BRAC serves the bottom of the pyramid through various social enterprises and development programs. It targets the "poor" who earn about $2 per day through its microfinance initiatives. BRAC links rural and urban markets to access money flows from the top of the pyramid to subsidize its rural development programs. It understands market segmentation and only provides charity to the "ultra poor" who are too poor for microfinance. BRAC scales its programs through a three step process of becoming effective, efficient, and then expanding operations through training and systems. Efficiency is key to operating sustainably in low-margin markets.

1. Serving the Bottom Of Pyramid
BRAC Business Study Mission, Bangladesh, March 13 – 16, 2011
Organized by WorldToilet.org & BoP Hub
© Eugene Chang, 2011

2. Disclaimer
The following analysis is of my own and based on field observations of various BRAC businesses; informal
interviews with beneficiaries, volunteers, employees and management that we had the privilege of meeting; long
discussions with fellow participants whilst traveling on overcrowded roads; as well as whatever other
information that was made available to me during this short period. These constitute my personal notes and I
share them freely without making any additional effort to verify and cross check the accuracy of the contents
herein. This document does not represent the views of my employer or any organization I am affiliated with.
© Eugene Chang, 2011

3. Understanding BOP Money Flows
After 39 years, C.K. Prahalad’s “fortune at the bottom of the pyramid” is not yet a reality for BRAC
$$$$$$$$$$
money flow
TOP
products & $$
services flow
$
insufficient
BOP txn within BOP
Solution: Exploit Middle/upper segment to subsidize rural developmental programs
• Link rural and urban markets to access money flow
• Create compelling services for middle/upper customers who can afford them
• With proper systems, BOP can provide access to quality, low cost input/supply advantage
• Stimulate economic activity with sustainable market-driven commercial solutions
© Eugene Chang, 2011

4. Market Segmentation & Strategic Targeting
BRAC understands that there is a DOUBLE poverty line and targets the appropriate segment
TOP
1ST POVERTY LINE
99% graduate MFI Target Segment Bottom
The Poor (50%)
Of
Charity Programs Pyramid
(too poor for MFI) Ultra Poor (50%) (BOP)
BRAC runs development programs for the Ultra Poor to help them “graduate” out of extreme poverty. Their
own community picks the poorest of the poor to receive help in the form of free chickens and other grants.
They are too poor to even qualify for micro financing. The good news is that 99% of them do get into a position
where they can receive MFI aid and can then start to enter into the mainstream economy.
BRAC’s MFI activity are targeted at the Poor (those who earn about USD2 per day and have a fixed address).
These people form the customers for their MFI and other social enterprises.
© Eugene Chang, 2011

5. Your Vision/Mission Drives Strategy
“Our mission is to empower people and
communities in situations of poverty, illiteracy,
disease and social injustice. Our interventions
aim to achieve large scale, positive changes
through economic and social programmes that
enable men and women to realise their
potential.”
A note on culture: It is clear the entire BRAC organization is united behind one singular purpose;
BRAC devotes much resource towards building a culture and passion with internal brand
communication and engagement a major part of their effectiveness. We have observed from
volunteer field staff all the way to the founder that this “greater than I” aspirational vision (the
“why”) has helped it to maintain strategic focus and alignment, improve talent management and
and encourage widespread initiative necessary to operate well in a distributed environment.
© Eugene Chang, 2011

6. 100% For-Profit – we just have a different starting point
“A social enterprise does not pursue profit exclusively- it looks for the ‘triple bottom
line’ (profit, people and planet) that must be considered if the business is to be judged a
success. BRAC’s Social Enterprises have evolved to support its core programs. They enable
BRAC to attain its vision and mission statements by sustaining the development
interventions and creating job opportunities- thereby contributing to poverty alleviation. The
surplus funds that BRAC Enterprises generate fuel most of BRAC’s non-income activities such as
health and education programs.”
SOCIAL MISSION
DEFINES OPERATING Core Programs in the BOP Space
ENVIRONMENT
FOR-PROFIT FOCUS
ASSURES SURVIVAL Social Enterprises and Donor Funds
WITHIN OPERATING Investments / JVs (2009: 27%)
ENVIRONMENT
Managers in each social enterprise repeatedly told us of their for-profit motives – they needed
to be so to survive in a competitive environment. It appeared that BRAC HQ defined their area
of OPs (e.g. serving a particular segment) and left them to create a sustainable business within
this space. It was less of an issue of balancing “this” OR “that” but 100% serving the poor.
© Eugene Chang, 2011

7. Commerce as a weapon against poverty
Understanding
• Market failures prevent efficient, vibrant economic activity
Premise:
• Economic activity will create jobs and increase wealth; if the poor are brought into participate
in the real economy, sustainable poverty alleviation can result.
Situation:
• Gaps or choke points exist to prevent economic activity (flow of goods/services to market)
Solution:
• Create focused enterprises to complement (not complete against) private or government
players that create a smooth flow throughout the value chain
BRAC Insight:
• Enter the market where BRAC can achieve monopoly power (pre-condition?)
• Use monopoly position to achieve scale efficiencies quickly
• When there’s money to be made and private/government players enter…
• exit to allow efficient players to takeover and reallocate resources to another project; or
• remain to provide efficient competition and keep prices down
© Eugene Chang, 2011

