Over the last decade or so, there have been concerted efforts around the world from the public sector, the private sector and non-governmental organizations to launch sustainable income generating activities for people at the base of the pyramid (BOP). Tailored packaging and distribution processes for fast moving consumer goods, collateral-free microfinance services, and increasingly affordable mobile telecommunications services are all great examples of such efforts. However, most of these efforts have been limited to replicating, with minor modifications, the already existing products and services offered to people at the ‘top of the pyramid’. Moreover, unlike the in-depth end-user research that is conducted for new product/service innovations at the top of the pyramid, product/service innovations in the BOP have had comparatively limited end-user research to understand the unique needs of the people at the BOP.
The World Economic Forum partnered with pi STRATEGY to conduct a research study with the goal to enrich the understanding of the needs of people at the BOP. An initial research topic was identified based on current market needs to kick-start the process. Mobile-based financial services was the theme selected since it serves as a good example of an area that requires multi-sector collaboration, spanning finance and telecommunication industries. The study used ethnographic research as the primary mode of inquiry. Key findings from the study are summarized in this article.
INSIGHTS FROM THE STUDY
By identifying the interdependencies of the people at BOP and challenges they face every day, the study helps expand the repertoire of strategies or opportunities that could be made available for changing their lives for the better. From the research conducted in 5 regions of the country, groups of observations that are tied by a common thread have been clustered to develop a theme. Some of these themes are unique to either Financial Services or Telecommunication, and others are crosscutting across both sectors. Observations from the study have been analyzed in detail to infer perceptions and underlying habits. Some of these are listed below.
FINANCIAL SERVICES
Negative Connotation of Interest-based Lending: In a country where 87% of the population are Muslims and communities where many of the poverty-stricken household children regularly attend the local Madrasah (school for religious education), it is only natural that the people refrain from engaging themselves into anything that the Islamic Law is perceived to prohibit. This has given rise to the negative perception of the term ‘interest’ amongst the BOP consumers. However, when slightly different words are used to refer to interest, as is done by religious banking systems, they seem to work just fine for BOP segments. The social stigma of consuming ‘interest’ on loans prevents commercial banking methods from being accepted by the BOP consumers in large scale.
Trust Factor: Trust is an important criterion to establish long-term sustainable relationships, especially in the area of finance. Quite unfortunately, rural households did not seem to speak favorably of their trust in the existing financial organizations. As a matter of fact, they would rather save in unsafe mud-banks or bamboo pillars at home, instead of banks. Micro-credit fraudulency is also not an uncommon headline in the local newspapers. Almost all the participating households have attested to being cheated upon in terms of financial services by micro-credit organizations or business ventures at least once.
Distribution Channels: Flow of money at the BOP occurs mostly through personal channels instead of a formal banking channel. Lack of proper distribution channel is a tremendous setback for the BOP’s access to financial service outlets. A distribution network expansion, or better leveraging existing distribution channels, will lead to greater participation of BOP consumers for financial services.
Saving Habits: The traditional view is that people at the BOP cannot afford to save. However, it has been observed in this study that people, particularly women and even children, have habits of saving for a rainy day or for future purchases. Whether it is the mud-banks, bamboo pillars, or a trusted friend that act as the saving system, the fact is they too have concerns for their future. What is interesting though is that they at best get zero returns on their savings (bamboo pillars don’t pay interests), and sometimes swallow negative returns as well (when friends charge them to safekeep the savings).
TELECOMMUNICATION SERVICES
Shift from Access to Ownership: The ‘luxury’ item of the early 1990s has transformed into a ‘necessity’ within the span of just one decade. Rickshaw pullers, fishermen, traders all use mobile phones to minimize information asymmetry, enhance livelihoods and remain in touch with others. In the early days of mobile phone adoption in BOP markets, the shared access model was prevalent. However, it was observed during this study that a quiet shift from access to ownership is taking place, largely driven by lower capital costs of handsets and the entertainment value of mobile phones (personalized wallpapers, music downloads, etc.).
Status Symbol: A cell phone serves as a status symbol to many people at the BOP. It is the mobility aspect of cell phones that makes it a desirable object of status signal. A lot of BOP consumers use mobile phones that are beyond their affordability.
Power & Electricity: Power and infrastructure problems are a common problem in the areas where people at the BOP live. Electricity here is often shared among households, with each family splitting the costs according to the number of electrical appliances. Use of alternative energy sources like biogas or solar panels is still scarce.
Usability & Fear: Among the users of mobile phones, it has been noticed that the elderly and male members of the households often deprive women of making use of the devices. Because of this lack of usage and familiarity with mobile phones, many mothers worry about the negative implications of having their children, especially adolescent daughters, use mobile phones.
CROSSCUTTING THEMES
Entrepreneurship: Among businesses at the BOP, needs-based entrepreneurship is the most prevalent. Villagers also have the tendency to refrain from embarking upon new business ventures that is different from the traditional or local line of work. Opportunity entrepreneurship has not been prevalent at this segment of BOP consumers.
Word-of-Mouth Marketing: Personal selling and word-of-mouth promotions work better than traditional promotions (TV or radio ads), at the BOP because they trust and value personal recommendations and interactions.
CONCLUDING REMARKS
The goal of this study was not to delve deep into solutions identification. Rather, the intent was to identify the challenges people at the BOP face in their daily lives. However, given the challenges that were observed, a few ideas for potential solutions emerged through the analysis. The value of generating such insights into the daily lives of people at the BOP has become apparent even from this rather modest study. It underscores the importance of adopting a user-centric design perspective for improvement of existing offerings and for generation of ideas for new offerings.
Stakeholders from public, private and non-profit spheres need to place the end-users at the BOP at the center of all interventions pertaining to the BOP. By truly listening to the often-unstructured signals of challenges, needs and aspirations at the BOP, an improved set of market-based interventions can be implemented.
This article was written in 2010.
pi STRATEGY