By Tamar Koosed
It’s been really fun exploring BoP ventures here at the Erb Perspectives Blog and hearing from some of you about the work you’ve been doing on the topic. We close our series acknowledging the progress that’s been done around poverty reduction and touching on the next generation of challenges for companies looking to create shareholder value and improve the standards of living for low-income communities.
Oftentimes, in our quest for improvement, we focus on the negatives, also known as “lessons learned” if you are in the international development field or as “opportunities” if you are in the private sector. We took on this focus while writing this blog series, pointing out why so many BoP ventures have failed and what strategies they could implement when trying again.
However, we, as a global community, have done a lot to reduce poverty in the last 20 years. According to the World Bank, in 1990, 42% of the world’s population lived below the $1.25/day poverty line. That rate fell to 21% in 2010.1 Poverty was halved and this is no small feat.
Many economists attribute this largely to the rapid growth in GDP in populous and initially impoverished developing countries, like China and India. But the trend is true for all regions, when there’s growth there are declines in absolute poverty. Good macroeconomic policies and ensuring there is rule of law are important contributors to growth, but so are trade and the ability of the country and its citizens to be integrated into the global economy. Businesses have an important role to play in this regard and promote GDP growth by selling and buying products and services.
But it will take more work and incredible ingenuity from businesses, and governments alike, to move the remaining billion people across the poverty line. Many of those that were lifted out of poverty were just below the $1.25-a-day threshold, making it harder now to get people who are deeper in the poverty cycle above the same mark. Importantly, the remaining billion are also the hardest to reach in countries that are already growing or are living under unstable and failing governments.
Number of people below the poverty line, in millions 2
Evidently, those that crossed the poverty line benefit from products and services that lead to shared prosperity, like good quality and affordable reading glasses for the poor, as living on $1.26 a day is not conducive to good standards of living. So there’s much work to be done.
Businesses will continue to tackle the challenges of creating good products that have social value, finding the balance between product costs and consumer price, raising awareness to create demand, and finding early stage financing. But as incomes rise around the world, the persistent challenge for businesses that aim to contribute to poverty reduction will likely be reaching those that need them most. Those living in poverty will more and more be in hard to reach areas of developing countries or simply reside in unstable, failed states. Businesses will need to find reliable and scalable distribution channels to simply reach those that need them most. A lot has been done to reduce poverty and improve standards of living, but much more needs to be done. I am certain entrepreneurs are up for the challenge.
1. [Dollar, David, Tatjana Kleinerberg, Aart Kraay. August 2013. “Growth Still Is Good for the Poor.” The World Bank. [http://goo.gl/z758aA].]↩
2. [Chandy, Laurance, Natasha Ledlie, and Veronika Penciakova. April 2013. “The Final Countdown: Prospects for Ending Extreme Poverty by 2030.” The Brookings Institution. [http://goo.gl/Qsx2CV].]↩
Tamar Koosed is the founder of MANAUS Consulting. She has experience in the area of impact assessments and international development and has conducted several independent evaluations of BoP business models and helped disseminate successful strategies in the field. She has worked closely as a consultant with Opportunities for the Majority, an Inter-American Development Bank Initiative that promotes and finances market-based, sustainable business models to deliver quality products and services for the base of the pyramid in Latin America and the Caribbean. She has recently been appointed to the World Economic Forum’s Global Shapers Community in Brazil, where she is originally from. The community is a network of young leaders with potential for future leadership roles in society. Tamar dedicates her professional career to uncovering creative and effective solutions to development challenges.
Read other posts from this BoP blog series:
Social Enterprise: Understanding the Base of the Pyramid
The Business Case for BoP Strategies
Distinguishing Between Demand and Need in the BoP
Incubating Expertise: Fostering Partnerships within the Community
Should corporations promote development?
Tips on Early Stage Financing for BoP Ventures