Daniel Izzo on Brazil's First BoP Impact Investing Venture Capital ...

"In this paper, I identify the bottom of the pyramid (BOP) markets as a new source of radical innovation.

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By focusing managerial attention on creating awareness, access, affordability, and availability (4As), managers can create an exciting environment for innovation. I suggest that external constraints can be utilized to build an innovation sandbox within which new products and business models can be created.

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Using a live example of such an innovation?the development of the biomass stove for the rural poor in India?I illustrate the process and the usefulness of the approach. Increasingly, global firms are recognizing the implications of innovations at the BOP for developed markets as well."

The Ambernath fair is an annual fair organized on the day of Maha Shivratri, when the Ambernath temple is overcrowded with pious devotees who come there to seek the blessings of Lord Shiva. This was the venue for the field activity in the ?Business at the Bottom of the Pyramid? course, and the objective was to experience the art of selling to rural and semi-urban customers.

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A brainchild of our professor, Dr. Anshu Jalora, all the second year students of NMIMS?s MBA Core program, who had taken up this elective, were divided into a total of 9 groups each comprising of around 6 students. The task given to each group was to choose a product which could be sold in a rural market, pool money within the groups, buy items from wholesale markets, and sell the same in the fair.

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An experiential marketing campaigm was deemed a must. The groups chose products like food products, stationary items, sports goods and games, while one group chose a service of applying mehandi and nailpaint.

?What works for the Bottom (or Base) of the pyramid (BoP) marketing or markets for poor, as regards products, services or technologies being introduced, is reflective of creating a market where the poor operates to earn a living, and not await humanitarian donations. In this piece, ?product? will be applied interchangeably with services or technologies, for consistency, as the essence is the application of these in livelihood enhancement of the poor.

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Product designs for this new market should be created around customer need, often involving manufacturing from local materials, cheap and affordable to the poor. In other words, within the BoP marketing concept, products must be useful to the poor and allow them to get out of the poverty trap. Products for BoP can evolve from the agriculture, housing, consumer goods, and financial services sectors.

There is indeed fortune lying at the bottom of the pyramid. C. K. Prahalad, a renowned business professor who was born in Coimbatore, Tamil Nadu, made this point in his book, The fortune at the bottom of the pyramid. He wrote: ?Collectively, the world?s 5 billion poor have vast untapped buying power.

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They represent enormous potential for companies who learn how to serve this market by providing the poor with what they need. This creates a win-win situation: not only do corporations tap into a vibrant market, but by treating the poor as consumers they are no longer treated with indignity; they become empowered customers.?

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I would argue that one needs not to rely solely on corporations to serve the needs of those at the bottom of the pyramid. In the presence of an enterprising culture, the untapped value can be captured by the young indigenous entrepreneurs who are intimately aware of the constraints and opportunities that lie in a resource-constrained market place as the one existing in Pakistan. There is therefore a need to educate the youth about entrepreneurship and value creation.

Two issues are dogging existing mobile money systems: excessive system downtime and lack of interconnection.

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An estimated 70 percent of people in developing countries do not have access to a basic bank account?the challenge of financial inclusion is daunting. Banks hesitate to deploy dedicated retail infrastructures in slums and rural areas, and generally do not see a business case for low-value accounts.

Over the last decade, mobile network operators have stepped in to try to fill the vacuum by offering mobile money services, with varying degrees of success. Unlike most banks, they have a true mass market vocation, well-known brands that are relevant for the poor, experience running extensive third-party retail channels, a deployed base of smartcards (SIM cards) with secure identity elements, and an increasingly ubiquitous mobile network that can be used for remote real-time transaction authorizations and confirmations. Smart Communications in the Philippines was the path-breaker, but Safaricom in Kenya has become the poster child. MTN, Vodacom, Tigo, Orange, and Airtel are all trying to make it work in various other countries.

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Dave Foster (Advertising ?05) is a social innovation designer, focused on creating solutions for social and environmental benefit based on deep understanding of issues and communities in need.

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His expertise is in social enterprise, sustainability and, increasingly, development and appropriate technologies.

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He is the founder and editor of BoP Designer, a?website and blog dedicated to ?solutions and social innovations at the ?base of the pyramid??. His personal portfolio can be found at davefoster.info. Dave currently lives in Dubai, UAE.

Para Unilever, P&G y Nestl?, el negocio del futuro est? en ?frica donde est?n realizando acciones de marketing novedosas basadas en la atenci?n a la Base de la Piramide (BoP).

In recent years bottom-of-the-pyramid (BoP) models have emerged as a popular strategy for offering poor women the opportunity to earn an income by distributing goods and services door-to-door.

