Feb. 12, 2015

Do you know who counts as living at the 'Base of the Pyramid'?

And do you know how many conflicting definitions there are? Many!

The 'original' definition of the Base of the Pyramid (IFC/WRI 2007) uses an income level that is several times higher than international poverty lines used by organisations such as the World Bank, in Africa and Asia.   

Poverty lines are confusing for many because they are set in purchasing power parity not current dollar terms ‒ for good logical reasons, but who expects an entrepreneur to start doing conversions? 

Evidence on which segments of the BoP are actually reached by inclusive businesses is flimsy and variable. Certainly insufficient to guide a new business model design or programme targets.

Users of IRIS indicators more often define their beneficiaries by their demographic (e.g. rural, female) than their income level, or choose all three income segments. In summary, to be frank, it's a confusing mess.

And even if you find the definition that is fit for purpose, who should then be counted as a 'beneficiary?' Should you multiply by household size? If you know the number of transactions not the number of clients, does that help? If you're an investor, do you count 100% or a share of those reached?

The lack of information for decision making in the impact investment market is something the DFID Impact Programme is trying to address. The Programme aims to build the impact investment market in Sub-Saharan Africa and South Asia. It’s an interesting mix of delivery and market building. Up to £75 million invested via the DFID Impact Fund managed by CDC seeks to deliver commercial and social performance while demonstrating to the market that viable investments that benefit millions at the BoP can be achieved. Other components of the programme invest directly in market infrastructure. 

To define our approach to tracking reach to the BoP across the investment funds and portfolio companies, we reviewed what others do, and decided to share it as part of challenging inconsistency and lack of transparency across the market. The Discussion Paper, Tracking Reach to the Base of the Pyramid, outlines how the terms BoP and low-income are used by a host of development and investment actors, some of the tools and practice that exists so far, and the key issues for working out 'who counts'.

It is, to be honest, a pretty boring technical paper. I'm allowed to say that, as I helped write it. But given the hours, years, dollars and more spent by businesses, investors and donors to count and claim the number of people who gain from inclusive business at the BoP, it's an overdue contribution.   

Much of the analysis was done by the Results Framework team on the DFID Impact Programme, to help us define our own approach, as the Programme aims to benefit five million people at the BoP through impact investment. But the analysis is shared now as a Discussion Paper to help put the material out there, and draw in comments and views on how these definitions should be used going forward.

The Discussion Paper is published by the DFID Impact Programme and was written by Joe Shamash and Caroline Ashley.

A 4-page Checklist for entrepreneurs, on Can you count what counts? How to tally numbers reached at the BoP (pdf) was launched alongside the Discussion Paper. The Checklist, published by the Practitioner Hub, Business Call to Action and the DFID Impact Programme, covers the 4 essential steps to count numbers reached, helping navigate confusions and pitfalls along the way.

This blog was originally posted on the Practitioner Hub for Inclusive Business.

Caroline Ashley is the Results Director of the DFID Impact Programme. The Impact Programme, of the UK Department for International Development, aims to catalyse the market for impact investment in Sub-Saharan Africa and South Asia. Visit www.theimpactprogramme.org.uk to find out more.

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