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Housing
the Poor by Engaging the Private and Citizen Sectors: Social Innovations
and “Hybrid Value Chains”
Stephanie Schmidt and
Valeria Budinich

Executive Summary
More than one billion of the world’s urban
residents live in inadequate housing, mostly in slums and squatter
settlements of the developing world. While the UN and most governments
recognize the basic right to adequate housing, this is yet to be
translated into effective solutions to address the housing needs of
low-income populations -
particularly as
population growth and urbanization rates strain the ability of existing
systems to keep up with demand for housing construction, but also for
water, sanitation, electricity, and transportation infrastructure.
Improving the housing conditions of one-sixth of the world’s population
constitutes a massive economic, social, and environmental challenge. Or,
when looking at it from a business perspective, it could represent a
sizeable unserved market.
Many governments cannot afford to heavily subsidize the
capital-intensive housing sector with the hope of solving the housing
shortage. While some progress has been achieved at the policy level, so
far most private initiatives sponsored by developing country governments
have benefited middle-income rather than low-income families. As a
result, the most important players in low-income housing delivery are
the poor themselves. Faced with almost no formal options, they use a
variety of resourceful, incremental, informal, and often illegal means
to meet their shelter needs.
But two new types of actors are emerging to support this
effort. On one hand, during the last two decades, the citizen sector[1]
has experienced unparalleled growth and has become increasingly
competitive. This has resulted in numerous bottom-up social innovations
and in active involvement of community groups in housing initiatives.
Most of these innovations are powerful and effective at the local level
but they often encounter challenges to secure the resources needed to
scale-up, with only a few and remarkable exceptions. On the other hand,
although most large businesses in the housing sector still consider
low-income populations to be an insignificant or unattractive business
segment, an increasing number of visionary business leaders have started
leading the way to serve these markets profitably and with social
impact.
Serving the needs of hundreds of millions of families will
require combining the talents and resources of both the citizen and the
private sectors. We argue that these concurrent trends provide the right
environment for an unprecedented level of business-social congruence to
address the central challenge of scale by leveraging the core
competencies of both sectors. The first part of this paper will briefly
discuss the inadequacy of current housing value chains[2]
to serve low-income populations in developing countries. The second part
will highlight innovative housing solutions from social entrepreneurs
and will illustrate how large corporations have started to successfully
learn from these principles to develop new business models capable of
delivering not only products and services to low-income communities, but
also significant social impact. Finally, we will discuss the need for
“Hybrid Value Chains”, highly leveraged and commercially sustainable
business-social partnerships, to provide large-scale solutions for
low-income housing and transform the way housing services are delivered
to the poor.
A. Inadequacy of current
housing value chains to serve low-income populations
Housing is a complex process that involves the coordination
of a wide range of “inputs” and players, even more so in low-resources
environments. For the majority of mid- and high-income consumers, the
housing industry is adequately delivering affordable and comprehensive
services. In contrast, as we describe below, low-income households face
a very different situation. In spite of an increasing focus on urban
housing and development, informal systems are still the dominant
producers in many developing countries - an estimated 60 and 70 percent
of Mexico’s and Brazil’s current housing stock is built informally[3]-
because current value chains are not adapted to the needs and realities
of this growing market.
Exhibit 1. The various components of housing solutions for
low-income populations

Development of
housing offerings:
The “low-cost housing” that is produced is often inadequate to meet the
real needs of the poor for reasons of desirability or quality.
Developing an appropriate offer must begin with an understanding of the
end-value for the clients themselves. For low-income families, a house
is much more than a roof over one’s head. Beyond physical shelter, it
represents the promise of improved health through more decent sanitation
systems and protection from weather; security against violence,
vandalism, and theft; productivity given that many informal sector
workers use their homes as factories and/or warehouses for inventory,
and that services like water and electricity reduce the time spent on
household chores and/or extend productive daylight hours; and sense of
identity, confidence, and an increased ability to plan for the future.
For example, Grameen Bank views housing as a basic human need and a
critical element of its members’ overall development. As stated in its
principles, a shelter is one of the basic requirements for a person to
organize her thoughts, discipline her action, and undertake long-term
plans. It also enables increased productive capacity of
micro-entrepreneurs.
A common misperception is that low-income consumers make
purchasing decisions based solely on cost. However, if there is a
perceived value, there will be a willingness to contribute. Pride and
aspirations, quality, and suitability are important factors to consider.
First, housing is a product intimately linked with its owner’s sense of
identity. Many low-cost housing projects have the effect of branding
their occupants as poor or outcasts - often because they look
“different.” Monolithic block housing can do this, but so can
innovative, low-cost, environmentally-friendly housing structures.
Instead of creating incentives for long-term investment in their homes,
these structures can breed alienation and resentment. Low-income
individuals are also rational economic decision-makers who must make the
most of every penny to survive - so factors like quality, safety, and
durability count. However, free or low-cost services from governments or
NGOs often lead to a negative dynamic where providers may not feel
obliged to provide quality services and beneficiaries may not feel
entitled to claim quality services. Another issue may be the lack of
effective quality incentives: for example, for developers who are funded
by government subsidies or obliged by law to allocate 20 percent of any
new development to low-income housing. Lastly, some low-income
individuals may want their homes to be conducive to family and community
relationships. For them, single-family detached homes on large plots may
be undesirable. Others may need homes designed to support
income-generating activities, making a flat roof for drying leaves or an
open porch a desirable feature. For all, proximity to social networks,
schools, and employment opportunities is key.
Land:
Access to land with
secure tenure is definitely at the core of the housing issue for
low-income households. Not only might they face the risk of being
evicted, but even when their situation is secure, lack of formal land
title will limit their access to additional services such as finance,
water, or electricity. Current property rights policies make it
difficult to ascertain legal claim to land, even where families have
lived for decades in a location, paid taxes, etc. According to Hernando
de Soto[4],
the amount of capital locked up in extralegal housing in emerging
markets alone currently exceeds USD$9.3 trillion. Land cost is an issue
in rapidly-growing cities where land is scarce. Moreover, the number of
new plots available is often limited by local municipalities that try to
control rural migrations to address issues of urban planning, poor
hygiene conditions, and public safety. As a result, informal land
developers may take advantage of low-income families who lack options by
charging exorbitant prices, selling the same plot several times, not
delivering on their sales, etc.
