FSG’s Harvey Koh on What It Means to Create Inclusive Markets

This blog was originally published on the Practitioner Hub for Inclusive Business

Our teams in Mumbai have been working on the opportunity—and the challenge—of inclusive markets for over 11 years. In that time, we have wrestled with some tough questions. What business models can really serve and benefit the poor? How do we develop and grow these to have large-scale impact? 

In the last couple of years, we have been grappling with a new one: what does it actually mean to have an inclusive market? This is no trivial question, particularly as aspirations across our sector are increasingly raised up to encompass systems change in whole markets. If we are to be involved in a process of systems change, we must necessarily engage with the question of what our desired outcomes are for the system itself. For many of us, concepts of social inclusion and equity very much underpin this vision, but to what extent do we make this explicit and cultivate a strong orientation towards this in our work? 

When our inclusive markets work began in 2006, we focused on significantly improving the products and livelihoods available to low-income populations in India. We recognized that these groups were already participating in various markets, but received the lowest-quality goods and services and faced challenging livelihoods. We wanted to find ways to deliver something better to low-income households and grow those mechanisms over time. We helped to build new markets in sectors such as housing and housing finance, and we conducted research into and advised on other areas, such as agricultural value chains

But as some of these improved markets took off, new concerns emerged. In the housing market, we saw that weak consumer protections led to incidents of predatory and exploitative commercial behavior, causing some customers to lose their savings and their chance of owning a decent home. We also saw clearly that wealth and income was only one dimension of marginalization: most of the new affordable housing projects were open only to the majority Hindu community and not to minority Muslim households.  

In agricultural value chains, we have observed how new schemes are being set up to provide greater market access to smallholder growers. But some of these have a single large buyer with a tremendous level of power in relation to the fragmented base of smallholder suppliers—a classic, problematic monopsony. This has consequences for the way in which economic value was shared between grower and buyer in the value chain, but it also creates a high degree of risk and vulnerability for the growers: what if the buyer decides tomorrow to walk away, leaving the growers high and dry? What if increasing monoculture makes households more vulnerable to climate and disease shocks? And what if these activities lead to greater incomes today but degrade the environment in a way that compromises livelihoods for future generations? 

These are difficult questions, to be sure, and there is no certainty that any market system (or indeed any other social system) will be able to fully address every aspect of exclusion and inequity. But we believe these questions should be asked. If we are working to help market systems be more inclusive, we must pay close attention to all the dimensions that matter to us. Greater awareness gives us the ability to make decisions that are more in line with our intentions, as well as to monitor and mitigate the risks that inevitably arise. It might also help us to explicitly acknowledge necessary trade-offs where it is unlikely we will achieve all of our desired goals in tandem, rather than continue in blissful (or, worse, self-congratulatory) ignorance of the harms we might be causing, or inequities we might be exacerbating.  

We are also beginning to realize that progress against multiple inclusion goals is not likely to be driven by an individual enterprise or other actor, but instead emerges from a web of complementary actors and forces across a market system. In our recent research into actual cases in history where transformative market change towards inclusion has been achieved, we saw that these shifts resulted from a panoply of innovative efforts beyond the enterprise itself, including but not limited to community development, social movements, ethical consumerism campaigns, and laws and regulations that actively promoted inclusive behaviors in the marketplace.  

Our best hope of achieving truly inclusive markets will therefore come from taking this wider, ecosystemic perspective, and tapping into a multiplicity of forces rather than expecting one actor alone to drive all of the change. 

The recent FSG research referred to in this post was conducted in partnership with the Rockefeller Foundation. The Rockefeller Foundation has also developed an inclusive economies framework that proposes a number of characteristics of an inclusive economy, and may be a good starting point for those interested in developing a stronger, more multi-dimensional perspective on economic inclusion.  

Learn more about FSG’s inclusive markets work >

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