News Releases

Oct 2, 2014

IDB launches report on effect of broadband on companies serving base of the pyramid markets

Study shows how companies are using broadband to increase their productivity and better serve the base of the pyramid

The Inter-American Development Bank (IDB) has released The Broadband Effect: Enhancing Market-based Solutions for the Base of the Pyramid, a study that shows how companies that serve the base of the pyramid (BOP) around the world are using broadband technologies to improve the efficiency of their operations and better serve this market segment. The study, produced by the consulting firm Hystra for the IDB’s Opportunities for the Majority sector and Broadband Initiative, seeks to raise awareness on the importance of broadband communication technologies for generating opportunities for the low-income population in Latin America and the Caribbean.

Private companies that have adopted the use of Internet technology in their businesses have an average increase in profitability of 10 percent, according to the McKinsey Global Institute. The Broadband Effect provides in-depth analyses of eight BOP-focused businesses in Africa, Asia and Latin America and concludes that companies can leverage broadband connectivity to include the BOP in their economic value chains as clients, producers, or employees, with the following benefits:

  • Better information at lower costs. Broadband provides BOP end-users with better information and connection to the world, while minimizing transportation costs. Urban Planet Mobile (www.urbanplanetmobile.com), for example, has 250,000 daily subscribers who receive English lessons on mobile phones in formats, including audio and video tutorials. Additionally, Broadband enables real-time interactivity between BOP consumers and the rest of the world, bringing remote expertise or key services to their doorsteps. eKutir of India (www.ekutirsb.com/) helps farmers communicate with agricultural experts who help them make better business decisions.
  • Broadband helped increase competitiveness. Data connectivity and broadband empower small franchises and shop owners by improving the diversity, quality, and competitiveness of their products and enhancing their revenues. Small stores offering Barared’s broadband-based services in Mexico (www.barared.mx) typically double their revenues through commissions.
  • Banking is more accessible to the BOP. An average of 35 transactions per day are carried out in Barared’s small stores, enabling BOP customers to perform their banking operations closer to home at a fraction of the cost in a commercial bank. The charge for a withdrawal is $0.80 through Barared, versus $1.20-$2.20 through other delivery points and banks. Remittances are not charged a commission via Barared, whereas fees on the market average 4 percent.

The study shows how broadband has helped profitable business models be more efficient in terms of accessing, creating, and distributing goods and services to the BOP in agriculture, health, education, and financial services. Without the use of such technology, these solutions in some cases would not be available to this segment of the population.

Although these businesses have greatly benefited from the adoption of broadband, the report also looks at challenges and limitations that have to be addressed. In most cases, the greatest hurdle is the investment required to install broadband infrastructure. In instances in which the infrastructure does exist, there is also the cost for companies and BOP users to adopt the technology, which is known as covering “the last mile.”

“Our main goal was to show how broadband adoption can help BOP-focused businesses reach and serve their target in a more efficient and effective way. The pioneers featured in the report show that there’s opportunity for those interested in leveraging connectivity for development,” said Luiz Ros, Manager of Opportunities for the Majority.

“It is urgent to formulate public policies that promote the implementation of broadband development plans and digitalization strategies in order create an ecosystem that enables the adoption of broadband,” added Ana María Rodríguez, Manager of the IDB’s Institutions for Development Sector, which manages the Broadband Initiative. “The Broadband Effect is a useful tool for policymakers interested in the potential of connectivity.”

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