An April 2005 report on the financial performance of African microfinance institutions (MFIs) finds that more than half of those surveyed fail to turn a profit. Conventional wisdom (and much of the writing on this site) tends to say otherwise – that microfinance is profitable. Maybe that’s a big reason why this report, jointly published by the DC-based Consultative Group to Assist the Poor (CGAP) and the Microfinance Information Exchange, is so important.

Most African MFIs are not out just for profit – often, their primary mission is to serve poor, at-risk groups and profit if possible. That explains why cooperatives generally fail to profit, while regulated microfinance providers – which behave more like banks – average a 2.6 percent annual return on assets. The report identifies poor infrastructure, hard-to-serve rural markets with low population density, and high labor costs as barriers to MFI profitability.

What the report doesn’t say is that the private sector will likely resolve these discrepancies, given time and decent governance. Hard-to-serve, unprofitable groups will continue to be the focus of cooperatives and NGOs, while banks will incorporate technology and management practices focused on a slightly better-off (but still poor by all accounts) clientele. The technology is, in many cases, already here – read about the Remote Transaction System’s successful pilot in Uganda, for instance – and the management practices are coming. Is microfinance dead in the water in Africa – hardly. What do you think?

WBCSD member companies have a combined annual turnover of more than 5 trillion USD, and their products and services touch the lives of about 2.5 billion people every day. Imagine the possibilities if even a portion of this business energy is harnessed to transform the lives of the world's poorest people.

This premise forms the basis for Business for Development, a new WBCSD report that makes the business case for sustainable development by illustrating how the private sector is taking an active role in the achievement of the Millennium Development Goals.

Some 250 people packed a hotel conference center here in Mexico City to hear Professors Stu Hart and CK Prahalad and a host of Mexican government officials, corporate executives, and social entrepreneurs talk about the business and social opportunities represented by the base of the pyramid. The workshop builds on the broader BOP conference held last December in San Francisco by encouraging participants to translate concepts into local contexts.

Ethan Zuckerman of the WorldChanging blog writes eloquently about the importance of mobile phones in low-income communities. He identifies three factors critical to the spread of mobile telephony: new versus replacement infrastructure, pay-as-you-go pricing, and used phones.

Zuckerman is right on. By leapfrogging landline infrastructure, developing communities have been able to adopt modern technology faster and cheaper than we have in the U.S., for example. Pay-as-you-go pricing, meanwhile, lets low-income consumers afford to make a call when they need to, rather than sign up for lengthy guaranteed contracts – as documented in this case study of Smart Communications in the Philippines. Used phones, operating on analog networks, are often more affordable than new GSM handsets - and the shipping containers they arrive in can even be used as shared-access, entrepreneur-run phone shops.

However, it’s only towards the end of his post where Zuckerman hits the nail on the head: “More fundamental than these three factors is the fact that very poor people are willing to pay money to communicate.” He cites Grameen Phone as an example – read the case study here. (PDF)

Mobile telephony is already profitable for the telecoms. Now the question is: how do we incorporate this leapfrog innovation into a range of pro-poor business models? Stay tuned.

This morning I read an article in the New York Times about a company that is providing English tutoring services to teenagers in California. What's interesting is that the teachers all live in India, and communicate with their students using the Internet. Growing Stars pays its teachers a monthly salary of 10,000 rupees ($230), twice what they would earn in entry-level jobs at local schools.

The article reminded me of another one I had seen about Chida Soft - a village BPO doing coding on legal paper for an US client. It is one of India’s first BPOs in

The Nextbillion.net Team is pleased to announce the launch of our new BOP Activity Database. The Database tracks innovative enterprises that offer products and services to underserved communities in developing countries, and is searchable either by keyword or through a variety of pre-defined categories. It is meant to serve as a knowledgebase for those interested in researching and developing sustainable business models that address the needs of the world’s poorest citizens. You can access the Activity Database by clicking on the link above, or by clicking here.

The 200 activities currently in the database represent only a small fraction of the creative work being done today. Do you know of a relevant BOP enterprise that should be included? Please tell us about it online. Once you are logged in, click on 'Submit an Activity' and then enter in the pertinent information.

