The conversation about the role of business in poverty alleviation has evolved substantially over the last 15 years. Often seen as part of the problem, business is now viewed increasingly as a critical partner in solving this global challenge. In his 2005 book The Fortune at the Bottom of the Pyramid, C.K. Prahalad highlighted the opportunity for business to serve those at the base of the pyramid (BoP), a term used to describe the 4 billion to 5 billion people who live on less than $3,000 a year.
These billions of people, roughly two-thirds of humanity, generally conduct their market transactions in the informal economy and are poorly served by the formal business sector. While their individual income is relatively low, the BoP in aggregate represents a sizeable market opportunity. Indeed, the World Bank’s International Finance Corp. has estimated this market to be $5 trillion and growing.
Interest from the business community in serving the BoP is changing as well. The corporate response to poverty traditionally had been to increase investments in philanthropy or social responsibility. These generous and impactful efforts weren’t necessarily strategic and scalable. Today’s BoP enterprise leader aims to develop a business model that is financially sustainable at scale and can help reduce poverty worldwide.
The challenge of development
Although interest and investment in BoP enterprise continues to grow, doing business in these markets presents unique challenges to leaders who draw their experiences from more developed markets. The BoP business environment is characterized by consumers and producers with low purchasing power, unpredictable cash flows and limited ability to tolerate risk…Read more: Making money by fighting poverty