According to the Encyclopaedia Britannica, Base of the Pyramid (BoP) is a term in the field of economics which refers to “the poorest two-thirds of the economic human pyramid, a group of more than four billion people living in abject poverty.” It also refers to an approach of alleviating poverty through a market policy of development.
This can mean private companies focusing on selling products and services that are affordable to the BoP. Companies and corporations have usually ignored this segment of the world’s population as a potential opportunity for generating profits, choosing to focus on the wealthy and the middle classes.
However, it has evolved to become a development model based on partnerships between private companies, NGOs, and BoP communities that try to alleviate poverty by working with the BoP to create a more sustainable model through entrepreneurship and community engagement.
In the wake of the political and social unrest that has gripped many parts of the world since the 2008 global financial crisis, attention towards addressing issues of poverty and inequality have grown in importance and urgency. Even billionaires such as Bill Gates have spoken publicly about the lack of sustainability with currents levels of inequality.
As a result, working with underprivileged and impoverished communities has become more and more of a priority to NGO’s, governments, and private sector entities, not out of philanthropy or charitable giving, but as a necessary and urgent matter to create and maintain meaningful stability and prosperity throughout the world. Many see it not just as a socio-economic issue, but an issue of security as well.
This has meant that BoP business models have inevitably grown in significance in recent years. Two weeks ago, the AUC’s John D. Gerhart Center for Philanthropy, Civic Engagement and Responsible Business hosted the Middle East and North Africa’s first ever BoP summit from the 1 to 2 October. Professor Alan Fowler, an honorary professor at Wits Business School of the University of the Witwatersrand, Johannesburg, was among the key speakers who attended the summit. He spoke exclusively to Business Forward to explain the different evolutions of the business side of BoP and to express the urgency of addressing the issues being faced by world’s poorest and working with them to resolve them.
“Enduring poverty is a politically destabilizing economic drain. It can be the seed bed for destabilizing social action, often inviting repressive responses from regimes in power which can undermine creativity and innovation as engines of economic improvement that reach the poorest and most vulnerable,” Fowler said.
BoP thinking first emerged around 20 years ago with the concept of business being catered to the world’s most impoverished. It was utilized in the very traditional market economy view of making a profit from the BoP. Most of these initiatives were top-bottom, couldn’t be scaled up, and some just failed.
This model then evolved into BoP 2.0 which entailed businesses partnering with NGOs to achieve economic development. According to Fowler “2.0 was an evolution because business found that it wasn’t competent at dealing with poor people. And therefore, they will work in partnerships with non-profits and others who knew something about the bottom of the pyramid and have been working with the base of the pyramid for years. So it was much more partnership where businesses would support non-profits to actually engage in economic ways with base.”
BoP 2.0 brought its own set of problems due to the disconnect between businesses and the communities they were supposedly benefiting. “Because of this partnership model, businesses themselves don’t learn about working with the base of the pyramid,” Fowler said.
BoP concepts then developed to become more participatory, giving birth to the 3.0 model. This model stipulates that businesses should partner with the base of the pyramid to collaboratively create and produce economic gains for all the parties involved. According to Fowler, 3.0 is about “businesses working directly with the base but from [the] perspective of co-production, trying to capitalize on what assets the base of the pyramid already has. Not looking at the base of the pyramid from the perspective of its deficits.”
A study released by the charity Oxfam in 2015 revealed that the richest 10 percent produced half of all fossil-fuel emissions, while the bottom 50 percent were found to have only contributed 10 percent. According to another report by Oxfam, currently, the world’s 26 wealthiest people owned as much as the poorest 50 percent. If current trends continue, by 2030, the richest one percent of the world are projected to own more than two-thirds of all wealth. This massive accumulation of wealth at the top has been seen happening at a staggering rate since the 2008 global financial crisis.
It is essential for all current and future development and sustainable business strategies to involve the communities they intend to lift out of grinding poverty. Only through community engagement and participation can any progress truly take off the ground and be well maintained.
“If people don’t own the processes of change, they’re not going to be sustainable,” Fowler said. The people must have the power and capacity to participate meaningfully in their development of their societies. They must “own the process of change enough to continue to put energy into it and if they don’t put energy into it, change won’t endure.”
As to what the future repercussions will be if economies around the world fail to address this inequality and take the BoP seriously, Fowler said “Today’s unwelcome socio-economic conditions in many countries provides an answer… If the current systems deny communities then change will not be sustainable. Inequality will carry on and instability is around the corner if you’re not careful.”