Profits and the Poor
Can the private sector earn money fighting poverty? Three recent case studies in Colombia, Venezuela and Brazil suggest it's possible—but it won't be easy.
Can the private sector fight poverty and still make money? Social initiatives have become increasingly attractive to companies around the world who believe that pursuing strategies that empower low-income groups and impoverished communities is also smart business. In Latin America, that argument has become the focus of debate among scholars and anti-poverty activists who question whether integrating low-income groups in the global or national economy through markets—“democratizing the economy,” as the development economist C. K. Prahalad has called it— really represents a passkey to social change.
Much of the attention to so-called “bottom-of-the-pyramid” strategies has focused on the activities of major multinationals, such as Unilever in India and Cemex in Mexico. But three recent case studies conducted by the Social Enterprise Knowledge Network (SEKN), a partnership of eight business schools in Latin America (EGADE, INCAE, IESA, Pontificia Universidad Católica de Chile, Universidad del Pacífico, Universidad de los Andes, Universidad de San Andrés, and Universidade de São Paulo), the Harvard Business School, and ESADE in Spain, suggest that poor and marginalized communities can be transformed by the creation of new market-oriented networks operating at lower levels of economic activity.
The case studies examined three business operations: Colcerámica in Colombia, Electricidad de Caracas (EDC) in Venezuela, and ASMARE, a recycling cooperative in Belo Horizonte, Brazil. Both Colcerámica and EDC developed local relationships, which made it possible for the firms to develop new markets for their goods and services in communities that were once written off the economic map. ASMARE demonstrated how new value chains could be created in which groups of homeless entrepreneurs who were once subject to periodic “street cleansings” by the authorities were transformed into commercial entities...