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
"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
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 (http://www.wri.org) 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