Index spotlights firms that cater for base of pyramidJune 2008
A new index has been created to recognize companies whose products, services and outlook concentrate on the needs of poor people in Latin America and the Caribbean.
The Opportunities for the Majority index has been devised by US-based Innovest Strategic Value Advisers at the request of the Inter-American Development Bank (IDB). It ranks listed companies operating in Latin America and the Caribbean on how they cater for the 70 per cent of the population that lives on less than $3260 (£1675) a year.
The IDB hopes the index will encourage institutional investors to support the best-performing companies in responsible investment programmes, and businesses to consider how they can better reach underserved markets.
Henderson Global Investors said the index would ‘be a useful reference point for our research’.
Researchers assessed 75 companies against nine criteria, including whether they sell products or services specifically to low-income markets, the importance of these markets in their growth strategy, whether they make staff aware of the needs of low-income communities, and how they maintain ‘trusting relationships’ with communities.
Banco Bradesco, one of Brazil’s big four banks, heads the index. Its programme of opening branches in post offices has reduced the number of Brazilian towns where there is no access to banking facilities from 2351 to 574, and reached 16 million extra customers.
Matthew Kiernan, chief executive of Innovest, said companies from Brazil, Peru, Mexico and Chile dominated the top of the index ‘because they are among the most dynamic and highly-developed in the region and arguably in the countries where the bottom of the pyramid idea has progressed the furthest’. He added that it was ‘not surprising’ that companies in the smaller economies of the Caribbean were less prominent.
The index is part of the IDB’s Opportunities for the Majority programme, which seeks to persuade the private sector to take more account of the needs of the poor. Studies conducted for the IDB suggest that, despite having little money to spend, they ‘represent a stable and substantial market for companies willing to engage responsibly and with commitment and creativity’.
Kurt Hoffman, director of the Shell Foundation, told EP: ‘There are enormous opportunities at the so-called bottom of the pyramid ... if this index incentivizes companies to focus their operations on this sector then that is a good thing. The jury is out on whether or not it will achieve this, but if it does then we should be looking to replicate it elsewhere in the world.’
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