| The bullet point series #2 - Next 4 billion |
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| Social Entrepreneurship - Trends and News of Social Entrepreneurship | |||
| Written by Cyril | |||
| Wednesday, 10 February 2010 10:08 | |||
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The report assumes the "orthodox" theorical framework of Prahalad, and give detailled figures about BOP market. This market is considered as gathering every people gaining less than $3000 per year. It makes a large and heterogenous group, but facing common unmet needs, BOP traps.... Focus is not so on poverty fighting, but on providing better access by sustainable models. The comprehensive report can be found here - In 2005 USD, this report consider that every people gaining less than USD3000 a year is part of the BOP market. It means 4 billion people. They are not all among the poorest, but they don t access to basic needs - Global household income is $5 trillion a year (in PPP, or USD1.3 trillion) - Criteria is not poverty, but the fact that BOP population is not integrated to the global market economy and do not benefit from it. They face significant unmet needs (no bank account or financial service, no phone, no formal title to their dwelling, no access to water, sanitation, electricity…). They also depend on informal or subsistence livelihoods, they lack access to market to sell their products, working time or crops, depends on local employers or middlemen. And finally, they are impacted by a BOP penalty. They pay higher prices for basic goods and services, in cash or in the effort they must expend to obtain them. It is not just the very poor who pay more for the transportation, or face exorbitant fees for loans or for transfers - It is the entire low-income market , not just the very poor, who has to be analyzed and addressed for private sector strategies to be effective. - A market based approach. Traditional approaches often focus on the very poor, proceeding from the assumption that they are unable to help themselves and thus need charity or public assistance. A market based approach starts from the recognition that being poor does not eliminate commerce and market processes. It asks about willingness to pay across market segments. It looks for solution in the form of new products and new business models that can provide goods and services at affordable prices. It recognizes that only sustainable solutions can scale to meet the needs of 4 billion people. There is not enough grants or subsidies to cover the needs of 4 billion people! - There are successes in the BOP. For example, mobile phones! But energy sector has only limited success. - Water represents $20billion, IT $51 billion, but with a huge growth. Health %158billion, transportation $179, housing $332 billion and energy $433 billion. Food is of course the largest with $2 895 billion - India has the largest measured energy market in Asia, with $163 billion in annual household spending. Annual per household spending ranges from $342 to $751. For rural BOP households, energy spending averages around $705 a year, or $2 a day. - Strategies used to target this market are: focus only on BOP with unique products, services or technologies ; localizing value creation through franchising, agent by building local ecosystems of vendors or suppliers, or treating the community as the customer ; enabling access to goods or services, financially (single use, packaging, pre paid…) or physically ; unconventional partnering with governments, NGOs, groups… - Informality is key to understand BOP. 70% of the workforce is informal (WHO). Revenue from remittances is a large part of poor household income. Half of them are informal
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This second serie of bullet points about major document regarding BOP market is for a very detailled report made by the World Ressource Institute, from household income from 36 countries.