New Analysis Reveals $5 Trillion Market at Base of the Pyramid

International Finance Corporation and World Resources Institute Report

Details Economic and Development Opportunities

Mar 19, 2007, 01:00 ET from World Resources Institute

    WASHINGTON, March 19 /PRNewswire-USNewswire/ -- Four billion people who
 live in relative poverty have purchasing power representing a $5 trillion
 market, according to a new report released today by IFC, the private sector
 arm of the World Bank Group, and World Resources Institute.
     The report, The Next 4 Billion: Market Size and Business Strategy at
 the Base of the Pyramid, for the first time measures the size of markets at
 the base of the economic pyramid using income and expenditure data from
 household surveys. The analysis is complemented by an overview of business
 strategies from successful enterprises operating in these markets.
     Accurate data on market potential provides a foundation for private
 sector engagement that can drive down what the report calls the "BOP
 penalty," where poorer people often encounter goods and services that are
 more expensive, of low quality, or difficult or impossible to access. The
 report seeks to help businesses think more creatively about new business
 models that meet the needs of these underserved markets.
     According to the report, base of the pyramid markets are often rural,
 underserved, and dominated by the informal economy, and as a result are
 relatively inefficient and uncompetitive. As greater numbers of formal
 firms compete to redress the BOP penalty, the poor experience a direct
 increase in quality of life. As the report describes through business case
 studies and data, the penetration of mobile telephony into these markets is
 a classic example of how competition can drive such improvements.
     "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, World Bank/IFC Vice
 President for Financial and Private Sector Development and IFC Chief
 Economist. "The report also highlights the need for governments to pick up
 the pace of reforms to the operating and regulatory environment, so that it
 becomes easier to do business," he added.
     In its geographic analysis, The Next 4 Billion finds that the Asian BOP
 market (including the Middle East) is by far the largest, with 2.86 billion
 people and a total income of $3.47 trillion, constituting 83% of the
 region's total population and 42% of the its aggregate purchasing power.
     Eastern Europe's $458 billion BOP market includes 254 million people,
 64% of the region's population, with 36% of aggregate purchasing power.
     In Latin America the BOP market of $509 billion includes 360 million
 people, representing 70% of the region's population but only 28% of
 aggregate purchasing power, a smaller share than in other developing
     In Africa, the BOP market is $429 billion, but it represents 71% of
 aggregate purchasing power in this region. The African BOP includes 486
 million people -- 95% of the region's surveyed population.
     The report also characterizes the base of the pyramid markets by
 sector. Sector markets for 4 billion consumers range from those that are
 relatively small, such as water ($20 billion) and information and
 communication technologies ($51 billion), to medium-scale markets such as
 health ($158 billion), transportation ($179 billion), housing ($332
 billion), and energy ($433 billion), to truly large markets, such as food
 ($2,895 billion).
     "This report shows how critical it is to focus on the BOP in all its
 dimensions," said Jonathan Lash, president of the World Resources
 Institute. "The BOP wins when brought into the formal economy. Businesses
 win when they pay attention to the needs of the BOP markets. The world wins
 when environmental sustainability, transparency, and equity are as deeply
 embedded in BOP growth strategies as the drive for profits. This report
 lights the path to sustainable business engagement with the BOP."
     The empirical profile of the base of the pyramid in the analysis
 substantially extends previous analyses by C.K. Prahalad, Stuart Hart and
 other experts by offering a detailed economic portrait of BOP markets. Data
 are given by income segment, urban/rural location, economic sector, country
 and region.
     Some striking patterns emerge from the data. More than half of BOP
 health care spending, for example, is for pharmaceuticals. As incomes rise,
 the share of household spending for food declines, while the share of
 spending for transportation and for phone and Internet access rises
 sharply. Access to electricity is universal in Eastern Europe and high for
 most BOP households in Asia and the Latin America region, but quite low for
 Africa. For all regions except Eastern Europe, firewood is the dominant
 cooking fuel for the lower- income segments in the BOP, while propane or
 other modern fuels dominate higher BOP income segments and urban areas.
     The World Resources Institute ( is an independent,
 non- partisan and nonprofit organization with a staff of more than 100
 scientists, economists, policy experts, business analysts, statistical
 analysts, mapmakers, and communicators developing and promoting policies
 that will help protect the Earth and improve people's lives.

SOURCE World Resources Institute