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In this article, we explore one recent example of BoP entrepreneurship: the CARE Bangladesh Rural Sales Program (RSP). The RSP is a partnership between CARE and several multinational and domestic companies that seeks to provide poor women with an opportunity to participate in new forms of economic activity, offering them a prospect to earn an independent income and provide a better future for their family by selling a mix of multinational and locally produced consumer goods across rural Bangladesh.

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Our research found that the RSP has opened up new pathways of empowerment for some marginalised women in a context of considerable socioeconomic and cultural constraints, yet whether such schemes will have traction as a model for economic empowerment over the long term remains an open question

A new in-depth analysis of a rural door-to-door goods distribution system in Bangladesh examines key issues associated with so-called Bottom of the Pyramid (BoP) schemes. Professor Linda Scott, Dr Catherine Dolan and Mary Johnstone-Louis of Sa?d Business School, University of Oxford, have completed a four-year research project on CARE International?s Rural Sales Programme (RSP) - a distribution system which has developed from a modest pilot scheme in 2005 involving 49 local women, into a sales network of 2,640 women working in 80 districts, carrying goods from seven companies.

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From this fledgling NGO programme, CARE International and danone.communities have announced the formation of a joint venture named ?JITA? ? a groundbreaking NGO-private sector hybrid with the goal of employing 12,000 women and reaching 10 million customers in Bangladesh by 2014.

Endeva takes an empirically grounded approach to inclusive business development. In order to counter challenges in the slums and villages of developing countries, we apply interactive methods in our field research.

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These are complemented by desktop research, interviews and expert workshops. The video illustrates our approach with the example of a energy kiosk project in Madagascar.

The ?African Facility for Inclusive Markets? (AFIM) is a regional private sector and inclusive market development programme for poverty reduction in Africa. Based in Johannesburg, it is supported by UNDP?s Private Sector Division and Regional Bureau for Africa.

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As part of its objective to increase the capacity of regional organizations, governments, and other stakeholders to support inclusive market development in the region, AFIM will develop a report based on the ?Growing Inclusive Markets? (GIM)Initiative?s methodology, including the research and analysis of case studies of inclusive business models. The GIM Initiative has already documented 120 case studies of such business models across regions ? for more details, see http://cases.growinginclusivemarkets.org.

The informal networks through which low-income people do store and transfer money have high transaction costs and are prone to theft. Mobile money is beginning to fill this gap by offering financial services over mobile phones, from simple person-to-person transfers to more complex banking services.

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To date, there have been more than 100 mobile-money deployments in emerging markets; at least 84 of them originated in the past three years.

On June 2 at the CECP Summit, one of the world's top authorities on the implications of sustainable development for business strategy, Professor Stuart Hart drew on the latest edition of his book Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems as well as his pathbreaking article "The Fortune at the Bottom of the Pyramid," written in collaboration with C.K. Prahalad, to discuss both why and how companies can move "beyond greening" toward transformational, strategic change.

Recently, the Opportunities for the Majority (OMJ) Initiative of the Inter-American Development Bank hosted Daniel Izzo, co-founder and partner of Vox Capital, Brazil?s first impact investing venture capital firm, which focuses on high potential businesses that serve the Brazilian low income population through products and services with the potential to improve their lives. In addition, Vox Capital is the first Brazilian fund OMJ is investing in.

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In this wide-ranging interview, I spoke to Daniel about his motivations, the portfolio of companies currently under Vox Capital?s belt, the social entrepreneurship sector in Brazil and Latin America more broadly, leadership lessons he?s acquired throughout his career, and much more.

n an article written for the March 2011 edition of the Harvard Business Review, Ashish Karamchandani, Mike Kubzansky, and Nishant Lalwani, who lead Monitor Inclusive Markets, an initiative within the Monitor Group that focuses on catalyzing market-based solutions for social change, argue that it?s far more difficult than many global corporations realized to get prices low enough to attract consumers and to manage distributed low-income producers.

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The market for products and services aimed at the ?bottom of the pyramid? (BOP), i.e., the 4 billion people living in poverty in developing economies, is vast, representing $5 trillion in purchasing power ? but so are the obstacles for reaching them. Despite the immensity of the markets and the volume of the hype, few multinational firms have built sizable businesses serving consumers or producers who survive on just a few dollars a day.

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M-Pesa, a simple, easy to use way to move money and pay for goods with a cellphone, is transforming the economy in East Africa.

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Agnes Ngooro, a small trader in the bustling central market of Mombasa, spends her days sitting behind a wooden table selling trousers for a few dollars a piece, and while it may not look like it at first glance, she is an international businesswoman.

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The clothes displayed on her table are manufactured in China and Thailand, and they arrive in East Africa in the region?s major cities including Nairobi, Kenya and Kampala, Uganda.??If I want to buy something from Nairobi, I send money to the wholesaler. When he receives it he sends me the goods,? Ngooro said on a recent day while tending her goods.

