The development community has tended to focus on meeting the needs of the poorest of the poor—the 1 billion people with incomes below $1 a day in local purchasing power. But a much larger segment of the low income population—the 4 billion people of the BOP, all with incomes well below any Western poverty line—both deserves attention and is the appropriate focus of a market-oriented approach.
The starting point for this argument is not the BOP’s poverty. Instead, it is the fact that BOP population segments for the most part are not integrated into the global market economy and do not benefit from it. They also share other characteristics:
Addressing the unmet needs of the BOP is essential to raising welfare, productivity, and income—to enabling BOP households to find their own route out of poverty. Engaging the BOP in the formal economy must be a critical part of any wealth-generating and inclusive growth strategy. And eliminating BOP penalties will increase effective income for the BOP. Moreover, to the extent that unmet needs, informality traps, and BOP penalties arise from inefficient or monopolistic markets or lack of attention and investment, addressing these barriers may also create significant market opportunities for businesses.
Perhaps most important, it is the entire BOP and not just the very poor who constitute the low-income market—and it is the entire market that must be analyzed and addressed for private sector strategies to be effective, even if there are segments of that market for which market-based solutions are not available or not sufficient.