One of the greatest challenges in developing programs aimed at reaching the base of the pyramid is how to make contact with not just a neighborhood or village, but an entire city, county or country. Only on this large a scale can there be significant benefits, both for companies and for the low-income people they serve. At Opportunities for the Majority, we have found one of the most effective approaches to this level of scalability is what we call the platform strategy.
In this strategy, existing platforms, such as those provided by utilities, logistics companies, or even NGOs, can be used as a launching pad to provide additional goods and services that serve the needs of the BOP. For example, a decade ago, the Bogotá, Colombia energy company CODENSA started a new microcredit program called Codensa Hogar. Since then, Codensa Hogar has provided over 600.000 micro-credits averaging US$ 370 each, 35 percent of which went to previously unbanked, poor people. It has over 180,000 clients with micro-insurance solutions, 12,000 of whom are small shop owners. In just ten years, it became one of the largest microfinance institutions in Colombia. Now, this is scale!
The driver behind this BoP success story is the fact that CODENSA leveraged its client distribution platform (over 2.2 million homes) and "added value" to its basic proposition: energy. In addition, it had, in its bill payment histories, detailed individual credit histories for over 2 million customers. But the platform concept is not limited to utilities. Small businesses represent approximately 95 percent of enterprises in the region. All are served by complex logistics and distribution networks. If one can buy a Coke or a bar of soap in the most remote location, there is no reason why these networks cannot provide additional value to the BoP.
Latin America has gone from fewer than 10 million mobile phone subscribers in 2002, to over 300 million subscribers today. This explosive growth cannot be explained only by the technology or the business model itself, but by how these devices provide access to markets and information. And now, the cell phone platform is starting to change the landscape in many other industries. It is becoming the platform of choice for the banking industry to reach the poor, for example. In turn, mobile banking serves as a means to financial inclusion, and to further lower the cost of remittances for migrants and their families. This is what BoP platforms can do for the BoP scale quandary.
In a series of blog postings, I will present six different kinds of platforms that are found across Latin America and the Caribbean, each of which presents great possibilities as potential partners for reaching majority markets.
Francisco Mejía is a principal in the IDB’s Opportunities for the Majority initiative. He is a former director of the Center for Economic Development at the Universidad de los Andes in Bogota.
A version of this post was published on the NextBillion blog.