Basic services:
The willingness of low-income families to invest in basic infrastructure
and services like water, sanitation, or electricity is inversely linked
to the risk of being evicted. Nevertheless, even when low-income
families are willing to upgrade their housing conditions, many formal
service providers are not interested in serving them for legal or
economic reasons. On one hand, local laws may prohibit from them serving
households without legal land titles. On the other hand, communities may
not be organized collectively to represent a critical mass of demand in
order to guarantee sufficient return on their investments. Providers may
consider low-income families as “bad payers” or even “thieves” who are
responsible for setting up illegal connections and degrading their
infrastructures. In reality, few companies have tried to develop
appropriate strategies and pricing schemes to enable the poor to become
regular clients. In spite of these generalized misperceptions, the poor
can and often do pay many times more in absolute terms than their
middle-class counterparts for the same goods and services. We argue that
low individual purchasing power is less an inherent barrier to serving
low-income markets than a market characteristic that most private sector
providers choose not to innovate around.
Finance:
Access to housing finance is another critical bottleneck for the
majority of the population in developing countries. Although several
potential sources of housing finance for low-income families exist, most
of the needs are still unmet. Government subsidies tend to be
insufficient or inappropriate; mortgage markets tend to serve only the
richest 10-20 percent of the population; in spite of its strong value
proposition, housing microfinance is still an emerging industry; and
informal systems are not efficient. Only 3 percent of outstanding credit
in low-income countries is held in the form of housing loans compared to
27 percent in high-income countries[5].
Highlights on each one of these financing mechanisms are provided below.
a. Government subsidies.
The performance of many subsidy programs is not optimal.
Ironically, the poor may not be eligible for housing subsidies that will
benefit middle-income households, because they operate through the
mortgage market or require the recipient to build a house before
obtaining the funding (coming back to the issue of upfront construction
costs). Beyond this, one of the biggest issues with government
subsidies is that they tend to crowd out market-based housing
initiatives, which have the potential to be more scalable, sustainable,
and therefore more effective in meeting low-income housing needs.
Overall, government programs may end up not being cost-effective as they
spend money on contractors who are making standard profits in their
industries. Quality and size of dwellings are sometimes a second
priority.
b. Traditional mortgage market.
There are limitless opportunities to use private capital for
low-income housing as it has barely been tapped. Low-income
households are often excluded from traditional mortgage markets for
several reasons:
·
They may
not be able to use their land or homes as collateral because they
lack formal property rights; their homes are of low resale value and/or
secondary housing markets do not exist; or regulations prohibit it.
·
They may
not be formally employed. In India, for example, 92 percent of
workers are informally employed without stable employer-employee
relationships.
·
They may
have irregular cash flows and incomes are, in any case, low.
Low-income families cannot afford the loan size that would be economical
for traditional mortgage financiers to manage. In addition, their
preferences often run against it. On one hand, developing countries are
characterized by both macro and micro uncertainty (such as property
rights insecurity, inflation, or income instability) and under such
conditions the poor are naturally reluctant to assume long-term
liabilities. On the other hand, many favor improving existing homes
rather than moving to new ones in new locations because they value and
need to preserve their social networks.
c. Housing microfinance.
In spite of recent growth, effective demand for housing
microfinance far exceeds supply. As a whole, the microfinance industry,
with approximately 50 million clients worldwide, still meets only 5-10
percent of likely demand. Moreover, individual providers face particular
challenges in adding housing microfinance products to their portfolios
due to: lack of access to medium- and long-term funding; national
regulations (e.g., access to savings, taxes); institutional capacity;
confusion over the roles of subsidies and financial services; and high
fragmentation of the industry. There are about 10,000 MFIs today, of
which about 200 or 300 are considered commercially viable and
financially sustainable. Only two percent have more than 100,000 clients[6].
Major players in
housing microfinance include Grameen Bank (Bangladesh) with over 600,000
loans since 1984, Patrimonio Hoy (Mexico) with over 120,000 loans since
1998, MiBanco (Peru) with over 20,000 loans since 2001, SEWA Bank
(India) with over 20,000 loans currently outstanding, and Bank Rayat
(Indonesia). However positive trends include an increasing involvement
of commercial banks in microfinance through downscaling or on-lending
and massive remittance flows. In this context, housing microfinance has
emerged as a fast-growing sub-industry within microfinance over the past
five years. Although they are still limited, microfinance-style
solutions are often more appropriate to the housing finance needs of
low-income families:
•
Loans are
small and repayment periods are short. This matches borrowers’
incomes, preferences, and building habits although loan amounts and
terms can vary significantly.
•
Nontraditional forms of collateral are accepted. These might
include co-signers, “peer support” groups, or small items of value such
as jewelry, appliances, or vehicles; sometimes no collateral is required
at all.
•
Ability
to pay, even with informal and/or irregular incomes, can be ascertained
through standard microfinance techniques. Many housing
microfinance providers foster participation in savings groups to
reinforce cultures of savings and repayment or require the prospective
home loan borrower to complete one or more working capital loans
successfully.
d. Informal financial systems.
As a result of
limitations in the other sources of housing finance, the most common way
for the poor to finance their homes is through informal systems. The
two most common are local “loan sharks” who charge exorbitant interest
rates, and savings groups such as tandas in Mexico; stokvel,
letsema, or ubuntu in South Africa; or minga in
Ecuador. Savings may be monthly, weekly, or daily to capture the
unpredictable income flows as they occur. Saving for housing is a
primary goal for savings groups in many countries; however, realities of
life often interfere.
These various illustrations demonstrate that current delivery
systems that have typically been developed primarily for middle and
upper-class clients are still not adapted to the realities of low-income
populations, who are too often caught in a vicious circle. In order to
make the housing value chains work for the poor, successful strategies
of social entrepreneurs that have been designed, from their inception,
for and with low-income communities are particularly relevant.
B. Social innovations in
urban housing and urban development
Although public institutions have traditionally played a
significant role in providing for housing, new actors are emerging and
demonstrating alternatives to traditionally top-down approaches of
governments and international institutions. The past two decades have
seen an extraordinary explosion of entrepreneurship and competition in
the citizen sector that had been sometimes considered as inefficient,
unresponsive, and mainly about activism. With an estimated volume of
resources of over US$1 trillion and 19 million jobs at a global level,
the non-profit sector is already equivalent to the eighth largest
economy in the world[7].
Social entrepreneurs[8],
practical visionaries committed to finding systemic solutions to address
social challenges, have been at the forefront of this transformation.
Most of these social innovations typically arise from a market or public
sector failure. They often start at a grassroots level and are developed
on a shoestring budget, leveraging the power of communities. Successful
initiatives are based on leveraged solutions that approach a problem
from a different and targeted angle.
Based on recent research on innovative solutions in
affordable housing that focused on the main patterns or principles
emerging from these solutions, we present below a “mosaic of solutions”
that attempts to offer a conceptual framework to the issue of housing in
developing countries. The value of the mosaic is also to illustrate a
“More-than-the-Sum-of-Their-Parts” effect where individual social
entrepreneurs can see the approaches they developed in perspective with
those created by the rest of the field. The main barriers to housing for
low-income families, real or perceived, are listed horizontally and the
main principles emerging from the innovative solutions, vertically.
