Probably a million dollar question for millions of people living life at few dollars a day. As per World Bank recent data, 900 million people live below poverty line and India alone has 180 million people under poverty. Estimated 3 billion people worldwide live their lives on $2 or less income per day.
While some may say Poverty is a state of Mind and few dollars a day income may not necessary be reflective of poverty in all parts of the world however no one can deny the fact that millions of people’s inability to afford even basic life necessities can certainly be classified as state of poverty.
Why most businesses didn’t try to reach out to this segment to provide product & services which they need (I guess desperately), may be companies assumed poor are not their target customers as with their current cost structures they can’t generate any meaningful returns on their investments.
Late Prof. C.K. Prahalad, in his book “The Fortune at the Bottom of the Pyramid” says that low-income markets present a prodigious opportunity for the business. He stresses that these markets need low cost products & services designed for consumer needs and a different business strategy & execution model to succeed.
Nobel Laureate Professor Muhammad Yunus (who believes that the right to credit should be recognized as a fundamental human right) took this business challenge and founded Grameen Bank in 1983 which introduced Microfinance programs offering loans of $50 and above that enable the poor to start or expand small businesses and provide other financial services such as savings and micro-insurance products.
In Bangladesh today, Grameen Bank has 1,084 branches, with 12,500 staff serving 2.1 million borrowers in 37,000 villages. Grameen Bank Micro Finance programs helped 10+ million Bangladeshis to move above poverty line. Bank reported 1.3b Takka ($17m) as Net Profit for 2013.
Bandhan Financial Services, the first microfinance institution in India which won a bank licence, is also one of the youngest entities to be allowed to enter the banking space. Bandhan under the leadership of Mr. Chandra Shekhar Ghosh has expanded its service network to 2,016 branches across 22 states and Union territories, Bandhan had over 5.23 million borrowers as of Feb, 2014.
With recent digital revolution in Banking industry, Banks are re-designing & overhauling their systems in a major way to get ready for serving millions of new customers with very low cost banking service.
Banks who wish to be at the fore-front of "future of banking" are remodeling their organization structure, re-engineering business processes and re-defining their costs structures.
Banks need to take lead to define new business models to reach out to everyone at the bottom of the poverty. Banks “Digital Avatar” riding on social media, telecom & retail industry eco-system will soon be ready to expand its reach to much wider consumer base.
As Chris Anderson once said “The future of business is selling less of more” so banks needs to start offering products & services on very low margins but target volume in millions.
Amazon, NetFlix are already reaping benefits of implementing “The Long Tail” business model and it’s now Banks turn to experience it.
Going back to key point, there is a huge opportunity to create new markets at the bottom of poverty and Banks have a key role to play in creating these new markets.
World will forever be thankful to banks in eradicating poverty from this planet by leading this initiative.