The Brazilian economic journal Valor recently interviewed University of Michigan professor and The Next Practice founder C.K. Prahalad about business strategies for the base of the pyramid. The full interview, translated from the Portugese, follows below. (Translation credit: Alex Bloom).

C.K. Prahalad: We can take Brazil as an example. One of the largest sellers of electronics products is "Casas Bahia," which primarily sells to poor people of São Paulo and Rio de Janeiro, most of whom live in slums. They take in about US $3.5 billion per year and are profitable. In the market of fast foods, "Habib's" is growing fast and also targets consumption by low-income people. These examples are repeated in different parts of the world. The biggest developing countries - China, India, Brazil, Mexico, Turkey, Russia, Thailand, Indonesia and South Africa - concentrate a purchasing power on the order of US $12.5 trillion, which is more than Germany, England, France, Italy and Japan combined. It is a ready market to be explored, but that still does not receive due attention.

This interview originally appeared in the Shell Foundation's October Newsletter.

The Shell Foundation has conducted an enlightening interview with former World Bank economist and respected academic William Easterly. As the author of a bestselling book and numerous articles about the effectiveness of development, Mr. Easterly offers a fascinating insight into the workings of the aid industry and why the application of business principles could offer a route to improved performance.

At July's G8 summit world leaders pledged to double aid spending by 2010, and barely a month later agreed to cancel $40 billion of poor country debts. We asked former World Bank economist and aid industry critic, William Easterly, whether he thought this was good news for the poor?

“Securing pledges for more aid is not going to make poverty history. What we should be examining is the aid industry’s plans to spend this new money because it has a track record of failure dating back to the 1940s and 50s. There’s been numerous and diverse attempts to buy the poor out of poverty but none of them have been particularly successful. So in 2005 we found ourselves ostensibly throwing more good money after bad. Above all, this is tragic for the poor.”

Bill Clinton and Bill Gates held forth Wednesday afternoon at the Time Global Health Summit in New York City. Both have made global health issues a priority through their foundations, and both received a standing ovation for the work that they have done. What was fascinating was how much they shared the same strategies, priorities, and sense of urgency—even though Clinton is focusing on working with governments while Gates focuses on funding science and working with global health agencies.

The conference was tied to the launch of the PBS series Rx for Survival airing this week and special coverage of global health issues in this week’s Time magazine. The event covered the big three infectious diseases (malaria, TB, AIDS), the threat on an avian flue pandemic, and other topics. It finishes today.

The Newsroom has been regionalized, allowing you to easily view the latest BOP news from a specific part of the world. Regional RSS feeds are now available as well.

The regions, defined on the map below, include: Latin America, North Africa & the Near East, Sub-Saharan Africa, Europe & Eurasia, South Asia, and Asia Pacific. To view a complete list of countries included in each region, click here.

What Works: First Mile Solutions' DakNet Takes Rural Communities Online, the latest of WRI's What Works case study series, is being released today. The full-length business case study, written by two Harvard University graduate students under WRI supervision, highlights how the innovative DakNet technology is being rolled out to the benefit of rural Cambodia.

Telecommunication companies are usually reluctant to extend their network due to high infrastructure costs, low population density, and limited ability to pay for the services. First Mile Solutions (FMS) counters this problem by providing telecommunications equipment that can cheaply connect rural and remote populations to the Internet through an innovative technology: DakNet. DakNet leverages short- range wireless technology in tandem with traditional telecommunication and physical transportation infrastructures. Local transportation - e.g., public buses, motorcycles, and supply trucks - facilitates data exchanges between rural villages and Internet hubs. This unconventional communication network provides end users with asynchronous access to e- mail, voice messages, and Internet browsing.

Despite their best efforts, government and NGO programs have generally failed to achieve the scale and sustainability necessary to provide adequate and affordable healthcare to many living below the poverty line. But as the Time Global Health Summit illustrated, the role of the private sector in improving the delivery of healthcare in developing countries is still being debated. Although private sector strategies may improve efficiencies and lower costs, some fear that turning healthcare entirely into a consumer service will marginalize the poor even further. There is also the question of whether or not providing healthcare to low income communities can be done profitably.

The debate may finally be settled based on the success of several new business models that are blurring the line between NGOs and the private sector. Over the next week, I will be highlighting a number of innovative enterprises that leverage cross-sector partnerships to provide affordable healthcare to the poor. They will be organized in four broad categories: franchised networks that provide health services, ventures that produce health-related consumer products, enterprises that provide financial services and health insurance, and entities that are using the latest technologies to provide world class healthcare.

