Captiva Africa helps businesses, government and development agencies to think more creatively about new products and services that meet the needs of the masses that form the base of the economic pyramid and about opportunities for market-led approaches for the BOP populations.
Market-based and Traditional Approaches
Traditional approaches in the development sector focus on the very poor and are based on the assumption that they are unable to help themselves and therefore need charity, handouts and public funding.
Market-based approaches on the other hand are based on the premise that being poor does not eliminate trade and market processes. Market-led approaches therefore look at people as consumers, producers, entrepreneurs and seek solutions that make markets more efficient, competitive and inclusive.
Traditional approaches are pointedly not sustainable whilst the market-based approaches recognise that only sustainable solutions can be scaled up to address the needs of the millions of the underserved population.
Base of Pyramid Segment (BOP)
Four billion low-income people, a majority of the world’s population constitute the base of the economic pyramid. Studies show that the consumer behaviour and aggregate purchasing power of the BOP segment presents significant opportunities for market-based approaches.
In Africa, the development community has tended to focus on the poorest of the poor with incomes below 1$ a day. Yet a larger segment of the continent’s low income population-486 million with incomes below $3,000 and form the BOP segment deserve attention and is the appropriate focus of the market-based approaches. This BOP segment makes up 71% of the purchasing power estimated at US$455 billion. This segment is not integrated in the market economy and hardly benefit from it.
From our recent engagements at Captiva Africa, the BOP populations are characterised by three main features:
- Most are unbanked and have no access to financial services, water, sanitation or electricity.
- Rely on subsistent livelihoods.
- Are impacted by the BOP penalty where they pay higher prices for most goods and services and often receive lower quality.
Captiva Africa is quickly developing a reputation for effective and innovative implementation of market-based approaches in our focus sectors.
Our local knowledge and deep understanding of the challenges in developing efficient and inclusive markets in Africa enables us craft custom solutions unique to our clients’ requirements.
Our approach has been to analyse and address the entire BOP segments and not just the very poor, to ensure that the market-led initiatives are effective even if these approaches may not be adequate for the poorest of the poor.
Captiva Africa’s teams of Business Development Advisors help clients craft and implement solutions that seek to address the following:
- What’s the level of private sector participation in the sectors of water, sanitation and clean energy in the Eastern Africa region?
- What are the market opportunities and core markets in these sectors?
- What are the barriers to increased private sector activity in the sectors of water, sanitation and clean energy?
- What should be done in order to address these barriers and encourage more private sector activity in W&S?
- Where should the resources be focused in order to minimize if not eliminate the BOP penalties in our target segments?
- What’s the level of willingness to pay across the market segments?
Strategies for Market-Based Approaches
Captiva Africa has recently partnered with leading multinational development agencies to develop the water and sanitation markets in East Africa.
We have assisted mobilize private sector participation in the target sectors and in turn enabled clients channel development aid to segments for which market-oriented approaches are not viable.
For one engagement in Kenya, Captiva Africa has been retained by the International Finance Corporation IFC, a member of the World Bank Group and the largest global development institution focused on the private sector in developing countries. Some of the more effective strategies we have helped craft and implement include the following:
Embedding the Value Chain within the BOP
We have helped businesses target the BOP segments of water and sanitation by crafting and implementing franchise and agency models with ecosystems of local vendors and suppliers. This has ensured that most of the value creation of the businesses is controlled by the local micro-entrepreneurs for which the community is the target customer.
Enabling and Creating Demand in the BOP
Captiva Africa has crafted innovative strategies for creating and enabling demand in both the rural areas and the informal settlements in the urban areas.
We have crafted and helped implement strategies that lower barriers to access of goods and services. In a recent engagement we have helped lower financial barriers to demand by working with local SACCOS to structure tailor-made financial products for the purchase of latrines by households, and with local masons to lower the costs of the latrines.
In Kenya we have enabled access to products by assisting businesses develop and implement agency and franchising models in order to spread their channel distribution within the BOP segment.
In implementing these strategies we have partnered with progressive agencies in the public sector, businesses and development sectors to bring diverse capabilities and perspectives to the table.
Tailoring Products and Services for the BOP
We have partnered with clients to implement technologies tailored for BOP in particular the informal settlements in urban centres. We have also worked with entrepreneurs in local communities to manufacture water and sanitation products that are tailored for the BOP segments. This strategy has been anchored on Captiva Africa BDAs whose main focus and expertise is in the BOP segments in our target sectors.