The document discusses sustainable business models and three sub-topics: the Base of the Pyramid, microfinance, and microinsurance. It provides an overview of approaches and strategies for each, including challenges and debates. Key points include exploring underserved markets profitably through affordable products and services, the impacts and approaches of microfinance programs, and principles and operational challenges of microinsurance to protect the poor against risks. The document aims to facilitate discussion on business opportunities and responsibilities regarding poverty alleviation.

1. Sustainable Business Models Base of Pyramid, Micro-Credit and – Insurance o ikos Spring Meeting 2009, Oslo Friday, 28 March 2009 Martin Herrndorf o ikos PhD Fellow, University of St.Gallen m [email_address]

3. Sustainable Business Models Background „ Business cannot succeed in a society that fails” Björn Stigson, World Business Council for Sustainable Development Oslo Conference on Partnerships for Sustainable Development, 28 March 2007

4. Population x Footprint WWF Living Planet Report 2008

5. Population x Footprint WWF Living Planet Report 2008

6. Human Development vs. Footprint Ecological Footprint Human Development Index

7. Environmental issues as cost driver Source: Herrndorf (2006): Greening SMEs in Developing Countries Cost structure of micro-enterprises in Mexico: Costs for material and energy 3.6 as high as salaries paid. Environmental, social and economic synergies!

9. Access to products and services Prahalad, C. K. and Allen L. Hammond. 2002. What Works: Serving the Poor, Profitably. Harvard Business Review 4-11. The poor do not have access to adequate products and services at acceptable prices Business can innovate more adequate products and services cost in poor quarter cost in rich quarter

10. Market Size — One Estimation Hammond, A. L., W. J. Kramer, R. S. Katz, J. T. Tran and C. Walker. 2007. The Next 4 Billion – Market Size and Business Strategy At the Base of the Pyramid . Washington, DC: International Finance Corporate, World Resources Institute.

11. Constraints & Strategies UNDP. 2008. Creating Value for All: Strategies for Doing Business With the Poor . United Nations Development Programme.

12. Base of the Pyramid (BoP) Seelos, Christian and Johanna Mair. 2007. Profitable Business Models and Market Creation in the Context of Deep Poverty: A Strategic View. Academy of Management Perspectives 21

13. Assuring sustainability? Herrndorf, Martin and Burcu Tunçer. forthcoming. Consume More, Use Less: Business Strategies for Sustainable Consumption in Base-of-the-Pyramid Markets . CSCP, SEI, Swedish Ministry of Environment.

14. BoP — A critical perspective Karnani, Aneel. 2009. Romanticizing the Poor. Stanford Social Innovation Review 38-43. ‘ BoP Proposition’ ‘ Reality’ The BOP market size is $13 trillion to $15 trillion. The BOP market size is only $360 billion. The poor have untapped purchasing power. The poor have a low savings rate and little untapped purchasing power. Profit margins in BOP markets are high. BOP markets are not very proitable because customers are price sensitive and the cost of serving them is high, given small transaction sizes and poor infrastructure. Companies can reduce prices dramatically without reducing quality. For most products, the only way to reduce prices significantly is to reduce quality. Single-serve packages increase affordability. Single-serve packages do increase convenience and help poor people manage cash flow. But the only way to increase real affordability is to reduce the price per use. Large multinational corporations should take the lead in the BOP initiative to sell to the poor. Markets for selling to the poor usually do not involve large-scale economies, and so small- to medium-sized local firms are better suited for these opportunities.

15. The BoP Readings Prahalad, C.K. and S.L. Hart. 2002. The Fortune At the Bottom of the Pyramid. Strategy+Business 26:54-67. Seelos, Christian and Johanna Mair. 2007. Profitable Business Models and Market Creation in the Context of Deep Poverty: A Strategic View. Academy of Management Perspectives 21 Karnani, Aneel. 2009. Romanticizing the Poor. Stanford Social Innovation Review 38-43.

17. Access to financial services

18. Effect on consumption

19. Effect on consumption Khandker, Shahidur R. 2005. Microfinance and Poverty: Evidence Using Panel Data From Bangladesh. The World Bank Economic Review 19:263-286.

20. Effect on poverty Khandker, Shahidur R. 2005. Microfinance and Poverty: Evidence Using Panel Data From Bangladesh. The World Bank Economic Review 19:263-286.

23. The Microfinance Readings Khandker, Shahidur R. 2005. Microfinance and Poverty: Evidence Using Panel Data From Bangladesh. The World Bank Economic Review 19:263-286. Akula, Vikram. 2008. Business Basics At the Base of the Pyramid. Harvard Business Review 86:53-57. Littlefield, Elizabeth. 2008. Microfinance and the Financial Crisis. In Weblog, ed., Crisis Talk - Emerging Markets and the Financial Crisis . World Bank.

25. Micro-Insurance Definition „ Microinsurance is the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved” Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re Foundation.

29. Involvement of large insurers Michael Anthony, Allianz SE, Presentation at Utopia Conference, Berlin Explain insurances and risks covered to the heads of village. To raise understanding and awareness about micro-insurances mass rallies are being held by Care and local NGO. Village officials explain and discuss with its members the concept of insurance. During these awareness campaigns a puppet theatre and microinsurance song are shown to explain insurance. 1 2 3 4

31. The Micro-Insurance Readings Brown, W. 2001. Microinsurance - the Risks, Perils and Opportunities. Small Enterprise Development 12:11-24. Kuper, Andrew. 2008. From Microfinance Into Microinsurance: Insurers Should Think Small to Tap Into One of Their Biggest Opportunities for Growth: Serving Poor People. Forbes.com Insurance Price, Michelle. 2008. Small Fortunes. The Banker { Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re Foundation. }

34. Good Bye Thanks!

35. Sustainable Business Models Base of Pyramid, Micro-Credit and – Insurance o ikos Spring Meeting 2009, Oslo Friday, 28 March 2009 Martin Herrndorf o ikos PhD Fellow, University of St.Gallen m [email_address]