IFC, World Bank's private sector arm, has cast its critical eye over the well-known Grameen Telecom Village phone scheme (you know, the phone ladies in Bangladesh). It has identified what it calculates as a US$5 trillion business plan when translated globally. We explain why...
IFC, World Bank's private sector arm, has cast its critical eye over the well-known Grameen Telecom Village phone scheme (you know, the phone ladies in Bangladesh). It has identified what it calculates as a US$5 trillion business plan when translated globally. We explain why...
International Finance Corporation (IFC) has examined the business model for the Grameen Telecom Village Phone Programme. That is, the format of a telephone located in every village in rural Bangladesh. Walk ten minutes and you will have a receiver in your hand.
IFC estimates there are four billion human beings living in substantial poverty. But add up their earning potential and you are on the verge of a US$5 trillion market. This is the key conclusion to the IFC/World Resources Institute report The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid (BOP). It may also be the first time that the BOP markets have been investigated and evaluated on the basis of household income and expenditure statistics.
Where Grameen scores is in what the report calls an innovative business mode, namely shared access whereby an entrepreneur with a phone provides pay-per-use access to a community: mobile phones move on from being purely a subscriber phenomenon. And their social and economic consequences rise alongside.
And why just Bangladesh?
Bangladesh is renowned worldwide for the Grameen initiative; its entrepreneurs (entrepreneuses, in view of the ladies running the phones) are working in 80,000 villages and generating over US$100 per month. But Bangladesh is not the whole story.
South Africa is hot on her heels. No, it is not 80,000 villages but 4,400 similar phone-shops, all entrepreneur-owned, generated the majority of Vodacom's mobile revenue in South Africa three years ago. Customers pick up a mobile, paying by the minute. Those entrepreneurs out-perform 8 million individual subscribers.
And there's room for improvement. The greater and more accurate the data on what markets can bring, the further down the BOP penalty is driven. For then private sector involvement becomes more possible as investors realise the BOP's potential. Poorer people should not have to suffer goods and services that are more expensive, of low quality, or difficult or impossible to access.
Returning to South Africa and Vodacom's success, IFC is confident that "a strong value proposition for low-income consumers has translated into financial success for mobile companies." Business strategies bear out the success.
Overhaul your business strategies
The authors of IFC's report impress on business executives the need for more creativity as they seek the solution to BOP markets. At present such markets are underserved, remote and subject to what it calls 'informal' economic influences. Bring in the 'formality' of fully incorporated and experienced businesses and thereby boost efficiency competition. 'Formal' firms can be there to redress the BOP penalty, and mobile firms are demonstrating how such improvements can be effected.
Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development and IFC Chief Economist, took the opportunity not just to endorse the report but also to call on governments to play their part: "The report backs up the calls for broader business engagement with the BOP, stressing the need for the private sector to play a greater role in development. 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."
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