The BOP Conferences in Brazil and Mexico were a tremendous success. Brazil attracted over 550 attendees; Mexico over 300. WRI’s New Ventures project and our in-country partners (Fundacao Getulio Vargas and Fondo Mexicano para La Conservacion de la Naturaleza), with support from Ashoka and the Multilateral Investment Fund, invited an excellent lineup of speakers that included several CEOs, Presidents, and Ministers. (See conference proceedings for full details, including PowerPoint presentations).

The Financial Times’ Special Report on Business and Development, published today, pulls together a host of NextBillion strategies, anecdotes, and prescriptions in one well-written package. Available to subscribers only, the 15-page section can be read by non-subscribers using a free trial subscription – well worth it. Excerpts from the paper:

At last week's Clinton Global Initiative in New York, NextBillion.net's Al Hammond had the chance to sit down with Emily Gertz of WorldChanging. They discussed some of the "tools, models and ideas for building a better future" - and how they relate to the BOP - in an extended interview.

All Paths Lead to the BOP, by Jeb Brugmann originally appeared in the September issue of Alliance Magazine.

While the media and public discourse has been accentuating the divide between the private sector and civil society, the trend in practice has been towards convergence. NGOs and communities are now more enterprising, while business is more socially innovative. This convergence opens opportunities for breakthroughs in development practice that have evaded the international community for decades. If the trend holds, it will have important implications for international development initiatives like the Millennium Development Goals (MDGs).

The World Bank's annual Doing Business report carries the subtitle "Creating Jobs" this year (free overview available - PDF). Its indicators - using data comparable across a remarkable 155 countries - can be used to analyze how governments encourage or inhibit investment, productivity, and growth, i.e. job creation. These data further operationalize Peruvian economist Hernando de Soto's theories on dead capital and legal reform. If you're a multinational corporation and want to do business at the BOP, this report should be required reading - how easily can we set up in country X? (Quick answer: if X is in Eastern Europe, relatively easier than if X is in Africa - but read the report for why). If you're a local enterprise, it might be useful to find out which countries have comparable regulatory environments - and then check the Activity Database for successful models that have worked under those regimes. And for b-school students and professors, the aid community, and investors, your input on the report is encouraged by the authors through an online discussion. There are already 26 well-written comments and good back-and-forth from the experts. More commentary can be found on the PSD Blog. No matter your background, its time to get down to "doing business" in 2006.

A controversial title, to be sure. The Myth of CSR (PDF), published in this month's issue of Stanford Social Innovation Review, identifies a key truth about corporate social responsibility while failing to take the next step. Deborah Doane hits quickly on CSR's underlying fallacy: "ultimately, trade-offs must be made between the financial health of the company and ethical outcomes. And when they are made, profit undoubtedly wins over principles." Bravo, Deborah!

Trendwatching.com recently posted a good piece on Sachet Marketing, a BOP strategy already being used successfully to sell a variety of consumer products ranging from soap to cell phone minutes. The approach involves serving up products, services and loans in affordable portions, sachets or sizes, so that consumers get to know and like a brand. The practice was named after Hindustan Lever's successful introduction of single-use shampoo sachets in India.

The strategy of miniaturization provides an easy inroad to the BOP for companies wary of the perceived risks and uncertainties of entering this new market. I think of it as the low-hanging fruit, or BOP-lite, in that there really isn't much product innovation involved. Rather, it's simply repackaging or tweaking the distribution of what a company is already doing.

As an economist and self-styled BOP researcher, I've always been interested in the effect of technology on efficiency, price competition, and cost-of-living at the BOP. WRI, through its now-sunset Digital Dividend project, studied the effect of technology on low-income communities for years, and results pointed to a consistently positive relationship between access to information and greater efficiency, lower COL, etc. Mobile phones, in fact, have always been a favorite technology around here - low start-up cost, relatively minor literacy barrier, shared-use potential, etc. A great BOP technology - and one that's growing fast.

So you'll understand my excitement when I ran across the GSM Association's report, "Tax and the Digital Divide." A robust, regression-based analysis of the effect of taxation on mobile phone penetration!? A BOP economist dream come true.