World’s poor represent $5 trillion market: report

Tuesday, March 20, 2007

The world’s estimated four billion people who live under the poverty line represent an untapped global market worth $5 trillion in local purchasing power, according to a new report.

The report by the International Financial Corp., the World Bank’s private sector arm, and environmental think-tank the World Resources Institute, measures the size of the market using income and expenditure from household surveys.

It comes as domestic and multinational corporations look closer at breaking into this under-served markets, where microlending is already a mushrooming business.

Development projects have focused on the poorest of the poor, but a much larger group are families with incomes below $3,000 a year, who mainly work in the informal sector, have no bank accounts or access to modern financial services, and lack access to clean water, electricity and basic health care.

The report “The Next Four Billion: Market Size and Business Strategy at the Base of the Pyramid,” refers to this group as the base of the pyramid markets, or BOP.

A wealthier mid-tier group with per capita incomes between $3,000 and $20,000 represents a global market worth $12.5 trillion, but they are better off in general, living mainly in cities and are better served.

“The report backs up the calls for broader business engagement with the base of the pyramid, stressing the need for the private sector to play a greater role in development,” said Michael Klein, the IFC’s chief economist.

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Source: Reuters (link opens in a new window)