Because innovations usually emerge simultaneously in more than one
location and context, you may think of other initiatives around the
world using the same How To’s as those mentioned here. Note as well that
although the best solutions would probably speak to more than one
principle or one barrier, we have chosen to emphasize one specific
aspect of the initiatives.
These innovative solutions carry many lessons for players
such as businesses interested in low-income markets. First, most
solutions are based on insights rather than on breakthrough science.
Many have actually innovated by rationalizing and improving on
traditional community practices rather than by introducing technological
innovations. Second, the importance of designing solutions that have a
transformational effect and leverage the power of low-income communities
will never be emphasized enough. It is about helping communities and
individuals to become self-reliant and unlocking their vision for their
future. This is particularly relevant for housing given its potential as
a springboard for development and as a productive asset for the poor.
Lastly, although many innovative approaches are cost-effective, reaching
scale to serve a large number of beneficiaries is still the exception
rather than the rule. Reasons include the challenge of providing
systemic housing solutions (ranging from property laws to financing and
construction), the lack of efficient funding for the citizen sector, but
also sometimes the resistance of individual players to think big. As we
will argue later in this paper, business-social partnerships can be a
powerful strategy to enable large-scale and sustainable solutions.
Exhibit 2. Mosaic of innovative solutions for affordable
housing
MAIN
PRINCIPLES EMERGING FROM INNOVATIVE SOLUTIONS |
MAIN
BARRIERS |
Unavailability of complementary goods (e.g., land,
infrastructure) |
Low
individual
purchasing
power
|
Limited
access to
housing
finance |
Inadequate
current
product
offerings |
Enable
long-term investment |
•
Assign property rights to decrease investment risk - Bairro
Legal, Brazil
•
Invest in services and infrastructure to unlock latent housing
demand - Orangi Pilot Project, Pakistan |
·
Mobilize low-income families’ purchasing power through
experience-based learning and demonstration projects - Slum
Dwellers International, Global*
|
•
Market program by speaking to the poor’s aspirations - housing
as patrimony - to catalyze savings - Cemex/ Patrimonio Hoy,
Mexico |
·
Enable asset-building and create design that meets low-income
communities’ preferences - Housing Stock Exchange, Sri Lanka* |
Leverage
resources
abundant
at the local
level |
•
Build critical mass and empowerment for communities to negotiate
with government - Homeless People Federation, S. Africa
•
Target already-organized communities - Baan Mankong,
Thailand* |
•
Use “sweat equity” to reduce labor costs and create new skills -
Mutirões, Brazil |
•
Invest in customers’ income-generating potential - YKPR,
Indonesia*
•
Build systems to capture savings for all types and sizes of
incomes - VSSU, India* |
•
Facilitate community-led design - SPARC, India
•
Utilize local materials and building techniques - ADAPT,
Egypt* |
Radically
lower
the cost of
the whole
housing
delivery
process |
•
Harness the effectiveness of existing informal systems -
Saiban, Pakistan
•
Design new electricity distribution channels for slums through
cooperatives - Ashok Bharti, India* |
•
Aggregate demand to reduce transaction cost - ICICI Bank,
India
|
•
Reduce the risk of housing finance by building credit history
and income generation opportunities - Grameen Bank Housing
Program, Bangladesh |
•
Leverage community-led market research - Slum Dwellers
International, Global*
•
Offer comprehensive solutions - Cemex/ Patrimonio Hoy,
Mexico |
|
Main
principles emerging from innovative solutions in housing
As described below, we have distilled three main principles
emerging from successful low-income housing initiatives based on a
research conducted in 2005. This work included identifying and
researching over 60 social innovations and interviews with over 30 key
informants specialized in low-income housing around the world. The
quotes inserted at the beginning of each section were obtained during
this process.
1.
Enable long-term investment
“Poverty is a lack of material conditions, but it is also a lack of hope.
Housing fulfills a material need, but also the need for hope.”- Alfredo
Stein, Swedish International Development Agency, Central America
“Housing can be a key point of leverage in the development process.” -
Fazal Noor, Ashoka Representative and housing expert, Pakistan
“Under the threat of eviction, there will be no market.” - Billy Cobbett,
Cities Alliance, and former Housing Minister, South Africa
Low-income individuals must engage in a delicate
financial balancing act every day to survive. Making it possible for
them to undertake long-term, large investments (or successive short-term
investments over long periods of time) requires ensuring the right
economic incentives for them, as well as addressing more psychological
aspects such as their ability to plan for the future.
Precarious and insecure living conditions heighten the
financial risk of any investment occupants might otherwise make in their
homes. In an attempt to break this vicious circle, the municipality of
Sao Paulo’s Bairro Legal initiative succeeded in providing secure tenure
to more than 45,000 families through a comprehensive program from 2001
to 2004. Services included conflict mediation between land owners and
squatters, assistance for legal acquisition of land directly and through
partnership with the local Bar Association, and microcredit through
Brazil’s largest private sector bank. Another innovative market-based
initiative that has enabled slum dwellers to build assets and climb the
financial ladder is led by Darin Gunesekera from the Wiros Lokh
Institute in Sri Lanka. Darin has started a variation of a stock
exchange market to raise funds for the construction of new dwellings for
poor families who are entitled to certificates to purchase a new home of
their preference. This has changed the practices of developers who need
to compete for the preferences of the poor. Low-income families can
voice their preferences and gain confidence to invest their resources in
home improvement.
Unlocking some of the psychological barriers of low-income
families to build a better future is the other side of the coin. Slum
Dwellers International, a global network of squatter groups started by
several social leaders (including Ashoka Fellows Samsook Boonyabancha
and Joel Bolnick respectively in South Africa and Thailand) that counts
a total of 5.6 million members in 14 countries[9]
has defined its programmatic priorities based on people’s aspirations
and devised several strategies to enable action and problem-solving
among their beneficiaries. These include visits between members from
different neighborhoods, cities, and countries in order to encourage
learning through real life experience, as opposed to formal education,
and generate empowerment. The visible achievements in home improvement
are another powerful element to demonstrate that change is possible.
Demonstration houses are used to trigger discussion and joint
decision-making about design, construction materials, and processes.
2.
