Bottom of pyramid market in PH worth $33.4-B — ADB
MANILA, Philippines – The Philippine private sector must consider a $33.4 billion-worth market not yet fully tapped in order to further inclusive growth in the country, the Asian Development Bank pointed out in a study.
According to the ADB Inclusive Business Market in the Philippines report, the development of inclusive businesses (IBs) — enterprises still in growth phase that offer jobs and affordable services to the poor and low income segments — can drive the country to achieve inclusive growth.
In a presentation on September 16, AsianSocial Enterprises Incubator (ASEI) Director Markus Dietrich said "majority of the Philippine population belong to the base of the pyramid. It is not the poorest of the poor only but it goes up to P18,000, that's lower middle class in the Philippines which in this context of base of the pyramid (BoP) is considered part of this market."
"[Around] 50% of the total expenditure of the Philippines is happening in this space. Money is being spent [here]. Small amounts of money but by a huge population so this adds up to billions of dollars," Dietrich added.
BoP consists of those with monthly income of below P18,000 for a family of 5 or below $3 per day, based on purchase parity terms. Purchase parity, according to the United Nations, is the number of units of a currency used in the domestic market to buy the same amount of goods and services that $1 could buy in the United States.
There are about 57.4 million BoP customers in the country, he said. Basing on purchase parity terms, this means 62.5% live in vulnerability to poverty or below $3 a day per person.
Those living below $2 per day, around P12,000 per month, make up 41.7% or 38.1 million of the country's population. The poorest of the poor who live below $1.25 account for 18.4% or 16.9 million.
The ADB study said that the private sector must start maximizing its potential by engaging in IBs. At present, only 70 IBs exist in the Philippines.
Since IBs are enterprises whose core businesses target the needs of the low income segment, they are also a way of addressing systemic problems of poverty.
Not to be mistaken for corporate social responsibility, these IBs include those in the following sectors:
- Agribusiness - Coffee for Peace, which sources coffee from indigenous households
- Education - STI, which offers technical and vocational courses
- Food and beverage - Kennemer Foods, which sources cacao from farmers
- Finance - Globe BanKo, which engages in mobile microfinance product
- Health - Generika Drugstores, which supplies low-cost medicine
- Information technology - Encash, which installs ATM booths in rural areas
- Manufacturing - Gandang Kalikasan, which created the Human Nature line of cosmetics
- Real estate- Phinma Properties, which works on mass housing facilities
- Retail - Microventures, which created the Hapinoy Sari-Sari Store program
- Tourism - Island Bangka Cruises which partners with small boat operators
"The positive news here is they do it out of business reasons. It's not only because they want to do good but they want to increase their growth and they want to increase their profitability. They want to localize their supply chain and strengthen their reputation," Dietrich noted.
"By creating share value, they improve sales so again its not something where you lose money, it is something where people are gaining money. And of course [there's the] increased gratification that comes with those activities," Dietrich added.
ADB launched its report at the 2nd Inclusive Business Forum for the Philippines it co-organized with Philippine Business for Social Progress (PBSP) and ASEI. - Rappler.com