''Taken from www.monitor.com

Emerging market, emerging models: Market based solutions to the challenges of global poverty by Ashish Karamchandani Michael Kubzansky Paul Frandano
March 2009''

The original project involved a year-long analysis carried out by Monitor’s Inclusive Markets practice based in Mumbai, India (www.mim.monitor. com). The starting point was the belief that the “next microfinance” is out there, and that other market-based approaches may help address pressing issues of poverty and development in a commercially sustainable fashion.

An alternative and complement to traditional government expenditures, aid, and philanthropy, market-based solutions give low-income people better access to socially beneficial products and services that genuinely and directly improve the quality of their lives and livelihoods. In India, for example, such solutions provide or enable:
  • Clean drinking water at one-fourth the cost of the least expensive alternative.
  • As much as a 125 percent increase in incomes for small farmers.
  • Private education in urban slums that signifi cantly outperforms the best government schools for about $3 per month.
  • Safe, doctor-attended births for a total cost of $40-less than one-fourth the cost in traditional private hospitals.

Market-based solutions have recently attracted strong interest in the campaign against global poverty, in part due to the remarkable success of microfinance. They are relatively new, with an uneven performance record, and there is much yet to learn about what causes them to succeed or fail. The most successful pass two tests: they are self-funding, and they operate at sufficient scale to make a difference to masses of poor people. They also have one salient feature in common: a business model tailored to the special circumstances of markets at the base of the income pyramid.

Emerging Markets, Emerging Models is addressed to those organizations and individuals most concerned with making a real and enduring improvement to the lives of the poor. We hope entrepreneurs will find much of use on business models that work in low-income markets and how they work. We hope donors and investors will be encouraged to fund those ventures that have the characteristics and potential to help improve lives and livelihoods at the base of the pyramid. And we hope governments and aid organizations will recognize the promise of market-based solutions and act to encourage them.

The report is based on Monitor’s extensive research into hundreds of market-based solutions around the world, with a particular focus on India, which is an advanced laboratory of approaches and an especially fertile source of lessons about performance. The research is based on dozens of site visits and hundreds of interviews as well as extensive work in the public record.

Monitor’s findings about the sources of success and failure of market-based solutions yield important lessons and conclusions:
  • While the role of markets in the current global economic crisis is being reevaluated, market-based solutions in emerging markets have generated remarkable benefits to low-income people and offer enormous promise to do even more in the future.
  • That promise depends on adopting the right business models, which must be tailored to the particular economic and social conditions of the poor.
  • As happened in microfinance, new entrants and small enterprises are more likely than large corporations to lead the development of market-based solutions in low-end markets.
  • Noncommercial or “soft” funding plays an important role in low-end markets and helped many of the successful enterprises examined in this report to reach scale - even some of those started by large corporations.
  • Meaningful scale is achieved in different ways but invariably takes time, especially if large corporations are not involved.
  • The most common mistake among unsuccessful market-based solutions is to confuse what low-income customers or suppliers ostensibly need with what they actually want.

The report provides strong evidence that engaging the poor as customers and suppliers presents an exciting - and significant - opportunity to establish new
paradigms to bring genuine social change in economically sustainable ways.

Read the report in full here