Leverage resources abundant at the local level
“Look to build self-reliance, not just houses.” - Paul Cohen, Tlholego,
South Africa, Ashoka Fellow
“Beyond building a home, community-building is key because there are so
many other things poor people need to accomplish together.” - Celine
d’Cruz, SPARC, India
“Support the development of housing by supporting the development of the
community.” - Oswaldo Setti, Ação Moradia, Brazil, Ashoka Fellow
“Your biggest competitor can be the expectation of free help.” - Cheryl
Young, SAATH, Ahmedabad, India
Many of the barriers to housing for the poor require
political, or at least multi-stakeholder, solutions - for example,
securing land, modifying property rights regimes, or convincing
electricity providers to serve a settlement. Social capital is probably
the greatest asset of low-income communities who can achieve much by
joining forces. This is precisely the key break-through of microcredit
that replaced traditional loan collateral by social collateral. The
South African Homeless People’s Federation (SAHPF) is an example of a
truly community-based organization designed to be inclusive for the very
poor. It uses collective action as a core strategy to strengthen
communities and enable them to initiate and manage changes in the areas
that they have prioritized such as housing. The core strategy to
organize communities is the creation of daily saving groups where
members, mostly women, learn to trust each other and build a discipline.
Saving groups are then federated at the neighborhood, regional, and
national levels.
More generally, there is a great potential in enabling
low-income communities and individuals to become self-reliant. They have
tremendous assets they can contribute including a great deal of
resourcefulness, skills, time, and the ability to save. It is not a lack
of skills that makes poor people poor. Poverty is not created by poor
people but often by the institutions and policies that surround them[10].
There is therefore a great need for transformational and market-based
approaches to housing, as opposed to hand-outs, that leverage these
assets to provide long-term and sustainable solutions. This also
requires a different perception of the “poor” not based on pity or
mistrust but on openness and belief in their potential. The movement of
“mutirões” that started in Brazil and other parts of the world in the
early 1980s is based on individuals who come together after work and
during weekends to construct their homes and neighborhoods through
mutual self-help projects because they are unwilling or unable to rely
completely on the state. Despite the fact that this process takes longer
than using professional full-time constructors, this approach enables
them to reduce costs and effectively teaches self-management and other
administration skills to the community. Another initiative that
illustrates this principle is ADAPT in Egypt led by Hany El Miniawy. It
leverages locally available materials as a substitute for conventional
construction materials as well as ancient building techniques that are
more adapted to weather conditions and culture, given the limited
resources available.
Leveraging the productive potential of low-income communities
that can access the inputs needed for success is an important strategy
that enables them to increase their purchasing power. YKPR in Indonesia
organizes groups of families to apply collectively for credit from the
government housing bank that is unavailable on an individual basis and
it coordinates repayments on a calendar that accommodates the seasonal
nature of incomes. The negotiated credit is “three-way,” intended to
cover land acquisition, house construction, and income-generating
investments to help cover repayments on the loan. The government housing
bank now considers them more reliable than its traditional clients and
makes additional efforts to achieve customer satisfaction - for example
by collecting loan repayments at customers’ doorsteps. Although the
model was initially developed for rural areas, the principle is
applicable to urban settings.
3.
Radically lower the cost of the whole housing delivery process
“Understand housing as a process, including not only construction but
also land acquisition and title, provision of infrastructure and
services, planning and negotiation, financing, and community
organizing.” - Fazal Noor, Ashoka Representative and housing expert,
Pakistan
“Understand what families want…and the fact that it’s not what we think
they want.” - Oswaldo Setti, Ação Moradia, Brazil, Ashoka Fellow
“The poor are the world’s experts at managing money…They just face a very
narrow range of choices.” - Asian Coalition on Housing Rights
Thinking
holistically about how to make the overall housing transaction
affordable to low-income households rather than reducing the cost of
individual components such as cement or labor is critical. Saiban in
Pakistan is a remarkable initiative that makes the overall housing
transaction affordable and convenient for low-income households by
leveraging the benefits of informal housing processes. The organization
finances the purchase of unserviced plots of land, and leaves housing
and infrastructure to be developed incrementally as each household
accumulates the money to pay for them – as occurs in the informal
sector. While leveraging informal processes, the organization also
improves on them by providing secure land tenure and organizing
residents to plan and negotiate for additional services. Security in
Saiban settlements is higher; costs of living are lower; and services
are obtained years faster than in comparable informal settlements.
Radical cost reductions
can be achieved by streamlining the whole process and switching some of
the costs and responsibilities to clients - an interesting parallel with
the Internet revolution that enabled many companies to rethink their
business models by putting customers and partners to work thanks to the
Internet interface. Other strategies to increase the profitability of
distribution in slums and rural areas include multi-purpose distribution
channels and demand aggregation. Examples from other industries such as
e-Choupal, an ITC-led initiative for small farmers in India, could
inspire innovations in housing and building materials. With regards to
housing finance, Grameen was one of the pioneers and has already enabled
the construction of over 600,000 houses in Bangladesh. Unlike other
financial institutions, Grameen ventured into giving housing loans based
on the philosophy that investment in shelter for the poor is productive.
Its strategy for providing housing microfinance profitably uses the same
organizational infrastructure that it uses to make income-generating
loans, and restricts eligibility to clients who have developed
successful credit histories for four years to reduce risks associated
with housing loan products.
Additionally, an in-depth understanding of potential
customers’ needs and preferences is necessary to get the highest return
on investment by focusing on specific features or components that really
matter to end-clients. But conventional wisdom often does not apply in
low-income markets and market data is scarce. CEMEX learned this the
hard way when it began offering small bags of cement in order to
minimize waste, logically thinking that it would be more convenient and
affordable to low-income Mexican households without transportation means
and with limited disposable cash. However, they soon realized that these
bags were not popular as customers valued the social status associated
with having a large bag of cement propped up in front of one’s house[11].
This constitutes just one example of the multiple intangibles that play
a role in low-income customers’ preferences.
C. Business in development:
an increasing trend
Another trend parallel to the transformation of the citizen
sector over the last two decades is the increasing role that businesses
have been playing in local development by going beyond mere corporate
social responsibility. There is a growing realization that doing
business with social impact is possible, which is blurring the gap
between conventional territories of development players and businesses.
This is particularly critical in sectors such as housing and urban
development that have the potential to create significant social impact
by tremendously improving conditions of life, productivity and health of
low-income communities.
Traditionally, large companies have served only about 20
percent of the developing country markets. However, expanding one’s
traditional markets is increasingly becoming a strategic matter given
the rate of growth and the sheer size of low-income markets, in addition
to being an effective way to improve one’s socially responsible image.
98 percent of population growth until 2025 is expected to come from
developing countries. If efficient markets and appropriate product
offers, such as financing and delivery systems plus secure land tenure
were in place, the global market potential could be in the order of
hundreds of billions of dollars. Private companies could not only
benefit from this sizeable business opportunity but their investments
could also serve as critical enablers of the infrastructure and
institutions needed to develop a capital intensive sector such as the
affordable housing one worldwide.