Franchising

The franchise system is one of the most successful private sector business models. Its decentralization enables rapid scaling and replication, and may be particularly suited for penetrating rural underserved areas. The size of a franchised network can also be leveraged for cost savings and greater government and private sector support. Several initiatives are already demonstrating their effectiveness in providing healthcare to low income communities.

OK, so you want to change the world – from the inside. Not a bad idea, considering that some corporations’ annual gross revenues are larger than the yearly GDPs of most developing countries. With that kind of cash, business can make a difference – hey, you’re reading NextBillion.net, you probably get it – we’re glad.

Back to changing the world, one company at a time. A good way to start might be business school, but you want a business school that will prepare you for a world-altering career that aligns with your passion for development. At the same time, you’ve got to make some money or all your world changing idealism will be for naught – hey, paying off loans is no way to make a difference out there.

An ounce of prevention is worth a pound of cure. The old adage is particularly applicable to healthcare in developing countries, where millions of people die or get sick each year from illnesses that are easily preventable. The financial costs of these illnesses far outweigh the minimal costs of prevention, yet even these expenses are currently out of reach for the poorest. Today however, a number of new initiatives are seeking to address this injustice by producing consumer products that prevent diseases and are affordable to the masses.

This post is a continuation in my series about Healthcare Delivery at the BOP. In my previous post, I highlighted examples of enterprises that make use of the franchising business model to provide healthcare to the poor. In this post, I will look at consumer products that help prevent respiratory diseases and malaria. As always, I encourage you to post your comments and questions.

Indoor Air Pollution

More than half of the world’s population relies on biomass (dung, wood, or crop waste) for their cooking needs. Although they are inexpensive, burning such solid fuels indoors without chimneys or proper ventilation produces a range of harmful indoor air pollutants, including small particles that are up to 100 times acceptable levels. This pollution currently results in 1.6 million deaths annually due to pneumonia, chronic respiratory disease and lung cancer. With populations growing and alternatives such as kerosene or liquid petroleum gas becoming more expensive, the numbers of people relying on such fuels – as well as the negative health effects - are set to grow.

The International Finance Corporation and the Financial Times are sponsoring a research paper competition for 2005-2006. Top prize is US $30,000; all told, $90,000 will be awarded. Your 4,000 word (max) research paper should "add to the global discussion on private sector development and economic growth by providing new and innovative analyses, perspectives, or ideas."

Those thinking of submitting old undergraduate or graduate work, beware: the judging committee won't go for that. Trust me - I know one of them.

In conjunction with NextBillion.net’s series on Healthcare Delivery at the BOP, Rob Katz recently spoke to Michelle Fertig and Herc Tzaras, authors of the forthcoming What Works case study: “Franchising Healthcare for Kenya: The HealthStore Model.”

Michelle Fertig and Herc Tzaras will receive their Masters in Business Administration from Columbia Business School in 2006. Earlier this year, Michelle and Herc traveled to Kenya to conduct field research on a company doing innovative public-private healthcare delivery work at the BOP. HealthStore’s mission is “to improve access to basic health services and essential drugs for children and their families in the developing world.” Recognizing that ineffective distribution systems often prevent essential medicines from reaching BOP communities, HealthStore has established a network of pharmacy franchises reaching all the way down to the base of the pyramid while simultaneously providing living incomes for their nurse-owners.

1. What is the most innovative element of HealthStore’s model, in your opinion?

The combination of a for-profit franchise network with a non-profit central franchisor is the key innovation. The HealthStore Foundation (HSF) is non-profit and so there is no incentive to "cheat" the franchisees. Its job is to set the franchisees up for success, and it does this through relationships with the government, a non-profit drug distributor, regional support offices, and on-going training programs. Entrepreneurs are not only given the necessary support to earn a sustainable income, but they also gain the satisfaction of managing their own business without handouts. These local entrepreneurs are empowered to succeed in an environment where they are surrounded by poverty and despair. The communities in which they operate benefit because they are given access to essential, affordable medicine and because can be inspired by the success of the franchisee.

