We have come full circle. We have made three transitions in our thinking. First, we demonstrated that the BOP—the poor—can be a market. Second, once we accept the BOP as a market, the only way to serve that market is to innovate. The BOP demands a range of innovations in products and services, business models, and management processes. Third, these innovations must be accompanied by increased TGC, making the government accountable to the citizens and making it accessible and transparent. Market-based ecosystems can also facilitate the process of making transparency, access, and respect for commercial contracts a way of life. The intellectual transitions that are the substance of this book and its implications are visualized in Figure 6.1.

Figure 6.1. The Private sector and the BOP: Transitions.

How will these changes impact life at the BOP? As BOP consumers get an opportunity to participate in and benefit from the choices of products and services made available through market mechanisms, the accompanying social and economic transformation can be very rapid. The reason for this is that BOP consumers are very entrepreneurial and can easily imagine ways in which they can use their newly found access to information, choice, and infrastructure. Let us look at some examples:

The ITC e-Choupal infrastructure was created for farmers to have access to information regarding prices as well as agriculture-related information, as shown in Table 6.1. The system was configured to make them productive farmers and to make the supply chain for soybeans more efficient so that there was a win for both the farmer and ITC. That was the intent.

It took farmers fewer than three months to understand the strength of the Internet and they started using the system for a host of other, non-business-related and socially beneficial tasks. They found that they could connect with each other and chat about a whole range of issues, not just agriculture and prices. They found that the PC could be an entertainment device. It could be used to play movies, listen to songs, and watch cricket (a sport that is a national obsession in India). They could print out the classroom grades of their children. They also became very sophisticated in tracking prices, not just at the local mandi or ITC prices, but also for futures at the Chicago Board of Trade. They were able to correlate intuitively the futures prices with the prices they should expect in selling to ITC or others. They were establishing a clear link between global price movements and the prices in remote villages of northern India. Just three months earlier they were “hostages” to the vagaries of the local merchants in the mandi. They also became experts at e-mail and chat capabilities. The list of dominant, unplanned activities that evolved in three to six months among the villages connected by the system is shown Table 6.2.

ITC worked hard to create interfaces in the farmers’ native language, Hindi. It also provided software that made it possible to type Hindi characters using a standard English keyboard. The preferred language for writing e-mails and other electronic communication, however, is “Hinglish,” or Hindi typed with English characters. The reason for this is that combining vowels and consonants to create Hindi letters is a very cumbersome affair on a keyboard. It sometimes takes three keystrokes to render one letter. All the sanchalaks we spoke to agreed that this was the only aspect of computer usage they had not yet been able to master.

Undeterred, the sanchalaks started to use the English keyboard to write e-mails in Hindi. They were able to move fast in building both the capacity to communicate with the outside world and the ability to make themselves well-understood. The creativity in building communication patterns can be illustrated by one of the e-mails between a sanchalak in a remote village in northern India and the researcher in Ann Arbor, Michigan. There appear to be no barriers. The student in the United States was educated, rich, sophisticated, and well-traveled. The farmer probably never traveled beyond a cluster of villages, was poor and uneducated. All those boundaries were broken by the possibility of asynchronous communication through e-mail. We do not know how long it took to compose this e-mail, but suspect probably not long. It is very straightforward and to the point. The e-mail is shown in Figure 6.2.

Figure 6.2. E-mail from a sanchalak.

The use of the infrastructure in creative ways is not confined to the sanchalaks. Across the board, BOP consumers are able to use the systems they have access to in ways unimagined by those providing the systems. What is the real change for those at the BOP? The real advantages of a private-sector network can be captured as shown in Table 6.3.

The simple case of the ITC e-Choupal, if repeated 1,000 times, can transform a country. We find increasingly that women from different villages who have never met each other are in chat rooms discussing complex issues like interest rate fluctuations and political positions to take with respect to specific issues. They also use it for more family-oriented topics. In one chat room on the n-Logue network in southern India, the women were discussing the status of their grandchildren or other relatives living abroad. The newly found advantages are the building blocks of a market economy: transparency of information, universal access, dialogue among various thematic communities that form autonomously, and a discussion of the risks and benefits of various courses of action such as “Should I sell my corn today or hold back?” These four building blocks are dialogue, access, risk benefits, and transparency (DART). These are the same building blocks that are leading to more consumer activism in developed markets.^[1]

