OLD WINE IN NEW BOTTLES

As Prahalad articulates how the private sector can exploit profitable opportunities by tapping BOP markets, he gives the impression that this is a revolutionary idea. But companies have been selling to the BOP in one form or another for several decades.

Similarly, as he describes how microfinance is useful for tapping the BOP market, it seems to be a new model for serving the poor. But microfinance has long been recognized as an efficient way to eradicate poverty. The Grameen Bank, Muhammad Yunus’s landmark innovation, attracted worldwide attention many years before the BOP concept came to light. Less famous but larger is Bank Rakyat Indonesia, which has the world’s largest sustainable micro-banking system and has held a dominant position in commercial microfinance in Indonesia for more than 20 years (Robinson, 2002, 2004). Furthermore, organizations such as Amul, the State Bank of India, and Nirma have long realized the importance of serving BOP customers. The State Bank of India (SBI), a public sector bank, has been providing banking services for two centuries, and has more than 8000 branches all over the country. It has been serving rural poor customers by providing bank loans for agriculture and other purposes and offering personal banking products. The sheer size of its network of branches helped it reach out to rural customers. In addition to SBI, other national banks and rural cooperative banks have been serving rural and BOP customers, with services designed specifically for them. At some banks, a villager can open an account with as little as Rs 500 ($12.50), whereas MNC banks may require a minimum balance of Rs 5000 ($125) or more, well beyond the capacity of most BOP customers.

Many other organizations such as the National Bank for Agriculture and Rural Development (NABARD), other nationalized banks, and Nirma have been serving BOP customers for decades. These facts make it difficult to accept Prahalad’s contention that few initiatives have focused on developing BOP markets.