8. Scan for relevant opportunities
Example: Agriculture Sector
Dairy Industry
Poor Sericulture Industry
RURAL
Poultry Industry
Fish/Prawn Industry
Challenges:
• Low literacy & skills
• Hard to reach, dispersed
• Poor infrastructure Sector Characteristics:
• Good market demand (profit potential)
Strengths: • Suited for Rural Communities
• Low cost, unlimited labor • High labor requirements = employment
• Strong community mindset • Opportunities for low tech/low cap ventures
• Lots of land (soil conditions differ)
© Eugene Chang, 2011

9. Identify the “gaps” / causes of market failure
Dairy Industry
Retail
Poor Formal
Consumer
RURAL Trade
URBAN
UNTAPPED
Gaps: DEMAND
• Supply procurement issues including reliability, quality and safety
• Logistics issues including need for cold-chain transport & storage
• Cost of sourcing and processing milk is high
© Eugene Chang, 2011

10. Connect/unchoke the value chain
Startup Interestingly, BRAC always started on the supply side BUT this was in response
Capital to an actual market need. They solved one problem at a time and slowly
connected their stakeholders to the TOP market place.
MFI
Milk
Retail
Chilling Mfg Formal
Consumer
Farmer Trade
Centers Plant
URBAN
RURAL
SUPPLY
SUPPLY-CHAIN DEMAND
CAPACITY
COORDINATION CREATION
CREATION
© Eugene Chang, 2011

11. Control the process well
Startup Training *VO = Village Organizations. Where 4 – 5 million MFI customers
Capital & support meet EVERY week! Volunteers are recruited optimally from
the same village as they already have established relationships
MFI VO
Milk
Retail
Chilling Mfg Formal
Consumer
Farmer Trade
Centers Plant
URBAN
RURAL
SUPPLY
SUPPLY-CHAIN DEMAND
CAPACITY
COORDINATION CREATION
CREATION
© Eugene Chang, 2011

12. Control the process well
Startup Training Quality *CC = Chilling Centers serve as a collection point as well
Capital & support Control as stringent testing of the product quality. Milk is
rejected near the source to prevent problems
further down the supply chain
MFI VO CC
Milk
Retail
Chilling Mfg Formal
Consumer
Farmer Trade
Centers Plant
URBAN
RURAL
SUPPLY
SUPPLY-CHAIN DEMAND
CAPACITY
COORDINATION CREATION
CREATION
© Eugene Chang, 2011

13. Value-add to extract more value for customers
Startup Training Quality New product • various milk flavors
Capital & QC Control Development • butter & ghee
• various yoghurt drinks
MFI VO CC R&D
Milk
Retail
Chilling Mfg Formal
Consumer
Farmer Trade
Centers Plant
URBAN
RURAL
SUPPLY
SUPPLY-CHAIN DEMAND
CAPACITY
COORDINATION CREATION
CREATION
© Eugene Chang, 2011

14. Value-add to extract more value for customers
Corporate Strategy: BRAC facilitates by unblocking the BRAC stays out of
supply chain and providing value-add activities; activities where private
remaining focused on their social mission and not sector is already serving
opportunistic to earn more profit. Where possible, they the market well.
exit the market to avoid duplication and redeploy
resources to a more needy area.
Milk
Retail
Mfg Formal
Farmer Consumer
Plant Trade
RURAL URBAN
SUPPLY
SUPPLY-CHAIN DEMAND
CAPACITY
COORDINATION CREATION
CREATION
© Eugene Chang, 2011

15. Remember who your REAL customer is
BRAC has their eye right and center on their stakeholder which are their “real customers”.
The REAL
Customer (Not Here!)
Milk
Retail
Mfg Formal
Farmer Consumer
Plant Trade
RURAL URBAN
Protect/Increase: Maximize/Raise:
• Jobs (versus automation) • Value (versus commoditizing)
• Margins (versus cost cutting) • Margins (versus price cuts)
One reason why BRAC is successful today in creating social impact for the poor
© Eugene Chang, 2011

16. So, HOW does BRAC Scale?
“Pilot to learn the details of the business model, then scale and
mentor others on learning.”
- Sir Fazle Hasan Abed
Chairperson and founder, BRAC
3 STEP PROCESS
1. Be EFFECTIVE Innovate and test all avenues. If it works,
“routinize” essential tasks and discard
2. Be EFFICIENT non-essential ones
Only when 1 & 2 are achieved, increase
3. Then SCALE capacity to recruit, train, audit etc as
you expand operations
Note on HR excellence: BRAC is truly a learning organization. It understands empowerment
through proper training and education programs is the only way to achieve the efficiency and
competitiveness it requires to work at the BOP. BRAC recruits motivated AND well qualified
people (we met many pursuing their post-grad education on staff, as interns or attending the BRAC
University). At any one time they have 3000 people in residence undergoing training in all their
facilities. They also recruit people from the corporate sector as BRAC uses a lot of corporate best
practices. Finally, Sir Abed also believes in giving good people space to do their job with initiative –
not micromanaging but putting an emphasis on monitoring results instead.
© Eugene Chang, 2011

17. Efficiency as a prerequisite
It is important to note that EFFICIENCY
has been fundamental for operating at
the BOP where margins are thin and a
volume model is in play.
Witnessing the efficiency and cost-
effectiveness of BRAC’s operations is
one of the most impressive displays of
good management and resource use.
Donors have also found this as one of
the most compelling reasons to step
forward to fund BRAC’s core programs
as no one can claim to deliver these
services as effectively dollar-for-dollar.
© Eugene Chang, 2011