Utility companies offer electricity, gas and water services to BoP markets. These services are quasi-ubiquitous in many urban areas in the developing world, and their adjunct platforms have massive consumer bases. On the other hand, because of higher servicing costs, their capillarity and reach is much more limited in rural areas.
Some utility firms have discovered that the information they gather about individual customers’ payment histories can be a very valuable asset. Subsequently, many of these companies have chosen to leverage such information to start offering financial services, either directly, or through external economic agents.
The most common financial product so far has been small consumer loans for the purchase of electric appliances, furniture or kitchenware, and inroads have recently been made in microinsurance products as well. Colombia’s CODENSA is a good example (for more details, see this brief case study).
As the volume of financial services provided has grown, so has the appetite for an increasing range of goods. Therefore, outside firms that may benefit from allying with utility platforms are by no means constrained to finance providers, and may include producers of mass consumer goods, such as household products of all kinds, as well as products related to health, education, nutrition, and/or technology. Utilities potentially represent one of the most flexible platforms currently available in low-income markets.
A version of this post, co-authored with Manuel Bueno, was published on the NextBillion blog.
Read parts 1 (Introduction), 2 (Conditional Cash Transfers), and 4 (Mobile Phones) of this series.
