Bottom of the BoP

The Acumen Fund is a non-profit global venture fund that aims to invest in, as well as provide business insight to, for-profit and nonprofit organizations that focus on delivering services to the poor. In addition to financial returns, the fund looks at companies who fulfill the following primary investment criteria: 1) Potential for Significant Social Impact, 2) Potential for Financial Sustainability and 3) Potential to Achieve Scale. In particular, they emphasize on meeting the needs of those at the BoP in their geographic region of focus. As of May 2008, Acumen’s portfolio included 32 active investments totaling nearly $22 million, which the organization claimed has impacted more than 36 million lives in BoP markets. It is interesting to see how companies are making a difference in any area traditionally reserved for charities, philanthropic and nongovernmental organizations. However, I am curious to see as to whether these products and services produced by these companies can truly make a difference to those who exist at the bottom of the BoP, as often times they lack the ability to buy food to feed their families, let alone pay for medical or sanitation facilities.

On a volunteering trip to Thailand, I visited a village in northern Chiang Mai where families were living on less than $2 a day. These families lived in shoddily built wooden houses with limited access to clean water and sanitation facilities. Many of the children there suffered from a form of malnutrition called kwashiorkor, where lack of protein causes swelling of the gut. It seems to me that although for-profit and nonprofit companies can cater to the poor, it requires them to be above a certain income level to even afford these extremely low-cost goods and services. Families, like the ones I saw in Thailand, can barely afford to eat and maintain shelter over their heads; clean water and medical supplies would be considered a luxury to them.

Furthermore, it is interesting to see how for-profit companies who accept impact investment delicately tread the line between low cost goods and services and generating profit, as most of these investments come in the form of loans, putting pressure on the company to produce profit to repay them. This pressure may cause companies to stray from their target population and cater towards more affluent markets who can pay more [1]. When this happens, what can firms like Acumen do to hold them accountable? Can impact investing really reach the bottom of the BoP? Is there really any profit to be made there?

Ultimately, I believe that impact investing has the potential to expedite the development of emerging markets, as well as provide a higher quality of life to those living in poverty at a more affordable price. It can help eradicate the poverty penalty by increasing competition in the market and allowing companies to cut costs by providing them with loans at extremely low interest rates. However, I question if these goods and services can be reached by all in the BoP, or just those merely at the top. 

[1] https://ssir.org/articles/entry/the_trouble_with_impact_investing_part_1