Base of Pyramid

First Person

BY VIKRAM AKULA

The author, center, in India.

Business Basics at the Base of the Pyramid

Why should business among the very poor be different than it is anywhere else? Listen to customers, standardize processes, and don’t be afraid to make a profit.

day that a fellow who runs a $250 million financial services firm has a fatwa, or Islamic religious ruling, issued against him. But that’s what happened four years ago when my then $7.3 million company, SKS Microfinance, started doing business in Nizamabad, India. Armed with broken bottles and machetes, a gang of local thugs intimidated, attacked, and stole

IT’S NOT EVERY

cash from some of our loan officers. They tried to extort money from us in exchange for permitting SKS to operate safely in the region. When we refused to pay, they spread rumors that we were trying to convert people to Christianity.

The fatwa, handed down by local clerics, said it was a sin to borrow from us. We knew if we became complicit with a culture of extortion, our customers would be the ones to suffer. They barely had enough money to meet basic needs, never mind pay off bad guys. So we walked away from our $285,000 portfolio in Nizamabad. By not giving in to the thugs, however, we won some respect in that town and in other villages where we were doing business. Many companies say they protect the interests of their customers. Very few actually sit in the dirt with them, using stones, flowers, sticks, and chalk powder to figure out if they’ll be able to repay a $20 loan at $1 a month. With this approach, we’ve created our own loyal “gang” of over 2 million customers.

photos courtesy of SKS Microfinance

hbr.org

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June 2008

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Harvard Business Review 53

First Person Business Basics at the Base of the Pyramid

SKS is like any other healthy highgrowth business, except that our customers have almost no money. Consider the plight of Saryamma: She and her husband were landless laborers who earned about $1 a...