Shared Prosperity through Strategic Community Investment:An IFC perspective

Anil Sinha, Regional Head Advisory ServicesIFC South Asia

26 September, 2013

IFC: Private sector arm of the World Bank Group Mission to reduce poverty and increase shared prosperity

Guarantees of private sector investment’s non-commercial risks

Interest-free loans and grants to governments of poorestcountries

Loans to middle-income and credit-worthy low-income country governments

Finance Debt

EquityAdvisory Services

Sustainable Business Access to Finance

Investment Climate PPP

IBRD

International Bank for

Reconstruction and

Development

IDA

International Development Association

IFC

International Finance

Corporation

MIGAMultilateral

Investment and Guarantee Agency

What Our Clients Say About Community Investment Challenges

• “We spend lots of money, but relations with communities don’t improve (and sometimes even deteriorate)…

• Our community communicates by blocking our roads

• Infrastructure projects we build for them lie abandoned

• Local stakeholders become dependent on us• We get endless requests – it’s hard to say

“no”• Our CI program has little to do with our core

business• In the end, we have little to show for all the

resources spent”

Strategic Community Investment

"If you want to go quickly, go alone. If you want to go far, go together." —African proverb

For IFC, strategic community investment (CI) involves voluntary contributions or actions by companies to help communities in their areas of operation address their development priorities, and take advantage of opportunities created by private investment, in ways that are sustainable and support business objectives.

Different channels for generating local benefits

Company

VoluntaryMandatory

Infrastructure

Consumption

Employment

Purchases

Projects & Initiatives

Royalties / Taxes

Demand for Inputs

Demand for G&S

Roads

Increased Business Opportunities

Increased Income and Employment Improved Infrastructure and Services

indirect direct

Operational

Royalty Management

Community Investment Strat.

Local Sourcing

$ for local public investment

IFC’s

SBA/SCI Offer

Cairn-IFC Program

• Program duration: July 2007 to December 2010

• Co-funded by IFC and Cairn

• Enterprise Centre:

• Started in July 2007 and continues as a legal entity under Cairn since January 2011

• Focuses on skill development for employability, MSME and vendor development

• Child & Maternal Health (CMH): September 2007 to July 2009

• Dairy project: Started in January 2007 and continues under Cairn’s CSR activities

• State government lends support to the program

Enterprise Centre

Child & Maternal

Health

Dairy Developme

nt

Cairn CSR BarmerSURE

CEDPA

ICECD

Key Outcomes in 3 years 6617 persons (1771 women) received vocational trainings and 75%

of them linked with jobs/ self employment activities,. Income levels have gone up from 25% to 32% for trainees across various trainings given by EC

60,000 workers were trained on Health, Safety, Environment and Security (HSES), which led to more than 49 million incident free safe man-hours on Cairn sites.

119 new micro enterprises operate in the region, 2500 odd farmers have been provided inputs for better farming practices and links with inputs suppliers

80 local MSMEs have received orders worth INR 89.3 Million, 22 have now their company websites

Over 8700 persons have directly benefited by health camps/Melas, more than 2400 children and 800 pregnant women have been immunized

4000 truckers been covered under awareness on AIDS

13 dairy cooperatives now contribute by about 14% to the total milk collection by the state dairy federation in Barmer. The average price realisation has gone up from INR 9 to INR 16.80. 7

Financial Valuation Tool and its benefits

Evaluation of site-specific community investment portfolios

Public tool (www.fvtool.com)

Estimates expected net present values (NPVs) of community investments

Answers two critical questions:

“what” is the right portfolio of community investments?

“what” is the financial return they will likely bring?

Improve community investment strategic planning

Assess value of a community investment portfolio

Improve cross-functional engagement around social responsibility

Establish an understandable business case and business language for community investment

Overcome “silo” approach in cross-functional discussions

Key Components of the FV ToolThis tool adds an additional layer of rigor to your traditional approaches to

stakeholder engagement, risk analysis and financial modeling.

