on poverty elimination: scope and my approach

Poverty-elimination is one of my life-goals. Recently, I took some time to scope the problem of poverty-elimination and attempted to come up with an initial approach. I approached it in the same way, I would approach any new product launch – by segmenting the market and understanding each segment's role. Here's a snapshot of my early analysis. I would love to hear your thoughts:

Question: What can I do to eliminate global poverty in the next 35 years?

Answer: Assuming that microfinance works, most obvious thing to start with would be to make microfinance more accessible in a measurable and leverage-able way.

More on the answer..(I don't know answers to the questions in red, but the search is on..I'll post the answers as I find them..)

Segmentation: In an effort to understand the market needs, following segmentation of the addressable market seem to make sense to me, but there are some fundamental questions (listed in red.)

1. Poor versus Ultra poor: At a very high level, needy poor can be divided into two categories:

1. People living just above the poverty line (say $2 per day) and

2. People living below poverty line (ultra poor)

Out of the two billion+ poor in the world, how many fall in #1 vs #2?

I’m assuming that microfinance typically addresses the needs of the economically active poor (i.e. those who live above the poverty line). With sophistication of the industry, more commercial institutions (banks, commercial lending groups, etc.) are likely to enter the market, but would serve the needs of the poor who are living above the poverty line. NGOs are most likely to serve the ultra poor in these circumstances. Would the NGOs be able to meet the demands of the ultra poor in terms of scale and type of services? Also, when resources-laden commercial banks enter the market how would the existing MFIs differentiate themselves/maintain a competitive advantage?

2. Willingness versus readiness versus access to microfinance:

Another way to segment the poor could be:

  • ·         Those who are not willing to borrow, due to social beliefs, fear of debt, etc.
  • ·         Those who are not ready to borrow, due to lack of markets, political/geographic instability, etc.
  • ·         Those who don’t have access to microfinance, due to lack of access to MFIs or lack of enough MFIs in the market.

    Is this segmentation apt and  how many of the poor fall in “not willing” vs “not ready” vs “don’t have access” category?

Innovation: I believe that three types of entities have a bigger opportunity as well as higher probabilities to innovate and add value in measurable and leverage-able ways:


Entity

Type of Innovation

Potential value-adds

1

MFIs

Service Innovation

a.       MFIs could design and implement newer delivery mechanisms of microcredit to make it more accessible to a larger set of poor and decrease the number of  (not willing + not ready + don’t have access).

b.      MFIs could design and implement newer ways to offer micro-credit at a cheaper rate than today, by introducing technical/process innovation (for instance: automatic credit approval and lending, auto-payment options, etc. to reduce manual inefficiencies from the microfinance value chain)

c.       MFIs could design  and implement new services that span beyond just microcredit  (for eg: money management, health insurance, credit rating, etc.)

2

NGOs

Social Innovation

d.      Test and deliver high cost/riskier programs to address the needs of the ultra-poor.

3

Social Enterprises

Product Innovation

e.      Design and distribute products that directly impact the bottom line of occupation/work that the poor are typically involved in (for instance, Grameen Phone initiatives in Africa, Cheaper irrigation products by Paul Polak, etc.)

This is a first step in doing something measurable and leverage-able towards poverty-elimination.

Let's eliminate poverty!
-Kintan

Extra: I had asked similar questions to Paul Polak – "Can we eliminate global poverty in the next 35 years?" His answer was Yes (with conviction). I liked how he explained pragmatically : Considering that half of the world's poor rely on agriculture for their livelihood, desiging innovative and affordable products to make effective agriculture accessible to the poor farmers – can solve half of the problem. Similarly product innovation can help with the other remaining half as well…