Increasing local income also increases prosperity for people in developing countries. The private sector plays a particular role in generating local income and the more the business model is rooted in the local context, the greater the contribution it makes. This means that companies employ more local employees, pay local taxes and source goods from local suppliers. The 2030 Agenda stresses the crucial importance of mobilising and using domestic resources efficiently to achieve the Sustainable Development Goals, in particular SDG 8 (Economic growth), SDG 10 (Reduced inequalities) and SDG 17 (Mobilising local resources).
DEG’s portfolio companies generated local income of EUR 235 billion:
In the reporting year, DEG’s portfolio companies paid EUR 25.6 billion in local wages and salaries as well as EUR 6.9 billion in corporate income taxes.
Some 66% of necessary supplies and almost half of capital goods were sourced locally, generating EUR 154.6 billion in income for local suppliers.
Interest payments to local capital lenders, local licence fees and profits after taxes of local businesses created further annual income of EUR 40.1 billion.
Businesses help to increase local income by paying taxes. This also contributes to SDG 17, of which one of the targets is to improve the mobilisation of domestic resources. A DEG study on corporate income and government revenue shows that the total contributions of the private sector to government revenue are underestimated, as many publications focus primarily on corporate income tax. However, if VAT and employee income tax are included, the contribution of DEG customers to local government revenue increases threefold.
Local sourcing offers a whole number of advantages for companies and the social environment. Among other things, it shortens supply chains, thereby enabling more resilience in production, is more environmentally friendly and boosts local income, which in turn can be invested in, for example, local infrastructure, education and health, and increases general welfare. To find out more, have a look at the DEG study “Unlocking the benefits of local sourcing for companies and society”.
DEG uses a range of different programmes to provide advice and support to its customers in order to secure their financial success and allow them to generate sustainable local income as a result. These programmes can also be used to enhance companies’ financial and management structures, as well as their supply chains, and to reduce project risks.
Name: Muangthai Capital Public Company Limited
Invested volume (in EUR) as of 31.12.2023: 35 million
Country: Thailand
DERa category: Local income
DEG provides a loan to Muangthai Capital PCL (MTCTH) for on-lending to micro-entrepreneurs and low-income households in Thailand. MTCTH is a listed non-bank financial institution offering loan products to micro- and small entrepreneurs, farmers and individual customers across the country via a network of around 7,500 branches. The DEG loan will provide much-needed capital to support the earning opportunities among low-income groups and increase their household income.
This transaction will not only help to reduce the inequality in access to loans of low-income individuals and microbusinesses, but it also creates new jobs also in rural areas due to the expansion strategy of its branch network. Additionally, all services and goods are mainly acquired from the local Thai market contributing to generating local income.
Name: Naturasol, S.A. de C.V.
Invested volume (in EUR) as of 31.12.2023: 19.4 million
Country: Mexico
DERa category: Local income
Naturasol, S.A. de C.V. and Mielmex S.A. de C.V. together form Grupo Naturasol. The family-managed and owned group of two companies produce nut snacks, honey, potato chips and energy bars, among others. In the honey sector the group is the local market leader and exports honey to Europe. In 2019, DEG provided a long-term loan. The funds are used to finance permanent working capital and new machines.
The transaction aims to secure approximately 1,200 existing jobs, and created over 400 new ones in 2023, with a notable representation of women, who make up around half of the workforce. In addition, Naturasol contributes to local income generation through full local staffing and tax contributions, alongside significant local supply and capital expenditures. The strong growth of revenue creates additional income not only for local small beekeepers, increasing the honey farmer network of the group to 16,000, but also to small producers of potatoes, strawberries and other farm products.
DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH
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