reactions in the face of success, effort and adversity differ. It will be required to work on agreements and to solve misunderstandings among those looking to collaborate to transform cultural and interest diversity into a valuable asset.

Should subsidies exist as part of a support system, the idea is that they may help organize the process of establishing the inclusive venture and its initial steps so that, after a certain clearly delimited time, it can be supported with the revenue obtained from its own productive activity, just like the other economic players do.

If successful, the inclusive venture may play an additional strategic role: it becomes an accumulation node, i.e., its surpluses, if any, might be applied to other economic initiatives within the same value chain, making viable certain projects that today cannot be materialized.

Setting up inclusive ventures involves strong innovation in respect of traditional production units that spontaneously emerge in the market, as their purpose is, at the same time, integrating poor and indigent individuals, achieving good results and practicing sustainable development values. Faced with such an enormous challenge, who could be in a position to promote this type of venture, and how would it be done?

Implementing this Type of Initiative: Inclusive Venture Developers

The knowledge required to successfully establish and lead an inclusive venture is already available in the market. However, on very few opportunities such knowledge and the financial and organizational conditions required to transform it into productive activity actually reach the bottom of the social pyramid. Poor and indigent people have access to residual and scrap knowledge. Therefore, in addition to the economic and management gap, they also have against them a huge gap of information and knowledge beyond their own subsistence. Closing that gap is today one of the greatest challenges when fighting against poverty and indigence.

An Inclusive Venture Developer is capable of channeling experience and knowledge of excellence to small producer communities who are faced today with enormous disadvantages due to their isolation and minimum scale. Its job is to identify promising economic opportunities and organize the way in which they can be seized through the creation of alliances with strategic partners that may contribute contacts, information, access to markets, financing, modern business management and business engineering.

A Developer does not just take into consideration what the poor and indigent people have been doing: it also strives to identify what new things might, with catalyst supports, be done in the immediate future. It thus explores expanding market niches, in search of opportunities for developing businesses that may include poor and indigent families. It then analyzes how an inclusive venture that takes advantage of any of the identified opportunities can be established and, on that basis, identifies participants, specifies purposes, required supports and criteria that might be adopted in order to secure a fair distribution of results. It is indispensable that the Developer’s team have a two-fold experience: in the universe of poverty and indigence so that it can understand and know how to operate with that population segment, and in the business world, in order to be able to identify opportunities that others fail to see or would not know how to take advantage of.

The focus of a Developer’s action is the integration of small-sized producers working in low-productivity, poor-yielding activities into efficient medium-sized economic organizations. Based on modern business engineering, and in consultation with participating stakeholders, a strategic partner is selected and an appropriate venture structure, the qualifications the management team should meet, and the accompaniment the Developer will be in a position to supply, are defined. Once these elements have been determined, the inclusive venture’s management team, which is to lead the development of the first business plan, is hired. Once the business plan has been approved, and the necessary resources have been secured, business operations begin.

Financing of an inclusive venture developer contemplates two clearly differentiated instances: one encompasses promotion, establishment and start-up activities; the other one, the developer’s regular business operation once the initial phase has been completed. The financing sources required in the first stage are very diverse, as they will depend on the unique circumstances each situation may present. It may be the case that the public sector is willing to subsidize a developer’s start-up, or the initiative may also be generated by union, business, or civil society organizations who, individually or in association, decide to fund the first two years of operations. After the initial period, however, the developer should finance itself with genuine income such as: (i) sharing in the results of the inclusive ventures it helped establish; (ii) fees charged for technical assistance services rendered to inclusive ventures (both in its own project portfolio and others already established requiring its intervention); (iii) capital contributions by its founders or new contributors; (iv) other short and mid-term financing modalities.

Context Support

No business concern or venture operates in an economic and institutional vacuum; the contextual circumstances always condition its course and viability. Hence, it is critical that poverty and indigence not be only addressed from the perspective of a direct support of initiatives as the ones suggested in this article. It is equally critical to have a favorable context. This includes making sure that (i) public spending includes the poor and the indigent as recipients of social and economic infrastructure; (ii) the tax system contemplates an incentive scheme for the first years of operations of inclusive ventures; (iii) capital markets generate special products that may help inclusive ventures finance their capital formation, (iv) the scientific and technological system is mobilized in their support, (v) production chain business leaders develop working relations with inclusive ventures, fully exercising their mesoeconomic responsibility, (vi) public opinion and the media value and encourage the efforts of inclusive ventures.

Poverty and indigence are not solved via “special programs” disconnected from macroeconomic policies and the responsible action of leading firms in production chains. It is nonsense, on the one hand, to define national policies and ignore the way in which production networks develop and, then, separately establish a specific effort to fight poverty. Poverty and indigence may be eradicated as long as the national and local public sector and a significant number of private sector and civil society actors play the role that each is required to play according to their knowledge, capacities and responsibilities.

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