Sustainability of Microfinance and Bottom of the Pyramid

Micro-entrepreneurship is an increasingly common way of fighting poverty. The Microfinance and Bottom of the Pyramid (BoP) concepts both use microentrepreneurship, but organize it in a different way. The question is which of both concepts has the best change of surviving in the long-term, i.e. which is the most sustainable. The structure of both concepts is judged using a case study where the incentives of the management of two companies that use the Microfinance and BoP concept are analyzed. The Microfinance approach is represented by Grameen, the BoP approach by Shakti. The analysis was conducted using the sustainability framework of Labuschagne, Brent & Erck (2005), with the modification that incentives for management are assessed, instead of business outcomes. Both Microfinance and BoP score high on their incentives for economic sustainability. The performance on social sustainability differs, with BoP scoring higher than Microfinance. The conclusion is that the BoP concept is more sustainable than the Microfinance concept.