Success in the 86 percent markets often means challenging conventional wisdom. In banking, for example, Grameen Bank, founded by Professor Muhammad Yunus, offered microloans to village businesses that wouldn’t have received a second glance from mainstream banks. Grameen began in one village in Bangladesh in 1976 and now has more than 3 million borrowers and a staff of more than 11,000 in more than 43,000 villages. With a loan recovery rate greater than 99 percent, Grameen Bank has been profitable every year since 1992, financing its loans almost entirely from its own funds and the savings of depositors. Grameen has become a trusted brand name that has led to other related businesses. According to UN estimates, somewhere between 70 million and 750 million microloans were offered by thousands of lenders worldwide in early 2005. The microlending model has been picked up by for-profit microlenders such as Basix in India, which provides financial services to rural borrowers in nearly 10,000 villages in India. Microlending has swept into the mainstream, along with a mind-set that allows companies to see the hidden opportunities in these markets. This shift in thinking is reflected in a 2004 advertisement for global investments by U.S.-based Franklin Templeton Investments that proclaims: "You see an ancient culture. We see modern homeowners." (See Figure 1-5.)
Figure 1-5 A Franklin Templeton advertisement recognizes that there are more opportunities in the 86 percent markets than meet the eye. (Courtesy of Franklin Templeton Investments. Copyright 2004–2005. Franklin Templeton Investments. All Rights Reserved.)
Millions of customers for financial services were invisible until someone created a business model to reach them. At the other end of the spectrum, companies are competing for private banking customers among a growing pool of affluent consumers in the developing world. These customers also only recently emerged or have been recognized. How many other potential customers are waiting out there for an organization to come in with the right solutions? Companies that have created strategies tailored for the 86 percent of the world’s population in developing markets have found tremendous opportunities, but this requires rethinking products, branding, distribution, and many other market strategies.
Developing markets can present very difficult challenges, with poor sanitation; lack of water, food, and clothing; housing shortages; and lack of education. But in the midst of these challenges, tremendous opportunities exist, in both the segments of the market that already have comfortable incomes and the segments that are still aspiring to rise from poverty. Companies can work with nongovernmental organizations (NGOs), governments, and other organizations to address the pressing needs of these countries while building profitable businesses. In the following chapters, we’ll explore in more detail the opportunities created by the unique characteristics of the 86 percent markets and some of the solutions for realizing them.