Contrary to popular belief, BOP consumers are always upgrading from their existing condition. MNCs and large firms oriented toward the top of the pyramid sometimes look at what the BOP consumers use and think of it as downgrading from the products they are selling. These products are seen as cheap. On the other hand, for the BOP consumers, the newly found choice is an upgrade from their current state of affairs. For example, when Nirma, a startup, introduced a detergent powder in India, the established firms in that business—both MNCs and large Indian firms—considered the product as low end and not of interest to them. At that time the total tonnage for high-end products was about 25,000 tons. Nirma was a new category, upgrading the BOP consumers from poor-quality, locally made soaps, and the brand built an impressive market of 300,000 tons. The lessons were not lost on the incumbents. The size of the market at the BOP is significant (300,000 tons vs. 25,000 tons at the top of the pyramid), but more important, Nirma was a product uniquely fashioned for the poor who wash clothes under a tap or in a running stream rather than in a washing machine.^[2] The same process is evident in a wide variety of businesses, including financial services. When the BOP consumers opt for a loan from a bank, as opposed to a local moneylender, they are upgrading. When they use iodized salt over the locally available unbranded salt, they are upgrading. When they get access to good-quality building materials and a design for how to add an additional room from Cemex, they are upgrading. The examples can be multiplied. The message is simple: For the BOP consumer, gaining access to modern technology and good products designed with their needs in mind enables them to take a huge step in improving their quality of life.

We have already examined the benefits of access and transparency and how that impacts the asymmetric information that was (and is) the norm in most BOP markets. However, once BOP consumers get access to digital technologies, the pattern of access to knowledge changes. For example, in the EID Parry Agriline example used in the book, the farmers had a concern about the quality of a particular crop: betelnut. They used their PCs and the attached cameras to send pictures of the affected leaves to a central agronomy center 600 miles away. They received advice from the agronomists at a remote location. That certainly improved their ability to solve the problem. Examples such as this one are proliferating by the day. It is becoming well-accepted in some parts of India that telemedicine is the way to go to get remote diagnostics based on PCs. Shanker Netralaya, for example, brings world-class eye care to rural India. It has vans fitted with optometric equipment that are connected via satellite hook-up to the hospital. Senior doctors can review complex cases on a two-way videoconferencing hook-up and discuss with the patients their problems. They can also offer a diagnosis based on images presented on a split screen. They can then recommend a course of action. This incredible access to very high-technology solutions is changing the way we think about the BOP consumers. Increasingly sensitized to what is possible, they are also demanding high-technology solutions to their problems.

One of the common problems for those at the BOP is that they have no “identity.” Often they are at the fringe of society and do not have a “legal identity,” including voter registration, driver’s license, or birth certificate. The instruments of legal identity that we take for granted—be it a passport or a Social Security number—are denied to them. For all practical purposes, they do not exist as legal entities. Because they do not have a legal existence, they cannot be the beneficiaries of a modern society. Voter registration in vibrant democracies, such as India, provides one form of identity. Erstwhile communist regimes had a system of documenting everyone, including the location to which they belonged. In Shanghai, for example, all the migrant workers were undocumented for a long time. They did not officially belong to Shanghai and therefore could not participate in programs such as government-assigned housing.

This picture starts to change as a private-sector ecosystem emerges. The individuals in an SHG have an identity. They are recognized as legal by the ICICI Bank. They all have a name, a designation, a group to which they belong, and a scheme in which they participate. The same is true of the eSeva service provided by the government of Andhra Pradesh. Now all citizens who pay their utility bills or register births and deaths have an identity. In fact, many BOP consumers are elated to see their names on a computer screen. This is universal. The poor in Brazil, when they shop in Casas Bahia, get an identity. They get a card from the company and that tells the world who they are. Consumers proudly display their Casas Bahia cards as proof of their existence as well as their creditworthiness. A similar situation exists in Mexico. When Cemex organizes women, it not only gives them the tools and the materials required for them to build a kitchen; it also gives them a legal identity. The women are bound to the firm and vice versa. Neither party can break the contract without penalty. That is a proof of legal identity.

The importance of legal identity cannot be underestimated. Without it, BOP consumers cannot access the services we take for granted, such as credit. Hernando de Soto documented the problems of a lack of legal identity at the BOP. The status of a “nonperson” in legal terms can confine people to a cycle of poverty.

A well-understood but poorly articulated reality of development is the role of women. Women are central to the entire development process. They are also at the vanguard of social transformation. For example, Grameen Bank’s success is based on lending only to women. The entrepreneurs who were able to use the microfinance made available were women. The Grameen phone “ladies” are the entrepreneurs. In the cases in this book, there is adequate evidence of the role of women in building a new society at the BOP. The SHGs at ICICI Bank are all women, as are the Shakti Ammas at HLL. These women are entrepreneurs responsible for saving and accessing credit. In the case of Cemex, the company works only with women. Amul, a milk cooperative, depends on women for their milk origination in villages. Women also collect the “cash” for the milk, and therefore have achieved a new social status. Access to economic independence can change the long tradition of suppression of women and denial of opportunities. The success of Avon, Mary Kay, and Tupperware in the United States and other parts of the world is also based on the role of women entrepreneurs. Although the evidence is overwhelming, very little explicit attention has been paid to actively co-opting women in the efforts to build markets and lead the development process. MNCs and large firms will do well to keep this in mind in their efforts to create new markets at the BOP.

