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A Market Solution to Help the World's Poor?

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Ten years ago the world made an inspiring commitment to dramatically improve the lives of the world's poor by meeting eight Millennium Development Goals (MDGs), which range from halving extreme poverty to halting the spread of HIV/AIDS and providing universal primary education by 2015.

On September 20th, world leaders will gather in New York to discuss the progress that has been made towards meeting these goals at a United Nations summit. Despite the dedication and hard work of the international community, the reality is that in many areas we are off-track and in some cases the situation is actually getting worse.

As development assistance historically has been the business of aid organizations and governments, perhaps it is now time to question this model and explore the role the private sector can play in not just meeting the MDGs but ensuring that the results are sustainable.

But is there a real business in helping the world's poor? According to the World Resources Institute and the International Finance Corporation, there is.

In a co-authored report released by these organizations in 2007, The Next 4 Billion, they make the case for the market potential of base of the pyramid business models -- in other words, market based solutions designed to meet the needs of the world's poor. In total, this market represents four billion people with a combined purchasing power of $5 trillion.

The base of the economic pyramid is perhaps one of the largest untapped markets in the world. In order to develop profitable business models aimed at this demographic, businesses need to develop strategies that meet the needs of these consumers, which development assistance programs are trying to do.

Then, by first complimenting these programs, companies can develop business models that largely replace aid programs. In the process, we can increase the productivity and incomes of this group and empower their entry into the larger economy.

To be successful, this often requires companies to invest in partnerships with either humanitarian organizations and/or already existing local businesses to better understand market conditions and the consumer.

For example, we are working with local manufacturers in countries such as South Africa and Bangladesh to provide fortified foods and nutritional supplements to those that suffer from hidden hunger, also known as micronutrient (vitamins and minerals) deficiency. The cost of adding micronutrients to food (fortification) is so low that local manufacturers do not necessarily need to incorporate the cost into the final sale price. However, given the size of the base of the pyramid market, when we magnify our sales to reach a large percentage of this demographic, then we are able to make a good profit.

The most compelling rationale for this approach to development assistance, particularly from an MDG perspective, is that successful business models must stand the test of time. Therefore, the private sector can help solve one of the biggest problems in development assistance -- maintaining sustainable results.

Moreover, this approach is about empowerment. Being poor does not mean you do not take part in society, trade and commerce. Almost every household in the world either trades in cash or labor to meet their needs. Therefore, the base of the pyramid business models enable people to find their own path out of the poverty trap.

If we are truly committed to meeting the MDGs, it will take the effort of all players in the global community.

At the end of the day, our ability to achieve the MDGs is not about money but more so our approach. When a business is not on target to meet its objectives, then changes need to be made to its strategy. Thus the UN Millennium Development Goals Summit should not be about pointing fingers or squabbling about financial commitments, but should focus on developing a way forward that will make these goals a reality.

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