Private Utilities and Poverty Alleviation

Private Utilities and Poverty Alleviation

Market Initiatives at the Base of the Pyramid

Edited by Patricia Márquez and Carlos Rufín

Drawing on cases from electricity distribution and other infrastructure industries, and from experiences spanning Asia, Africa and Latin America, this book examines new business models to bring basic utility services to the four billion people comprising the base of the socio-economic pyramid.

Foreword

Edited by Patricia Márquez and Carlos Rufín

Subjects: development studies, development economics, economics and finance, development economics, industrial economics, public sector economics

Extract

A few years into the twenty-first century, multinational corporations (MNCs) find themselves on the horns of a dilemma: shareholders expect double-digit returns while the global economy is growing at an average annual rate between 2 and 3 per cent. The answer may reside in focusing on emerging markets, but not the incremental market expansion targeted at the wealthy few; rather at the much larger base of the economic pyramid, the so-called BOP, where between 4 and 5 billion people (or two-thirds of humanity) live, work, consume and relentlessly try to improve their lives.1 The task of unleashing the economic potential trapped in the informal economy in which the majority of the world’s poor operate is a challenge that MNCs, together with a myriad of for-profit and nonprofit organizations (NPOs), have begun to focus on. This change implies a basic challenge: shifting mindsets that traditionally considered that majority too poor to be viable customers of their products. The challenges organizations face in providing utilities to the poor occur in broad contexts that differ among countries. Organizations need to respond to multiple stakeholders as they confront differing perceptions of the responsibilities of utility companies. Utilities must conform to varying regulations often developed amidst complex political interests. Thus far, articles and papers have centered mostly on how large consumer goods companies such as P&G and Cemex have turned their gaze to the BOP in search of profits, as ascertained by C.K. Prahalad in The Fortune at the Bottom of the Pyramid (2005)...