Joseph Bornstein

“Business and Poverty: Opening Markets to the Poor” – An Analysis of the Report

World Bank Institute Special ReportA key issue that the BoP development world currently faces is generating a tangible connection between markets, enterprise and the poor. After all, if we are going to alleviate poverty through enterprise, we require effective strategies that enable the BoP to participate in profitable business endeavors as well as markets that serve the BoP’s needs sufficiently.

In light of this difficult obstacle, WBI has taken steps to provide insight into how BoP development can be engaged successfully through its release of the special report “Business and Poverty: Opening Markets to the Poor.” The report’s 18 chapters-each about eight pages long-analyzes various effective strategies, obstacles and prospects for NGOs, non-profit organizations, corporations, banks, MFIs, and local enterprises working to serve those who are most marginalized and impoverished-the BoP.

Though the World Bank report does not provide comprehensive statistical analysis explaining clear steps that can be taken in order to address barriers to serving the BoP, it does offer numerous case studies regarding successful business models. It also offers supplementary analysis, which details how and why each example project was effective, and outlines what will need to be overcome in future years.

This report gives its readers the chance to learn from exemplars of corporate social responsibility programs that really make a difference, BoP entrepreneurship that accesses its market effectively, and NGOs as well as IFIs, NPOs, MFIs etc. that launch initiatives which greatly increase the quality of millions of people’s lives. It is an excellent snapshot of business and organizational models that work well and offer clues for where we should head next. Here is a brief summary of the report’s findings:

  1. Connecting Businesses and Poverty: there needs to be a cultural shift in the business world toward serving the poor. Part of what businesses need to start doing is increase productivity and income for poor people, increase employment opportunity either through their products or through direct employment, and move away from “traditional” customers and to the four billion people that have been ignored until recently.
  2. Collaboration Amongst Stakeholders: the best success stories come from collaborations between communities and businesses as well as other organizations such as NGOs, IFIs, and NPOs (the report provides several long anecdotal success stories on this note).
  3. Keys For Success In Serving The BoP: Companies like Unilever, Nestle, CEMEX, Shakti etc. all provide clues for how we can generate viable markets and enterprise for the BoP. A powerful lesson to be learned from these examples is that businesses should emphasize synergistic cooperation between local communities and corporations in order to ensure social sustainability-a model which requires patience and substantial investment in research and consultation. These success stories also illuminate the importance of businesses’ thinking being grounded in the BoP perspective rather than the “traditional” clientele. Goods and services such as mobile banking, voice operated ATMs, direct-to-consumer marketing, nutrient-rich soy sauce, and affordable independent LED lighting systems are all examples of product development that thought from the right BoP perspective and made significant changes as a result.
  4. In order to address poverty we need to provide access to finance and markets for poor people by creating an economic and social environment conducive to their entry into the business-world. This requires a network of financial institutions (cooperative banks, local banks, and non-banking financial companies) that could develop low cost financial structures, which serve the poor as well as investment opportunities focused on the BoP. Lastly, to fully generate access to finance and markets for the BoP, we need to generate education programs that provide the BoP with business and management skills.

Though I do think that this report is quite helpful in offering best practices based-off of past successful initiatives, there are very few tangible steps that can be taken from it. If anything, this report best serves to educate people about general trends that should be happening and to offer a foundation for future research. For example, the generation of an “enabling environment” for BoP access to finance and markets is a huge task with an amazing amount of variables and relevant particulars.

Determining what the ultimate vision of that “BoP-oriented environment” would actually look like would be the next question to be addressed, and then we would have to consider how to go about actually making that environment a reality i.e. what programs could be developed, what businesses should do, what laws should be passed and so on. Though it is helpful to have a general idea of where to head, it is evident that much more research on the directions suggested in “Business and Poverty: Opening Markets to the Poor” needs to be done.

Lastly, this report largely overlooks the fact that each model is specific to a particular socio-political and environmental context that framed the entire unfolding of each “case study” that WBI provides. Depending on cultural norms, political atmospheres, and environmental settings, the relevance and carry-over value of each “model” will be either enhanced or diluted. Without an evaluation system for these extra variables, it seems like we are just shooting in the dark, and making guesses as to what seems like it should work.

To take it a step forward, WBI’s presentation of the BoP as one unified community doesn’t just fall short of providing a complete analysis-it presents the danger of simplifying the issue in the minds of its readers by generating the false idea that what worked in “Africa” would work in India and Latin America too. Though I do not expect every report on this hugely complex issue to venture into every element of BoP development, I do think that it is important to outline a document’s limitations in addition to its aspirations so that the reader is given an appropriate frame to think through.