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Presentation about the IDB's Opportunities for the Majority Initiative

Presentation about the IDB's Opportunities for the Majority Initiative

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  • 1. Miami, July 19, 2010
  • 2. Changing the mid-set……..
    Common perceptions
    Our perspective
    We think it is an important new market opportunity but simply don’t understand the segment so the risk of failure is too big
    • Poorpeople do pay…justnotall at once…needtoadapttoclient
    • 3. Goodtrack record in microfinance, utilities and cellphonecompanies
    Too risky
    • Poorpeople are alreadypaying for veryhighprices for poorqualitygoods and services
    Poor people do not pay, they do not a have bank accounts
    • Many BOP-targeted businesses have failed because they were based on what people need without understanding what they want. Customer insights and understanding of the ecosystem are key to success
    Lack of information on consumer preferences, they are not reported in credit bureaus
    • While this may be true for people living below the poverty line, BOP customers represent a significant share of some sector’s total consumption
    Very difficult to reach them…limited access to distribution networks
    It’s too expensive to serve these customers
    • Poorpeople are alreadypaying for verypoorqualitygoods and services
    There is no opportunity – people at the base of the pyramid have no money to spend
    • Typically, business models successful in high income segments are not feasible for this segment. Companies need to innovate by leveraging technology and non-traditional partnerships to radically reduce cost
    public sector is responsible for poverty alleviation, the private sector should just make money
    • The futuremiddleclassis in the BOP…consumers are veryloyaltofirstcomers.Establishing brand loyalty could be a major competitive advantage as low groups’ income rises
    Poverty is an intractable problem
    There are still more significant opportunities in the middle classes
    IT IS POSSIBLE TO BE SUCCESFUL
    1
  • 4. Mobile marketsize LAC
    It is possible to be successful …. Mobiles
    478
    million
    2009
    Today: the businessmodelis:
    • Lots of clients, lowmargins
    • 5. Prepaid
    • 6. Per second
    • 7. A platform for otherservices (m banking etc.)
    1999
    10 yearsago, the businessmodelwasbasedon:
    • Fewclients – highmargin
    • 8. Multiyearcontracts
    • 9. Per minute
    • 10. Onlytelepohony
    10M
    TWO KEYS
    • Adapt business model
    • 11. Know your customer
    - 2 -
  • 12. Opportunities for the Majority
    Launched by IDB President Luis Alberto Moreno in 2007.
    Set up as an incubator within the private sector to drive innovation and best practices in applying market-based solutions to advance economic and social development.
    US$ 250 million set aside from the Bank’s Ordinary Capital.
    Created to foster collaboration between the public and private sector, and civil society, to attract new resources to address poverty challenges in the region.
  • 13. Why work with the IDB?
    Source of financing: The IDB is the main source of multilateral financing and expertise in Latin America and the Caribbean.
    Regional footprint: IDB offices in 26 countries in the region.
    Opportunities for the Majority: Dedicated team created to support the design and implementation of BOP business models with the private sector.
    Resources for business innovation: Support the piloting of pre-commercial initiatives with the potential to scale.
    Blended finance: Comprehensive financial options, including non-reimbursable resources to leverage lending products.
    Public policy support: Partnerships with local and national/federal governments to facilitate project development and implementation.
  • 14. Available financing
    Direct investments in market-based business models through the Opportunities for the Majority financing facility.
    LENDING HIGHLIGHTS
    • Loans and Partial Credit Guarantees
    • 15. US$5 and 10 million per operation (financing between 25% and 50% of the total project cost)
    • 16. Long tenors
    • 17. Market rates
    • 18. Risk-sharing among partners
    • 19. Co-financing opportunities through IDB’s syndicated loans
    ELIGIBILITY
    • Financially and structurally sound
    • 20. Innovative with the capacity to be repeated and scaled
    • 21. Sponsored by organizations with majority shares owned by an entity from one of the 48 member countries
    • 22. Carried out in one of the 26 borrowing member countries.
  • Luiz Ros luizros@iadb.org
    Francisco Mejia franciscome@iadb.org
    Elizabeth Boggs-Davidsen elizabethd@iadb.org
    Lorenz Artaker Lartaker@iadb.org
    - 6 -