As I discussed in Tuesday’s post, there are an increasing number of businesses producing health-improving consumer products that are affordable to customers at the base of the pyramid. Today, I will highlight a few more examples, including specialized food items meant to improve nutrition, and inexpensive filters that reduce water-borne illnesses.

Nutrition

More than 350 million children and adults worldwide are suffering from malnutrition, a problem which accounts for more than half of child mortality in low-income countries. In addition to making a person more susceptible to illness in general, a diet bereft of proper nutrients can result in otherwise easily preventable diseases. For example, a lack of iodine and iron - normally found in foods like meat that are often too expensive for the poor to buy - severely impacts child growth and intellectual development. Vitamin A deficiency is also the main cause of preventable blindness.

Seeing a market opportunity, two of the world’s largest consumer goods companies have developed products aimed at combating poor nutrition. Proctor & Gamble (P&G) has created NutriStar, a powdered health drink designed to help kids grow better while also boosting their mental alertness and performance, while Hindustan Lever Limited (HLL) has developed a more stable iodine for salt that is effective in preventing iodine deficiency disorder.

Has microfinance finally gone mainstream? The fact that the Economist devoted 10-pages to a survey of the industry this month convinces me that maybe it has. Through seven different pieces, the magazine provides both a good history of efforts made over the past three decades to bank the poor, as well as interesting prediction on where the industry is headed. In a word: commercialized.

According to the article, “Local banking giants that used to ignore the poor… are now entering the market. Even more strikingly, some of the world’s biggest and wealthiest banks, including Citigroup, Deutche Bank, Commerzbank, HSBC, ING and ABN AMRO, are dipping their toes in the water.” Fantastic!

But why the sea change? Why now? Above all, it seems to be an industry shift in mindset – from seeing the poor as charity to seeing them as customers.

This post is part of my continuing series about financially sustainable models that provide healthcare to the poor.

In developing countries, there is a strong correlation between access to finance and access to healthcare. Getting the poor to bank, and bank profitably, could push rural finance and healthcare past a tipping point: from philanthropy with a hint of business logic to real commerce with a hint of compassion. To test this assumption, a number of new initiatives are using private sector strategies to increase the availability of both.

One such model in Africa is piloting an approach to health insurance arising from principles of solidarity and mutual assistance. With support from USAID, groups called Mutual Health Organizations (MHOs) are being set up in 11 countries to provide affordable general and reproductive healthcare to women. Their structure is similar to microfinance self-help groups (SHGs), where women make monthly or semi-annual contributions that are pooled to cover future expenses of its members. The Organizations also leverage their combined bargaining power to negotiate better rates for a predetermined set of health services provided by affiliated clinics and hospitals.

This year’s Net Impact Conference, held at Stanford’s Graduate School of Business was by all accounts a huge success. Here are some quick stats:
• Over 1,400 participants from schools across the U.S. and internationally
• Over 200 speakers on approximately 75 panels
• 6 keynotes including: Al Gore, Generation Asset Management; Gary Hirshberg, Stonyfield Farm; VJ Joshi, HP; Judy Vredenburgh, Big Brothers Big Sisters; Greg Steltenpohl, Adina World Beat Beverages / Interra Project; and Kellie McElhaney, UC Berkeley – Haas.

Day One: The event kicked off with a strong keynote from Al Gore, who discussed the importance of integrating sustainability into business practice. Drawing from his experience with Generation Asset Management, he likened current risk management to the visible spectrum; noting that while we continue to assume that the narrow band of financial information used to value companies is sufficient, we can no longer afford to ignore the broader spectrum of global trends.

WorldChanging's Nicole Anne Boyer was able to attend the 7th Triple Bottom Line Investment (TBLI) conference in Frankfurt a few weeks back. Her thorough reporting from the event is a must-read for folks interested in socially responsible investment and its associated spin-offs (including "meso-finance" for BOP firms).

Boyer reports that "Scale seems to be the word of the day. Most conventional bankers won't look at anything -- a product idea, an innovation, a service -- unless they can see how it can scale. No mass market, no mulla. This puts at a serious disadvantage innovations which may not have an obvious scaling potential, but still deliver much value at the local level. How do we unlock these industrial age production mindsets? How do we overcome this dilemma?"

That's a good question. We're often asked how to scale up a good BOP business model out of a region, or country, to make it work for underserved populations worldwide. There isn't a quick answer - and perhaps there's even more to the question, as Boyer notes. How important is scaleability when it comes to reducing poverty?