But successfully entering these markets requires learning new
skills and adjusting business models to different and rapidly evolving
market dynamics[12].
The housing market is no exception. While the aggregated power of
low-income communities is significant, individual transactions are small
and incomes are low. Can most people in urban slums afford to build a
home? Most businesses are not yet convinced by this business
proposition. In the meantime, many of these potential customers have
found ways to build their homes, even when it takes a decade to complete
them. They pay top prices for their building materials, tend to hire
untrained masons who use poor construction techniques, self-construct,
or access loans with exorbitant interest rates.
A house will progressively evolve with the flow of life: a
room may be added when a new child is born, a son marries or relatives
move in. Just as commercial banks used to claim that the poor were not
bankable prior to the microfinance revolution, most business players in
housing behave as if this market was not worth entering. While banks
actively targeted large volumes, Mohammad Yunus departed from
conventional wisdom based on his fine understanding of the local
culture: “I decided to do exactly the opposite of traditional banks. To
overcome the psychological barrier of parting with large sums, I decided
to institute a daily payment program. I made the loan payments so small
that borrowers would barely miss the money.”[13]
Twenty years later, after mastering ways to keep transaction costs to a
bare minimum, microfinance is considered as a sound investment and large
private banks are moving in.
One of the most remarkable examples emerging from the private
sector is the case of Patrimonio Hoy (“Assets Now”), a program launched
in 1998 by CEMEX, one of the top three global cement manufacturers. This
case illustrates how a company successfully translated the social
innovation of microfinance to the construction material industry,
expanded their core business model to overcome the main barriers faced
by their potential customers (e.g., access to financing), and found
cost-effective ways to serve this market. It also an illustration of a
company actively seeking what constitutes an attractive value
proposition for low-income populations. PH was started after CEMEX
issued a “Declaration of Ignorance” and sent a team to the slum for
several months to understand how low-income families lived and built
their houses. It acknowledges the sense of empowerment produced by a
better home that enables low-income clients to break from their hopeless
resignation, the importance of social capital, and the critical issue of
trust by the community—notions that are typically considered as “soft”
or dubious by businesses. Also worth stressing is that unlike typical
innovations in the construction material industry, PH’s breakthrough is
about innovative business processes rather than technology-based
products.
[14]
Mexico has one of the
worst housing shortages in the world, with the need for 1.5 million new
homes annually and another 3.7 million existing units that are estimated
to be inadequate. Part of the initial motivation of CEMEX to start PH
was their realization that low-income segments were an unusually stable
market as the demand was not as strongly affected by Mexico’s
devaluation crises or by government spending cycles. It observed that 40
percent of the cement consumption in Mexico came from the self-built,
low-income segment, representing potential sales of US$500-$600 million
per year. The challenge then became finding a way to transform this
housing need into a viable market opportunity.
In most Mexican
communities where incomes are low and cultural norms may mitigate
against saving for the future, people tend to build their homes
incrementally as money becomes available. This can be a long process,
taking up to four years to build an additional room. PH’s model
addresses the financial constraints of low-income families by building a
system for saving and planning ahead. PH marketing emphasizes
“patrimony” – an asset and a legacy to pass down to one’s children – as
opposed to construction materials. Its offer is tailored to the reality
of how the poor build their homes, one room at a time, with their own
labor. PH makes it attractive with a “total housing solution” that
encompasses financing, cement, and various other building materials,
technical assistance, storage, and quality customer service. Since its
creation in 1998, it has enabled about 130,000 families to improve their
homes, saving an average 2/3 of the time and 20 percent of the costs of
traditional methods. PH’s current client base in Mexico is already
larger than all subsidized housing programs combined and unlike them, PH
is not limited in its growth by the amount of available subsidies.
PH’s comprehensive offer includes financing, construction
materials, technical assistance, and other benefits:
•
Financing:
While studying low-income families’ habits, CEMEX found that while 70
percent of the women involved in traditional saving cooperatives were
saving for housing, only 10 percent succeeded in actually spending their
savings on housing. PH’s scheme therefore provides a “system” for those
who do not have the discipline to save and a solution for those without
credit history or collateral through a combination of micro lending and
community savings. It consists of a 70-week payment plan in which
members make weekly payments of about US$14 through an individual or
group plan. Credit is provided in the form of materials, delivered in
several installments agreed on by the member. It has achieved impressive
repayment rates above 99.2 percent, demonstrating once again that the
poor can be trusted customers.
•
Construction materials:
CEMEX has not developed
lower cost or lower quality products for low-income markets, but instead
offers its standard products. In addition to cement, PH’s plan includes
more than 200 other building materials provided by distributors. PH
negotiates discount prices with distributors and suppliers thanks to the
considerable buying power of CEMEX. Quoted building material prices
remain constant for the duration of the plan, a great protection against
inflation. At each installment, materials are delivered immediately or
stored in PH distributors’ facilities until customers are ready to
build.
•
Technical assistance and other services:
New members
receive free advice from an architect /engineer about design, planning,
selection of materials, and construction techniques. This assistance is
very valuable to do-it-yourself homebuilders who often can waste up to
30 percent of materials due to inappropriate methods. Some
variations of PH’s offer include a partnership with the Mexican
government to work on public infrastructure projects financed partly by
households and partly the local municipalities (Calle Digna).
More than 130,000 families have gone through PH, improving
their living conditions and building rooms faster and at an average 80
percent of previous costs. The improved homes have also a higher market
value, thereby directly increasing the net worth of PH members. PH aims
to reach over one million families by 2010 and is expanding to Colombia
and Venezuela this year. It does not currently target the very poor, but
those earning between US$1,825 and US$5,475 per year, mostly in urban
and peri-urban areas. With regards to social impact, PH has also created
jobs for thousands of door-to-door promoters who earn an average US$200
a month for two to three hours work per day. From a business
perspective, the program is now profitable, generating a net income of
approximately US$1.3 million in 2004 and total sales of US$42 million
since its inception. Cement consumption has tripled among its
low-income, do-it-yourself customers where PH is present and PH has
improved CEMEX’s reputation as a socially responsible business.
From the beginning, PH was set up as a separate division
within CEMEX to allow more flexibility in terms of salary structure and
corporate culture among other reasons. It has now more than 62 offices
in 29 cities of Mexico. Each cell has a general manager, an engineer or
architect, a supply manager, and a customer service representative. Most
of the employees come from low-income communities. With regards to
distribution, PH selects distributors via a demanding set of criteria,
including good relationships with CEMEX and the capacity to store and
deliver materials to hard-to-reach neighborhoods. This is a critical
element as PH realized the importance of impeccable delivery despite the
logistical challenges in urban slums in order to overcome the trust
issues of its members.