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A wealth of opportunities for business to not only grow and prosper, but also develop philanthropic ways of operating and make a profit is opening up with the massive economic and demographic shifts taking place over the coming decades. The World Business Council for Sustainable Development (WBCSD) believes that tomorrow's leading companies will anticipate these trends and align profitable business ventures with the needs of society.

Inclusive businesses wanting to market to low-income, rural consumers are increasingly using a village entrepreneur model for the ?last mile? of their distribution channel. However, although this model is growing in popularity, its use does not always guarantee success.

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?Reaching the Rural Consumer? is a two-page Checklist which offers a series of factors for consideration, from the perspective of all stakeholders to help determine whether or not the village entrepreneur (VE) model is an appropriate solution to the challenge of reaching rural consumers.

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The companion publication, ?The ?last mile? challenge: the limitations of the village entrepreneur model? looks in more detail at circumstances where the ?village entrepreneur? model does and doesn?t work and why it may not be a universal solution to the ?last mile? challenge.

Today several of the world?s largest corporations ? including Hewlett Packard, SK Johnson and Unilever ? are engaging with the so-called ?bottom of the pyramid?, becoming key players in global development by selling products to improve health, nutrition and overall well-being in the rural markets of developing countries.

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Meanwhile development donors like DfID champion large scale social entrepreneurship as a mechanism for delivering social development outcomes, from gender empowerment, to disease eradication and access to energy.

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However, the BoP model is not without its critics.

Opponents have pointed to the paradox of promoting development by increasing mass consumption, highlighting the effects of selling single serve plastic sachets of soap and shampoo in a context of global climate change.

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Others claim that such initiatives are nothing more than a cynical marketing ploy on behalf of multinational corporations to ?have their cake and eat it? by selling products that arguably poor communities do not need but in a model that suggests a genuine concern for wellbeing and economic empowerment.

Working with companies including Unilever, Danone, Grameenphone, Bic and local producers, CARE International has used its deep insight and experience of working within communities in rural Bangladesh to establish a network of women to sell and distribute a changing basket of mixed goods, which includes consumer products, medicines, food, apparel and agricultural items.

This article analyses the issues present in micro-insurance and highlights operational innovations exhibited by two successful micro-insurance schemes based in Karnataka ? Yeshasvini Scheme and Sampoorna Suraksha ? which can potentially help scale up the micro-insurance coverage across India.

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Micro-insurance schemes inherently involve a trade-off between coverage, affordability and operating cost, and although different in nature of coverage and benefits, both the schemes discussed here have employed similar processes and tools to manage the trade-offs. These schemes have demonstrated how sustainable models of micro-insurance can be developed and scaled up, albeit with a new set of challenges.

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Chaired by ITN?s Alastair Stewart, the discussion will focus on a newly formed social enterprise called JITA, established by CARE to provide income generating opportunities to marginalised rural women in Bangladesh and provide a way for companies like Bata and Unilever to reach ?Bottom of the Pyramid? (BoP) consumers that are normally too expensive or logistically difficult to reach.

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JITA has made over $2 million profit and plans to expand beyond Bangladesh to other developing countries.

Beyond the point of circular discussion, it remains strongly debatable that actionable progress over the issue of truly dealing with what will be a doubling urban slum presence in the next 18 years is at a virtual standstill.

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Amongst the deplorable negativity often mooted that slums may well have to be a part of the global future, there has been some hope in the growing reputation and appeal of the ?impact? investment concept amongst private banks, venture capitalists, equity investors amongst others who are increasingly interested in exploring base of the pyramid housing sector opportunities.

Entrepreneurs will be first movers in impact investing, Impact investors care about only one thing that their investments have positive social and environmental impact.

The year 2009 was referred to as ?The first year of BoP in Japan?. Not only did the Japanese translation of the late Prof. Prahalad?s ?The Fortune at the Bottom of the Pyramid? received much attention, BoP market analyzation that focused on emerging markets in Asia and African countries gained wide recognition too.

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Documentaries on the subject were broadcasted not only on commercial TV stations but also on NHK (Japan Broadcasting Corporation), giving it an official media appeal. Subsequently, the joint ventures between UNIQLO and Yukiguni Maitake Company with Grameen in Bangladesh in 2011 accelerated the BoP boom.

The BoP Learning Lab for South(ern) Africa was established in 2006 as a joint initiative by the University of Stellenbosch Business School (USB) and United States professors Stuart Hart and Michael Gordon. The aim of the Learning Lab, as the local branch of a worldwide network of Labs, is to spread the message about the The Fortune at the Bottom of the Pyramid (title of the 2002 article by C. K. Prahalad and S. L. Hart) in this part of the continent.

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Spanning over four continents, the BoP Learning Labs represent a ?consortium of leading thinkers and practitioners interested in exploring new business opportunities in low-income communities that would benefit business as well as the local community?

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