Microfinance and the base of the pyramid

On a trip to Nicaragua last fall, one of my fellow travelers introduced me to the concept of the base of the pyramid. It’s a metaphor for the largest segment of the population, those who earn less than $2 a day. And while this segment is roughly half the world’s population, marketers and product developers have historically ignored them, since their buying potential per capita is so small. Collectively, however, they represent the largest untapped market left to most global companies.

One example is in telephony, where virtually everyone in the developed world is already a customer. So who remains?

There are three billion connections to GSM mobile networks currently active around the world. The biggest growth in mobile phone take up is in the developing world, which accounts for 85% of new connections. (Finextra)

Those numbers don’t lie. They represent the availability of cell phones in China, India, sub-Saharan Africa, and all through Latin America at prices within reach of the base.

Microfinance was one of the first services developed in recognition of the base of the pyramid. Even a cursory reading of Banker to the Poor reveals that thinking behind Yunus’ experiment. It remains to be seen, however, whether the overall effect of the new attention to the base of the pyramid will be positive.