Overall, PH’s marketing strategy aims at excellent customer
service and trust building. In close-knit communities where
relationships are highly valued, word of mouth is the number one
marketing channel. PH leverages this channel by using local promoters
who work on commission, 98 percent of them women who have established
credibility among their social networks. The introduction to PH starts
with a group session and a small party is thrown when a member completes
a room. Building on these principles, PH and Ashoka are currently
testing alternative strategies to leverage the knowledge and
grassroots-based infrastructure of already existing citizen sector
organizations. Patricia Nava (founder of Sisex, a reproductive health
network), ONI (a leading nutrition organization), and the food bank of
Toluca in Mexico are engaging members of their networks as promoters or
potential members of PH. In return, the partnering social organizations
receive a commission for referring clients to PH and are able to advance
their social mission by reducing domestic violence and providing more
decent living space for the participating families. As CEMEX/PH move
further into lower-income segments and/or rural markets, these types of
partnerships will become increasingly important.
Patrimonio Hoy is a pioneering program and is part of a
rapidly emerging trend. Lafarge and Holcim, the other two corporate
cement giants have also started initiatives to grow their presence in
low-income markets. In addition, various national and local players that
may not have as much visibility on the global scene have developed
innovative solutions thanks to their greater proximity to low-income
communities. Looking more broadly at urban development beyond housing,
water and electricity companies are also experimenting with creative
schemes designed to make the market more inclusive of low-income
customers. Two noteworthy examples from the Philippines and Colombia are
briefly introduced below. As competition increases, low-income
communities will benefit from a multiplicity of affordable offers and
much more effective commercialization channels.
Manila Water in the Philippines, whose customer base is more
than half urban poor, returned 16 percent on employed capital in 2004,
the best showing amongst a set of peer companies in Asia. When it won
the concession of a neighborhood in Manila in 1997, it faced numerous
challenges: one-third of the population did not have water, only 10
percent had sewerage services, and as much as 65 percent of the water
that left the treatment plant brought no revenues due to leakages,
illegal connections, or measurement problems. Low-income communities
were the major source of pilferage, accounting for up to 40 percent of
the total lost revenues.
In order to address the issues faced by low-income
communities with regard to high installation costs and difficulties in
collecting post-paid services, Manila Water developed a novel collective
installation and billing scheme. Clients can choose between an
individual or group scheme (chosen by 70 percent of the urban poor) that
not only lowers the connection fees for customers but leverages social
capital and peer pressure for bill payment for the provider. Manila
Water also launched a program to educate consumers on the risks of
illegal connections where water was often sold for seven times more than
what Manila Water would typically charge. They realigned their
philanthropic strategy to support development programs that had the
effect of gaining the support of the communities. Last but not least,
they resolved an important legal obstacle by securing regulatory
support. In the past, users were required to have a land title to secure
piping and faucets on their premises – creating incentives for illegal
connections – but now providers are allowed to serve informal
settlements[15].
AAA in Colombia is another case of providing water services.
The company was on the verge of leaving the region of Barranquilla in
Colombia to pursue more attractive investment opportunities in Chile
when some of the local management staff convinced the company to start a
systematic approach towards low-income markets that combined market
mechanisms with strong outreach to political and citizen-sector
organizations in the region. Major investments were made to increase the
quality of the water and the number of people with access to water and
sanitation. Beyond revamping its database to improve information about
clients and its customer service, it became possible to collect weekly
or even daily payments thus tailoring the collection cycle to the low
cash reserves of the poor. Bills were simplified for greater
comprehension, the service line was fully subsidized by the government,
and the meter was repaid in 36 months, again addressing the inability of
the poor to make large cash outlays. Mobile units were created to allow
customers to pay without leaving their neighborhoods, cutting down on
transportation costs.[16]
D. Advancing housing solutions for
the poor through Hybrid Value Chain collaborations
While an increasing number of businesses are starting to
explore low-income market opportunities, most of them soon realize that
they need to learn about these markets and find ways to access them.
Businesses may have strong technology, logistics, and investment
capacity but, more often than not, they face major challenges when it
comes to developing the necessary market knowledge about low-income
communities, the distribution channels in slums or rural areas, and
building trust-based relationships with these communities. Not only have
companies rarely considered these market segments as a source of
potential clients but there is little formal market data available.
In contrast, over many years the citizen sector has built
grassroots networks and alternative service delivery systems and
demonstrated significant outreach capacities to low-income families
throughout the developing world. These networks cover a diverse array of
specialized services targeting basic human needs like education,
healthcare, and access to financial services. While by themselves most
of these networks are not profitable, they constitute an outreach
infrastructure that can serve multiple purposes, one of which is the
delivery of valuable products and services to the poor. We argue that
these networks are the cornerstone to establish a new delivery
infrastructure capable of reaching hundreds of millions of people
through market-based solutions.[17]
To the extent that businesses - particularly those involved
with basic human needs like housing, water, and electricity - can learn
to leverage these social networks and their market knowledge, they could
substantially reduce the investment needed to develop these underserved
markets as well as accelerate their entrance into these new markets. It
makes business sense and it creates social value thanks to CSOs and
businesses offering complementary services to low-income clients. One
example of this is the alternative growth strategy for Patrimonio Hoy
that CEMEX and Ashoka are currently testing by leveraging existing
social networks as promoters of PH’s services rather than solely relying
on individual promoters.
In order to do this, CSOs must sensitize themselves to the
possibility of building new types of commercial collaborations that
would facilitate their access to the specialized infrastructure and
financial resources typically available only to businesses, and to
significantly increasing their impact. On the other hand, businesses
will need to change their perception of the citizen sector, recognizing
them as co-designers of solutions and finding ways to compensate them
fairly for the assets and skills they bring to the partnership.
Alternatively, they could also consider adopting and scaling up specific
elements of social innovations developed by CSOs. Some businesses have
already led the way, such as Lafarge which has placed partnerships with
CSOs at the core of its philosophy, starting with a broad global
collaboration in the field of environment with the World Wildlife
Foundation and extending it to housing with Habitat for Humanity - an
opportunity for the staff to get engaged in housing projects but also to
exchange good practices among business units. Based on these
experiences, Lafarge is now exploring the next stage of partnerships for
its low-income market initiatives in South Africa and India among other
locations.
