The International Finance Corp. launched on Tuesday a new database on the spending patterns of poor people around the world.
The tool, which IFC says is the most comprehensive source of consumer spending data from developing countries, is meant to help businesses find opportunities within the largely untapped market of 4.5 billion people considered to be at the “base of the economic pyramid,” or in other words, spend less than $8 a day — a market estimated to be worth about $5 trillion annually.
“By making data on spending freely available in a form that is useful to the private sector, we aim to lower the up-front cost of exploring inclusive business opportunities—reducing a critical barrier to investment and promoting shared prosperity,” Jin-Yong Cai, IFC executive vice president and CEO, said in a statement.
The data for 92 low-income countries can be viewed by country, industry sector, rural or urban location, and consumption level; and is adjusted for purchasing power parity (a measure of how much your money can actually buy in a given country).
According to the IFC, the new tool will enable companies to see existing demand for products and services, identify areas of latent demand and find areas for further market analysis. Eriko Ishikawa, global head of inclusive business, also pointed out that the data is now presented in such a way that it’s useful for business.
By promoting the business opportunities in low-income countries, the IFC is hoping to encourage what it calls “inclusive business models,” those that “include low-income consumers, retailers, suppliers, or distributors in core operations.”
“Why do we care about these companies that include the poor? Because we see that the needs are so huge, and governments and philanthropies can only do so much,” said Ishikawa. “The private sector is an enabler to provide all the goods and services to all those segments in the economy.”
The IFC chief explained that clients had been asking for better, more usable information about markets in low-income countries for a while. This data was intended to be a “first-cut” that could lower the barrier of entry for companies looking for business in the developing world, though private companies would likely need to follow up with their own market surveys.
As the private sector lending arm of the World Bank, the IFC gives loans to companies operating in the developing world to support the World Bank’s goals of eliminating extreme poverty and promoting shared prosperity. World Bank president Jim Kim has emphasized the importance of private sector investments in creating employment, economic growth, and reducing poverty in the developing world.
The IFC plans to double its portfolio over the next 10 years, while increasing investments in least-developed countries and fragile states, where most of the world’s poor will be living in the coming years.
Ishikawa said that the funding for inclusive businesses was demand driven, but she hoped that this type of information would spur more good business ideas and demand for IFC funding. Right now, inclusive businesses makes up only about 10 percent of IFC’s portfolio, she said.
The launch of the database was announced at the Shared Value Initiative Leadership Summit in New York. where Devex Impact reporter Adva Saldinger is covering how leaders from the private sector, civil society, and government organizations are discussing strategies for creating shared value between business and society:
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