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Tuesday, July 30, 2013

Pioneering in Colombia : The country has forged a strong record of BoP-focused ventures

By Claudia Martinez Ochoa

The II BASE International Forum that the Inter-American Development Bank celebrated in Medellín, Colombia last month served as a platform to showcase how the Colombian private sector is particularly interested in serving the BoP of the country.

Panelists who participated in the first plenary provided clear insights into how Colombian society has evolved and how in the last 15 years the private sector transformed itself from a passive actor to a vigorous player who sees serving the BoP as part of its DNA. Colombia has historically suffered from one of the most unequal societies in the world, resulting in years of violence and a sluggish economy. Today, the country has become one of the most vibrant economies in the world with 10 years of sustained economic growth and what now seems to be an end to the armed conflict.

This transformation did not occur overnight, it was a long process that began to crystalize about 14 years ago when the country suffered a deep economic recession. The economic downturn and the instability that followed was a wake up call to the nation. If Colombia was ever going to reach its true potential as South America’s second largest economy, both the public and private sector needed to join forces and build a new future together, particularly for the millions of Colombians at the BoP. The presentations made by Samuel Azout, entrepreneur and former director of the National Agency to Overcome Extreme Poverty (ANSPE); Antonio Celia, CEO, Promigas; Juan Esteban Calle, CEO of EPM; Santiago Perez, vice president Bancolombia; and Julian Jaramillo, CEO of Alpina are a result of this history. Promigas and EPM are today the largest utility companies in Colombia, not to mention Latin America and the Caribbean; Bancolombia is the country’s No. 1 financial institution and one of the largest in the region. Alpina has become a multilatinal with operations in Colombia and other countries in the region. Additionally, as a director of the ANSPE, Azout led the creation of one of only five social innovation centers in the world fostering private sector innovation at the BoP.

The success stories behind these companies are inextricably linked to the BoP. As leaders at EPM and Promigas explained, Colombia has become a world pioneer in providing universal access to public services through spectacular innovations that have allowed them to reach not just affluent consumers, but low-income households representing 70 percent of the population. Key innovations range from pre-paid utility services to financing utility connections. More importantly, these companies have come to realize that if their goal was to be sustainable, they need to ensure the existence of sustainable communities. As a result, both EPM and Promigas have gone beyond their public utility mandate and have banked around one million Colombians with more US$600 million, providing them access to energy efficient appliances, construction materials for home improvement, computers, and education.

Bancolombia also presents an incredible example of a bank whose core mission is to do good by doing well by enlarging their client base and at the same time providing access to financial services for the first time to millions of BoP Colombians through mobile banking and banking correspondents, as well as designing tailored financial products (special savings accounts, micro insurance, remittance programs, etc.).  

Jaramillosaid Alpina’s main objective is to sell products for all Colombians, including those at the base and the top of the pyramid. This product strategy  has enabled Alpina not only to combat malnutrition, currently at 40 percent of the population, but to grow its business exponentially.  

What do these different examples and business strategies have in common? First, they are all strategic business units taken to scale. Second, the private sector learned well that if it was going to succeed and grow, it could not stand on the sidelines and as Azout mentioned, let the public sector redistribute wealth on its own. Moreover, companies realized that it was not just about growing their business; it is about building a more prosperous and just society. As Azout pointed out, the objective is to do away with an economic pyramid, replacing it with a diamond-shaped society, where there are opportunities for the majority. He rightly concluded by saying that we do not yet have a magic formula to get rid of poverty, however, for the first time in history, society has understood that if is to prosper it needs to work cohesively toward that goal. 

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