From providing access to basic services (water, sanitation,
electricity) to distributing building materials, there are multiple
value-added steps that constitute the housing value chain. Enabling the
transformation of low-income populations into viable customers requires
carefully synchronizing the interventions of numerous partners including
community development organizations, social networks, building material
companies, large and informal constructors, microfinance institutions,
commercial banks, legal services, and the individual customers. As shown
in Exhibit 3, what emerges is a “hybrid value chain” in which the
business and citizen sectors work together to achieve maximum output:
Exhibit 3. Examples of
opportunities for Business/Social Hybrid Value Chain collaborations in
housing
Critical steps |
Main barriers to serve low-income markets profitably |
Potential value proposition of citizen organizations |
Examples of
main players
needed |
Access to
land |
•
High cost of urban land
•
Inefficient/ inappropriate property rights system
•
Heavy migration flows |
•
Organize communities
•
Negotiate new land allocation
•
Suggest legal changes
•
Offer financing schemes |
•
Municipal governments
•
Lawyers
•
Social movements and citizen groups |
Access to basic services |
•
Illegal settlements
•
High cost of infrastructure
•
Small individual transactions
•
Fear of low payment collection |
•
Organize communities
•
Create demand for better environment /change mindsets
•
Aggregate demand
•
Offer financing schemes
•
Manage alternative land development model |
•
Municipal governments
•
Developers
•
Water, sanitation, and electricity companies
•
Social movements and citizen groups |
Financing |
•
Lack of collateral
•
Lack of regular and verifiable salary
•
Limited outreach of housing microfinance |
•
Organize communities
•
Deliver financial services
•
Promote housing loan programs
•
Provide added services such as technical assistance |
•
National / local governments
•
Committed investors capable of mobilizing the creation of a
housing fund (e.g., investment banks, private investors,
consumer banks, building material manufacturers/ retailers)
•
Microfinance institutions and citizen groups |
Construction process |
•
Small individual transactions
•
Limited financing available
•
Limited construction skills
•
Lack of existing distribution channels in slums |
•
Organize communities
•
Create demand for better environment / change mindsets
•
Aggregate demand (for construction materials for example)
•
Provide alternative distribution channels
•
Provide technical assistance (create new skills and employment
opportunities) |
•
Construction material companies
•
Distributors
•
Constructors (large and small)
•
CSOs |
The above table illustrates the fact that businesses will be
able to enter low-income markets more rapidly and profitably if they
learn to tap into the knowledge and resources of citizen organizations.
It also highlights the need for widespread collaboration across the
industry to unlock demand and create opportunities for mutual value
creation. Multi-partner collaborations are required to create an
“ecosystem” because many services are interdependent and feed each
other. If there is no land security, there will be no willingness to
invest in services or housing beyond the basics - if there is no
financing, there will be no opportunities to advance construction, and
so on. In addition, looking beyond the traditional economist’s
perspective is critical. Designing offers based on a virtuous cycle
where low-income communities are not only consumers but also producers
is critical for economic and social value as new incomes generated by
providing employment will also foster long-term demand for housing
products and services.
In order to do so, a new vision of partnerships is necessary
- one that is centered simultaneously on profit and social impact and
that leverages the core competencies of all partners. These include
in-depth understanding of markets and the ability to organize
communities for citizen groups, and strong financial, technological, and
logistical capacities for businesses. From the business perspective,
these partnerships that are breaking from the philanthropic paradigms
and thus are not limited by corporate social responsibility budgets are
still scarce. They have the potential to generate a “win-win-win” value
proposition:
•
Improved
products/services for low-income communities, empowerment, and possible
employment opportunities;
•
Accelerated social impact (by providing products that address basic
human needs and leverage the business sector infrastructure) and new
sources of revenues (based on sales commissions or flat fees, as
negotiated) for the social partners;
•
New
markets, an improved image, and staff retention for
businesses;
E. Reflections on the concept of
Hybrid Value Chain
Ashoka is committed to help foster this new generation of
partnerships in areas of high social impact potential such as housing,
water and irrigation, and health. “Hybrid Value Chain” collaborations as
we have named them, represent a systemic change in the way businesses
and CSOs interact. These are not punctual, opportunistic, and
contractual relationships between businesses and CSOs but strategic
alliances that leverage resources to better serve communities. They are
commercial in nature and based on the premise that companies and social
entrepreneurs can interact commercially as equals. In this scheme, CSOs
are not only becoming alternative distributors but critical enablers,
value creators, and catalysts to ensure that all of the parts of the
system that are required are in place, such as land, services,
construction material, skills, and financing. This requires a profound
change of mindset and culture for both businesses and CSOs. Successful
demonstration projects involving industry pioneers are needed to build a
new paradigm that becomes standard practice for both businesses and CSOs,
and that will be replicated independently.
While we recognize that there is a cost associated to develop
partnerships and that business-social collaborations may not always be
the most cost-effective approach to developing low-income markets, we
believe that this is typically a superior solution, provided certain
conditions apply. These include products or services of high social
impact (required to engage CSOs on a sustainable basis) and
high-investment products or services that typically require a cluster
approach with value-added services that allow low-income customers to
fully benefit from their investment. This necessary cluster includes
services of mixed financial returns such as financial services,
community empowerment/mobilization, or capacity building that range from
market-based rates to merely philanthropic support.
In spite of the many cultural, strategic, and operational
challenges ahead, the potential is massive and pioneers will benefit
from first mover advantages. The key to these partnerships is to
identify the right partners and to ensure alignment at the strategic
level, complementarities at the operational level, involvement of
low-income communities, and the necessary resources to design, launch,
and scale the new business models.
Basically, creating an enabling environment for these new
partnerships relies on several factors that include people, money,
policies, trust, and collaboration. First, visionary leaders and
entrepreneurs are needed because this is not business as usual for
companies or for CSOs. Then the right kind of capital for the different
stages of the ventures is necessary: patient seed capital that will
enable the search for appropriate solutions, innovation, and support to
CSOs that must manage major internal changes when they “convert” from
being grant-dependant to income-generating entities that provide
services to businesses; and investment capital for the scaling-up stage.
Accessing seed funding is currently a challenge for most companies
because R&D is typically understood as innovating products rather than
processes. Moreover, according to classical thinking, the business of
business is business: all investment opportunities within a corporation
are subject to internal arbitrage based on future returns. As we argued
earlier, low-income markets offer sizeable growth opportunities in
addition to more intangible benefits such as social image and goodwill
with government and communities themselves, but in some cases a
compromise on margins is required especially when targeting very poor
populations. There is therefore a need for a new type of hybrid capital
that will take economic and social returns into account as well as for
different types of investors to fund the different pieces of the mosaic
of variable returns.