It is natural for us to ask, “If the involvement of the private sector in BOP markets can have such a significant impact on social transformation, do we need checks and balances?” Yes. We need to make sure that no organization abuses its power and influence, be it corrupt governments or large firms. Fortunately, checks and balances are evolving rapidly. The spread of connectivity—wireless and TV—makes it impossible for any group to abuse its position for long. Further, civil society organizations are always on alert. However, the most important protection is informed, networked, and active consumers. The evolution of the BOP consumer is ultimately the real protection.

The social transformation that is taking place in markets where the public and the private sectors have been involved at the BOP is quite impressive. BOP consumers have constantly surprised the elite with their ability to adapt and their resilience. As we described in this chapter, they do the following:

Taken together, these changes will lead to significant social change and transformation.

Although we have discussed the nature of social transformation that is possible at the BOP, the real test of the entire development process of development is poverty alleviation. How will we know it is taking place? Simply stated, the pyramid must become a diamond. The economic pyramid is a measure of income inequalities. If these inequalities are changing, then the pyramid must morph into a diamond. A diamond assumes that the bulk of the population is middle class. The morphing that we must seek to accomplish is shown in Figure 6.3.

Figure 6.3. The morphing of the pyramid into a diamond.

There will always be “the rich,” but a measure of development is the number of people in a society who are considered middle class. More important, social transformation is about the number of people who believe that they can aspire to a middle-class lifestyle. It is the growing evidence of opportunity, role models, and real signals of change that allow people to change their aspirations. Our goal is to rapidly change the pyramid into a diamond. To be confident that this transformation is occurring rapidly, we should be able, at a minimum, to measure the changing patterns of income inequities in a society. This is a relative measure. We can also measure the income levels over a period of time. This is an absolute measure of change in that society. Needless to say, modeling this change requires reliable measures of income, appropriate sample size, and longitudinal data. These are hard to come by.

An interesting study by the National Council of Applied Economic Research (NCAER) in India suggests that there might be some weak but clear signal that this change is emerging. During the last decade, India has liberalized its economy, promoted private-sector development, and allowed each state to experiment. As a result, instead of one monolithic approach to economic development, there are multiple models of development being implemented. The various states are also growing at highly differentiated rates. NCAER modeled the changing patterns of income distribution by states and projected the inflation-adjusted income pyramid for 2006–2007. It is easy to see that in some states such as Bihar and Orissa, the shape of the income distribution does not change. It is still the pyramid. However, in other states, such as Assam, Maharashtra, Gujerat, Haryana, and Punjab, the pattern is shifting noticeably. The projections of income distribution from NCAER are shown in Figure 6.4.

Figure 6.4. The shape of rural income distribution.

This pattern will repeat itself in both rural and urban India. This has several implications. First, we can measure the patterns of income distribution over time and can develop both relative and absolute measures of change. Second, the changing nature of the income distribution creates a virtuous cycle. The demand for products and services increases domestic economic activity, creating more jobs and wealth. The changing patterns of consumption of durables in India—in both rural and urban markets—are well-documented.^[3] Third, as the BOP morphs from a pyramid into a diamond, the distinction between the BOP consumer and the top-of-the-pyramid consumer disappears. There is only one consumer group.

The pattern of changes in income distribution seen in India is an early signal of what is possible. A measure of success is when the debate about BOP consumers becomes irrelevant as they become part of the mainstream market.

I have tried to depict a picture of the possibilities. I am sensitive to the fact that the illustrations that I provide are but islands of excellence in a sea of deprivation and helplessness. The important question for us is, “Do we see the glass as half full or half empty?” There is a long way to go before the social transformation leading to the elimination of inequalities around the world will be accomplished. The private sector, as shown by the examples we have examined, can make a distinct contribution. The changing patterns of income distribution, the increasing confidence of the BOP consumers, and their ability to become activists in changing their own lives through entrepreneurship give us hope. But the examples that we have examined challenge all of us, whether our primary obligation is boosting shareholder returns or reducing poverty and social injustice, to bring the resources and capabilities of the private sector to bear in pursuit of that goal.

Our best allies in fighting poverty are the poor themselves. Their resilience and perseverance must give us courage to move forward with entrepreneurial solutions to the problem. Given bold and responsible leadership from the private sector and civil society organizations, I have no doubt that the elimination of poverty and deprivation is possible by 2020. We can build a humane and just society.