In development cooperation attention is focused on the poorest of the poor: the 1 billion people earning less than a dollar a day. The IFC, however, pledges to take a market-oriented approach to reach a much larger segment of the low income population. Their needs are huge. Many of them have no bank account, no access to financial services, no phone, no formal land title, no proper house, no water, sanitation or electricity. They depend on informal or subsistence livelihoods, which keeps them trapped in poverty. And often enough, they pay more for basic goods and services than do wealthier consumers. Addressing the unmet needs of the BoP is essential to enable people to find their own route out of poverty, the report argues.
The analysis gives an overview of business strategies from successful enterprises operating in these markets. Among these enterprises are Philips, producing economical woodstoves and health care solutions for the poor, the telecom company Celtel with operations in fifteen of the poorest and least stable African countries, and, of course, Unilever with its widely known 'sachet' marketing, selling soaps and shampoos in small packages.
Critical in a business strategy that serves the BoP, according to the IFC, is focusing on unique products, services or technologies that are appropriate to BOP needs. This may require significant investment of money and management talent. Second important strategy is localizing value creation through franchising, through agent strategies that involve building local ecosystems of vendors or suppliers, or by treating the community as the customer. This strategy involves substantial investment in capacity building and training. Third is enabling access to goods or services, financially and physically. And fourth critical strategy is unconventional partnering with governments, NGOs, or groups of multiple stakeholders to bring the necessary capabilities to the table.
Traditional development approaches lack striking successes, according to the report. Better solutions may be found in a market-based and demand-driven approach: "Those solutions may involve market development efforts with elements similar to traditional development tools—hybrid business strategies that incorporate consumer education; micro loans, consumer finance, or cross-subsidies among different income groups; franchise or retail agent strategies that create jobs and raise incomes; partnerships with the public sector or with NGOs. (...) Perhaps most important, traditional approaches do not point toward sustainable solutions, while a market-oriented approach recognizes that only sustainable solutions can scale to meet the needs of 4 billion people."
P+ webtip: IFC