Monte Carlo is simply rolling the dice 1000+ times to model uncertain outcomes.

Value Driver Examples

Cairn learned pipeline security issues reported by farmers through SMS cell phone program led to up to $2 M in savings from averted sabotage.

Rio Tinto Madagascar identified large potential savings through local workforce training to reduce dependency on expat workers at very remote operation.

Newmont’s community relations team in negotiating land and owners cost helped 6-month fast forward at second site creating savings in owners cost = approx $350K.

Oyu Tolgoi realized the value of shifting from onsite housing for workers to developing a local town.

Revenue Management: Sample Tools

• Investment Capacity Assessment (ICA)• Municipal Knowledge-sharing Platform: Municipio al

Dia;• Promoting Internal Accountability• Citizen Report Cards (CRC)• Educational Caravans• Stakeholder engagement meetings

Practitioners Guide Rating Matrix & Good Practices Report templateWide range of web-based services

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FAQs Downloaded

Visits to Municipal Calendar

Visits to Library and Training material

Visits to the Tip and Question of the Month

Citizen Report CardStakeholder meetings

GeoReach: IFC’s Geomapping tool

• IFC has piloted a country focused district based geomapping tool

• Why Georeach?– Varied definitions of “poverty” globally that do not necessarily fit

South Asia– Lack of understanding of access issues in defining ‘Base of the Pyramid’– India has high growth but still home to 30% of the world’s

extreme poor– Demonstrating relevance of investments in underserved markets– Clients might be based out of Tier 1 cities, but have reach that

expands in poor/underserved areas– Gathering more granular level data to inform operational strategy

Benefits to Strategy and Operations

• Understand where there is a lack of access to specific resources, such as Health & Education, Infrastructure, and Agribusiness-- help advocate where projects may have a greater impact

• Helps to visualize the reach of client interventions

• Synthesize complex data into simple, yet powerful ways

• Maps and Analytics can guide client expansion strategies at a district level in India

Note: This map has been provided for illustration purposes only.

Illustration: Financial Inclusion Project (FINO) Results

14

Data not Available

BOP districts (as per IDG 4 )

Non-BoP districts

BOP districts targeted by FINO

Non-BOP districts targeted by FINO

183

400

No. of districts across India

(583)

BOP Districts

117

257

No. of districts targeted by FINO

(374)

BOP Districts

31% of FINO’s target districts are BOP districts

FINO covers 64% of India’s BOP districts

Comments from FINO• Perfectly aligned with our strategy, very helpful tool

• Very helpful in designing and launching new products. For example: crop insurance/ weather insurance product - tool provides initial data about density of customer pockets to support product development and access the initial product demand

Good Practice Principles for Strategic Community Investment

1. STRATEGIC Activities flow from a well-defined strategy Addresses both short and long-term objectives Focuses selectively on a few key areas for greatest impact Looks beyond financial resources Evolves with the business phase

2. ALIGNED Aligns the strategic issues of the business with the development priorities of local

communities, civil society, and government to create “shared value” Coordinates CI with other company policies and practices that affect communities, Promotes cross-functional coordination and responsibility

3. MULTI-STAKEHOLDER DRIVEN Positions the company as a partner in multi-stakeholder processes Recognizes that a multi-stakeholder approach reduces company control Supports communities and local governments

Good Practice Principles for Strategic Community Investment (contd)

4. SUSTAINABLE Seeks to avoid dependency, encourage self-reliance, and create long-term benefits Does not commence activities without a viable exit or handover strategy Invests heavily in capacity building, participatory processes, and organizational

development Reinforces, rather than replaces, indigenous institutions and processes where feasible

5. MEASURABLE Measures return on community investment to both the company and the community Uses outcome and impact indicators to measure the quantity and quality of change Tracks changes in community perceptions to gain real-time feedback on performance Uses participatory methods of monitoring and evaluation Proactively communicates the value generated by CI to internal and external audiences

Measuring Shared Value