Never Too Poor to Spend?

Wednesday, March 21, 2007

The World Bank is encouraging foreign investors and businesspeople to start pursuing the world’s four billion poor people as a potentially lucrative market worth five trillion dollars, much bigger than previously thought.

“Total annual household income of five trillion dollars a year establishes the BOP (Base of the Pyramid) as a potentially important global market,” the Bank says in a new report, jointly authored by the Washington-based World Resources Institute (WRI).

The International Finance Corporation (IFC), the private sector arm of the World Bank Group, says the report provides accurate data on market potential that paves the way for “private sector engagement”.

“The fundamental message of this to the business community is ’hey guys there’s a five trillion market here, are you interested?” Allen Hammond, WRI’s vice president for innovation, told IPS.

“The second message is to the development community and it is ’gee which makes more sense — to clamour for more aid or to try to frame the whole poverty alleviation in terms of access to opportunity and attract private sector investment’?”

This is the first time that the World Bank has measured the size of markets at “the base of the economic pyramid (BOP)”. The authors say they reached their findings by using income and expenditure data from household surveys in 110 countries.

The Bank report follows in the footsteps of another Washington-based public lender, the Inter-American Development Bank, which lends only to Latin America and the Caribbean, in eyeing the often neglected market.

The IDB announced its push into the disadvantaged people’s market in Latin America last year.

The study also claims that the so-called traditional poverty reduction methods championed by the World Bank itself, and that depend on aid and concessional loans, may not be as effective as “market-based approaches”.

This is mainly because the private sector is more efficient than governments in delivering essential services to a large population, according to the report.

Bank officials used the study to once again market their long-time advice of deregulation, opening up for foreign businesses, economic liberalisation and free trade.

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Source: Inter Press Service (link opens in a new window)