Paris, France – 24 May 2011 – Today at the OECD Forum marking the fiftieth anniversary of the founding of the OECD, Monitor Group releases Promise and Progress: Market-Based Solutions to Poverty in Africa, one of the most comprehensive analyses ever undertaken of financially sustainable enterprises that address challenges of poverty.
The past 15 years have witnessed a growing interest in new approaches to poverty alleviation, including market-based solutions. Today in Africa, more than 500 million people are struggling to subsist on $2 a day or less, and despite well-intentioned government policies and massive amounts of foreign aid and philanthropy, poverty rates continue to rise.
With the release of Promise and Progress, Monitor Group concludes a 16-month research project on the operations of 439 enterprises in nine sub-Saharan nations, enterprises which are active in 14 sectors and seek to use market mechanisms to improve the lives and livelihoods of people living at the bottom of the economic pyramid. These “market-based solutions” (MBSs) engage poor people as customers, offering them socially beneficial products at prices they can afford, or as business associates—suppliers, agents, or distributors—providing them with improved incomes.
The report shows conclusively that MBSs make a significant difference in the fight against poverty by delivering social impact in a sustainable way, at scale. Some examples:
- Aggregators collecting cash crops and staples from smallholder farmers to supply large, top-of-the-supply-chain buyers. To help guarantee stable supply, many of these aggregators provide the farmers with services such as credit, storage, and transport, as well as with low-cost seeds and fertilizer to help improve their yields. The farmers participating in such arrangements benefit from income increases of as much as 40 percent.
- Companies organizing and upgrading informal retail operations and working with vendors to sell socially beneficial products such as health care goods and agricultural inputs. The vendors benefit from training and demand stimulation, while the goods improve the lives of consumers.
- Vocational colleges that provide high-quality, no-frills training to a range of individuals, including the very poor. These institutions also enhance employability by helping students obtain internships and work experience. Institutions in South Africa report graduates earn between 170-220 percent of their prior wages.
The report builds on Monitor’s earlier study of MBSs in India, "Emerging Markets, Emerging Models," which found that the enterprises that succeeded—earning a profit, or at least covering their costs, and operating at enough scale to have a positive impact on poverty rates—possessed a business model attuned to the exacting conditions of low-income markets. Promise and Progress describes three successful business models not previously discussed in economic development literature and identifies three more models as promising and worthy of further study and analysis.
Promise and Progress is addressed to the broad community of actors concerned with making real and enduring improvements in the lives of the poor. The report discusses implications and conclusions of the research for the founders and leaders of MBSs; large and multinational corporations that seek to engage low-income people as customers or suppliers; impact investors, donors and philanthropists; and governments.
“As they did in their groundbreaking report on India, Monitor has deepened our understanding of what it is going to take for enterprises serving marginalised communities in Africa to reach scale sustainably. Promise and Progress describes the real challenges and potential that exist beyond the hype of ‘market-based solutions’ and provides a roadmap for the collaboration that will be needed across sectors to realise this potential,” said Antony Bugg-Levine, Managing Director of the Rockefeller Foundation, a co-sponsor of the report.
In addition to the Rockefeller Foundation, sponsors of Promise and Progress include: The Bill and Melinda Gates Foundation; [Swiss] State Secretariat for Economic Affairs (SECO); Business Trust of South Africa; Global Impact Investing Network; USAID’s SHOPS Program (Strengthening Health Outcomes through the Private Sector); International Finance Corporation; World Bank, World Bank Institute; Omidyar Network; Actis; and FMO (Netherlands Development Finance Company).