Creative capitalism: the poor are potentially an enormous market. Question is, how do you unlock this potential?

In this column, I would like to take up the subject of creative capitalism--the initiative geared towards addressing the issue of poverty alleviation by means of private sector involvement.

The Commonwealth Business Council has worked steadfastly towards being a driving force behind making globalisation work for all. In the past 10 years we have achieved tremendous success in terms of increased trade and investment into developing countries and emerging markets.

However, I feel that we have somehow failed to make much impact on spreading the benefits of globalisation more widely. In other words, to bring benefits to those who are at the "bottom of the pyramid".

Despite the overall progress in economic growth and development in many countries, and the significant number of people lifted out of poverty, globalisation has created gaps between the haves and have-nots in terms of wealth, education, health and access to technology.

Many visionaries have talked about making globalisation work for all, but it still remains very illusive. CBC believes that business will play a key role in economic growth and poverty alleviation and the way forward should include economic empowerment to engage the people at the bottom of the pyramid in wealth creation. We have to find creative ways to do this--a new form of 'creative capitalism'.

The good news is that there are some--both organisations and individuals--who have succeeded in catering to the bottom of the pyramid. The biggest contribution they have made is 'not ignoring the poor'.

Bottom of the pyramid

It is generally assumed that the poor have no market value. This is incorrect. Developing countries have tremendous growth opportunities. Within these markets, the bottom of the pyramid also represents a major opportunity. There are about four billion poor in this world and the estimated potential scope of their economic activity is more than $13 trillion in PPP terms.

Until the poor are financially engaged and empowered, the problem of poverty cannot be solved. And I believe it is not just the job of the governments and NGOs. I think that companies can make a big difference here. We have to look beyond Corporate Social Responsibility.

Access to affordable financial services is one way to start. CBC has been campaigning to make inclusive banking a central financial policy within the Commonwealth governments. We have a Banking Working Group which focuses on ways to improve inclusive banking and 'banking the unbanked'.

Pioneers like Muhammad Yunus, founder of the Grameen Bank, have demonstrated the feasibility of providing micro-credit to the unbanked. It is often assumed that the default rate is high among the poor, but the opposite is often true. In the case of CBC member ICICI Bank, I believe out of a low-income customer base of 200,000, the default rate was less than 1%.

Lowering the cost of remittances is another way to put more money into the hands of low-income households in many countries.

I am proud to say that with Commonwealth Finance Solutions, CBC has launched practical projects like rural banking centres in developing countries, starting with Uganda. We are also looking to establish this in India. By getting the poor into the banking fold, we are in a small way contributing to the change.

Technology has played a central role in creating opportunities for the poor to make their situation better. A most ingenious use of modern technology is the way fishermen in Kerala have taken control of the price of their produce and their lives.

They sell their catches to the highest bidders, using their cell phones to contact multiple possible landing sites along the Kerala coast. In Tanzania, poor farmers are using modern information and communication technologies like mobile phones and even the Internet to get access to market information, and to learn how to build better and more collaborative market chains from producer to consumer.

Market spies, known locally as shu shu shus, investigate prices and other aspects of local markets, then use their mobile phones to report the information back to their villages. Soon they might be using SMS to access Internet-based databases of locally-relevant market information.

Stimulus for ideas

I would like to stress that the poor are not just potential customers, but also a stimulus for innovative ideas and by engaging them, companies can create innovative products that can be easily replicated even in developed markets.

In Africa--and specifically South Africa and Kenya--large percentages of the population live below the poverty line and may not have access to bank branches. Non-traditional banks such as WIZZIT, MTN Banking, and Safaricom's MPESA follow new business models and are proving successful in reaching the unbanked and under-banked.

Interestingly and perhaps surprisingly, the population of unbanked in the US exceeds that of both South Africa and Kenya, and could potentially be addressed through business models that have proven successful in those markets.

However, I believe the best way to engage the poor is by introducing ways to co-create wealth at the Bottom of the Pyramid. We already have success stories like the Avon ladies who have proved that by arming women with information and giving them an opportunity, companies can not only gain access in a hard to reach territory, but also create new entrepreneurs.

We need to do more to harness this opportunity that will help both the bottom line and achieve social goals. For its part, the Commonwealth should assist countries to develop financial and economic instruments to empower communities and expand opportunities.

This could involve promoting financial inclusion projects through micro banking; risk management products that protect the vulnerable from economic uncertainty; and better linking Commonwealth markets to global markets.

To know more about CBC's activities go to www.cbcglobal.org. Next CBC Forum: Cameroon Investment, 15-17 April 2008, Yaounde.

By Dr Mohan Kaul, Director General of the Commonwealth Business Council.

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RELATED ARTICLE: Abuja insurance summit to highlight opportunities

Following the restructuring of Nigeria's banks, which are now acting as economic catalysts across Africa, the country's insurance sector is reforming itself in order to boost economic development by underwriting commercial and personal risk.

After a sometimes acrimonious, although very successful, insurance consolidation exercise--which saw the fall of one regulator, Emmanuel Chukwulozie, and the rise of another, Fola Daniels as insurance commissioner--there has been vigorous debate and strong political and judicial interventions regarding how the industry should move forward, all of which temporarily slowed the pace of new investment capital entering the sector.

Now, however, Nigeria's insurance sector is exhibiting strong growth and insurance stocks are increasingly amongst the most actively traded on the Nigerian Stock Exchange (NSE).

In order to build on these successes, the Nigerian Insurers Association (NIA), through its chairman, Ibidolapo Balogun, has announced that it will host the Insurance Future Summit 2008 in Abuja with a view to deepening the pace of change in the insurance industry, strengthening the capacity of local insurers, especially to participate in the oil and gas sector and accelerating the industry's modernisation to deliver better services to consumers.

Fola Daniels, the national insurance commissioner, has certified 49 companies to conduct insurance business in Nigeria. They fall into the following categories: 18 in composite insurance; 23 in general insurance; seven in life insurance, and one in re-insurance corporation. But these companies face numerous challenges which include restoring public confidence in the industry; raising fresh investment capital to support their national and regional growth strategies; introducing voluntary self-regulation by adopting global best practice; introducing new technologies and increasing human capacity building through training programmes.

Ibidolapo Balogun, chairman of the NIA, argues that the "insurance businesses and the industry are re-branding and repositioning in recognition of new realities for business and to empower themselves to take full advantage of emerging opportunities in Africa".

However, new regulatory frameworks and rising consumer expectations in a competitive market demand that insurers demonstrate better customer care.

Balogun has said that he wants to facilitate the emergence of an insurance sub-sector that meets global standards. His aspirations align with the goals of insurance commissioner Daniels who is intent on consolidating the gains of the recent recapitalisation exercise by stimulating competition, lobbying for new legislation, ensuring compliance and introducing a sanction's system to assure service delivery to the consumer.

The Insurance Future Summit 2008 is expected to highlight emerging opportunities and help set some specific benchmarks against which the insurance sector in Nigeria can be measured for performance and excellence.

Christian Udechukwu