Although we advocate a greater level of business-social
congruence, we do recognize the critical role of government as an
enabler of low-income housing. Ensuring the safety of urban development
is one dimension. With regard to financing, government incentives to
attract investments in these markets could make a big difference, as
could mixed financing models. Taking again the example of Patrimonio
Hoy, CEMEX has already envisioned leveraging partly public subsidies and
partly individual contributions to reach lower-income segments and
expand their saving program to infrastructure improvements. Microcredit
schemes could also be more widely adopted by public housing programs to
reach more beneficiaries, reduce up-front payment requirements, and
increase individual ownership and responsibility towards their homes,
improving the chance of commitment to further improvements in homes and
communities in the future. Although relying on communities’ micro
savings and informal processes typically takes more time to complete
construction, it makes achievements visible quickly and progressively
builds confidence about what can be accomplished.
Optimal solutions to address the massive shortage of adequate
housing are yet to be found but it is clear that given the magnitude and
the nature of the needs, no sector can deliver services by itself.
Forward thinking business leaders, social leaders, and investors are
needed to develop affordable housing solutions at a large scale and to
take the lead in tackling the various dimensions of the systemic
solution. We look forward to continuing the dialogue with these various
players.
We also want to recognize some key questions raised by this
new paradigm and open up the dialogue. Market-based approaches enable
financially sustainable solutions to low-income communities, but how
much profit is ethical in these market segments? Given that markets do
not always work efficiently in low-resource environments, what support
structures need to be created? How much can businesses collaborate
versus compete to address the massive social challenge of one billion
people living in slums? Are shared investments possible to develop an
enabling environment? To some extent, industry-level dynamics have
started in the environmental field. Can this alliance model be applied
to develop low-income markets commercially? Lastly, if the citizen
sector contributes to the creation of new wealth for private investors,
how can we then economically value their contributions? How do we value
social capital and intellectual property embedded in social innovations
that they bring?
Stephanie Schmidt
is
a Program Director and Change Leader at Ashoka, and a member of the
Advisory Board of Global Urban Development.
She joined the Full
Economic Citizenship initiative (FEC) in February 2004 bringing
experience from both the business and social sectors to the initiative.
Most recently she managed the FEC Changemakers competitions on
market-based strategies and health as well as the Lafarge project.
Valeria Budinich is Chief Entrepreneur and Leadership Group Member
at Ashoka. She launched the FEC initiative in 2003 after having worked
for 20 years in the creation of business development programs in 22
countries. Copyright 2006 by Ashoka: Innovators for the Public.
Acknowledgments:
This study was prepared
as part of a series of studies organized by the International Housing
Coalition (IHC) for presentation at the World Urban Forum III to be held
June 19-23, 2006 in Vancouver, Canada. It is the joint intention of
Ashoka and the IHC that the paper contributes ideas and reviews the
results of experience to assist in the search for solutions to the
problems of housing low-income families and slum dwellers around the
world. Both subscribe to the goal of “Housing for All” as an essential
element to ending poverty throughout the world.
This study was made
possible thanks to a research that Ashoka conducted in collaboration
with Lafarge in 2005. Ashoka would therefore like to express thanks to
the Lafarge team as well as to Elizabeth Jenkins, consultant, who
contributed significantly to this project.
About Ashoka:
Ashoka is a global network of social entrepreneurs. Since its
creation 25 years ago, it has invested in over 1,700 social
entrepreneurs in 62 countries through a “social venture capital”
approach as a way to address major social challenges with systemic
responses. Ashoka Fellows are selected for their innovative and
practical solutions to social needs. Based on these innovations,
Ashoka’s Full Economic Citizenship initiative focuses on spreading
successful solutions for low-income populations - harnessing the
potential of commercially sustainable business-social partnerships
(“Hybrid Value Chains”) to reach significant impact.
www.ashoka.org.
[1]
Ashoka has adopted the terms "Citizen Sector" and "Citizen
Sector Organization” instead of negative definitions such as
“Non-Profit” and “Non Governmental Organizations.”
[2]
The term “Value Chain” popularized by Michael Porter in the
1980s refers to the key value-added activities involved in the
delivery of products and services to end-customers including
distribution and sales of construction materials, construction
and financing in the case of housing. By “Hybrid Value Chains”
Ashoka refers to new types of commercial collaborations between
businesses and social organizations that leverage their core
competencies to improve the delivery of essential
products/services to low-income populations. Hybrid Value Chains
typically mobilize various actors from both sectors, each
managing its own value chain.
[3]
Sources: Daphnis Franck and Bruce Ferguson.
. Kumarian Press, 2004; Cement
Association of Brazil Portland.
[4]
Source: Hernando de Soto, The Mystery of Capital: Why
Capitalism Triumphs in the West and Fails Everywhere Else,
Basic Books 2003.
[5]
Source: Hernando de Soto, ibid.
[6]
Source: ResponsAbility's discussion paper “Engaging the
private sector”. <http://www.responsability.ch>
[7]
Source: “The 21st century NGO: In the market for
change”, SustainAbility, UN Global Compact & UN Environment
Program Publication, London 2003. (Note that this excludes
religious congregations).
[8]
For more on social entrepreneurship, see: David Bornstein.
How to Change the World: Social Entrepreneurs and the Power of
New Ideas. Oxford University Press, 2004.
[9]
SDI is definitely one exception within the citizen sector with
regards to scale. Its organization as a network as opposed to a
direct service provider has enabled it to grow rapidly.
[10]
Source: Muhammad Yunus, Commonwealth Lecture. 2003.
[11]
Source: Flores, Letelier and Spinoza, Developing Productive
Customers in Emerging Markets. California Management Review.
2003.
[12]
Although we recognize that ‘the poor’ are not an homogenous
group and different strategies may be needed by geographic
locations, income levels or social groups, this is not the focus
of this paper.
[13]
Muhammad Yunus, Banker to the Poor: The autobiography of
Muhammad Yunus, Founder of Grameen Bank. The University
Press Limited, 1998.
[14]
Facts about PH are extracted from several sources: Herbst.
Enabling the Poor to Build Housing: Cemex Combines Profit and
Social Development. 2002. Ashoka/ Changemakers.net; Segel
and Meghji. Patrimonio Hoy: a Groundbreaking Corporate
Program to Alleviate Mexico’s Housing Crisis. 2005. Paper
presented at HBS conference on business approaches to global
poverty’s paper; Flores, Letelier and Spinoza. Ibid; Prahalad.
The Fortune at the Bottom of the Pyramid. 2004. Wharton
School Publishing.
[15]
Zobel de Ayala, Aquino, Ablaza, Beshouri and Romano.
Developing
Viable Business Models to Serve Low-Income Consumers.
Paper
presented at HBS conference on business approaches to global
poverty. 2005.
[16]
Rufin and Arboleda. Utilities and the Poor: A Story from
Colombia. 2005.
[17]
Budinich. A Framework for Developing Market based Strategies
that Benefit Low Income Communities. 2005.
Changemakers.net.
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