Since the anti-globalization movement burst into the mainstream during the WTO Ministerial Conference of 1999, multinational corporations (MNCs) have come under increasing scrutiny for their business practices in developing countries. The debate has often centered on whether MNCs and globalization contribute to poverty or help to eliminate it. A more appropriate question may be whether or not MNCs can (and should) contribute to poverty alleviation, and if so how?

In a two-part series, Harvard professor George C. Lodge and International Finance Corporation economist Craig Wilson argue that multinational corporations (MNCs) have contributed enormously to reducing global poverty.

According to the authors, "MNCs exist to provide value for their shareholders, but are also in a position to serve as driving engines of social change, even in countries troubled by corruption and mismanagement."� They argue that "the reduction of poverty depends on the growth of business, especially small, domestic businesses. And increasingly for a local business to flourish it must have access to the world: to markets, credit, and technology, all facilitated by MNCs."� They also maintain that "poverty reduction requires systemic change, and MNCs are the world's most efficient and sustainable engines of change."

Microfinance: Very small loans provided to the poor to provide capital for starting a very small business.

MicroFranchise: A small business that can easily be replicated by following proven mentoring, marketing, and operational concepts found in formal franchises.

Put them together, and you have an easy way to promote economic development: by creating sound replicable business models that can be financed and managed easily by entrepreneurs at the base of the pyramid. This was one of the ideas put forward last Friday at a MicroFranchise Learning Lab presented by BYU’s Center for Economic Self Reliance.

Microcredit is a proven poverty reduction tool, providing the necessary capital for entrepreneurs to start their own businesses and lift themselves out of poverty. But not all people are entrepreneurial. And not all entrepreneurs have the necessary training and skills development to start and manage a successful business. That’s where microfranchising adds value - as a ‘turn-key’ business, a microfranchise can rely on the franchisor, who reduces the risk of failure by providing high quality initial and ongoing training.

Along with John and Cory, I had attended BYU’s Microfranchise Learning Lab in Washington DC this past Friday. Two of the four microfranchises featured, HealthStore Kenya and Scojo, operate in the health industry. Granted, microfranchises are flourishing in many industries (see Kirk Magleby’s catalogue of over 60 microfranchises), but how does the microfranchise business structure enable success in the health industry in particular?

Mi Farmacita Nacional pharmacy chain (Mexico), Janani health clinics and health product outlets (India), ASEMBIS eyecare clinics (Costa Rica), Scojo Foundation reading glass vendors (El Salvador, Guatemala, India) and HealthStore Kenya clinics and pharmacies, are all fascinating examples of microfranchises able to deliver affordable and high-quality health products and services to poor rural areas, a feat impressive enough without considering the fact that franchisees in all five cases are financially sustainable. The franchisors themselves are non-profit organizations (with the exception of the for-profit pharmacy chain, Mi Farmacita Nacional) that collect fees from their franchisees but are able to subsidize a part of their administration costs with donor funds, decreasing financial strain on their franchisees. Other strategies common among these five microfranchises include:

MDG Goal #3 is "Promote Gender Equality and Empower Women." The explanation is clear and concise: "Gender inequality starts early and keeps women at a disadvantage throughout their lives."

But why have a gendered focus in poverty alleviation? Why not simply target poverty and gender inequality in their separate spheres?

It's no secret that MFIs often deliberately seek out women clients. MFI Groups like Opportunity International , Promujer, Trickle Up, and Grameen Bank (96% women clients) all note that see great impact when they invest in women. Probably an overriding reason for MFI selectively choosing its clientele is that women "have proven to be very good credit risks with high repayment ratios."

Furthermore, women are often the most impoverished members of developing societies, so raising their income and access to services therefore will have the greatest overall economic impact on poverty.

On the topic of “in case you missed it”, Ethan Zuckerman of wonder-blog WorldChanging wrote a great piece on remittances back on January 12.

It's difficult to overstate the importance of remittance income to most African nations and many developing nations. Nworah cites a figure of $300 billion dollars sent from diasporas to developing nations via remittance. In Africa, the amount of money remitted by diaspora workers - $17 billion per year - is larger than the amount of foreign direct investment in Africa, and rivals official development assistance grants or loans ($25 billion per year)... While remittance income is incredibly important for the developing world, there are at least four major problems with the remittance system as it currently exists: cost, safety, potential for misuse, and scale issues.

The whole post is worth a read, especially the discussion of 4 major problems. Ethan also points readers to more resources on remittances, but I thought to remind folks of NextBillion’s Activity Database and topic category on remittances, as well as the recently-published case study on Thamel Dot Com, a fantastic goods remittance service. Still not satisfied? Browse the conference resources page for various presentations on the impact of remittances at the base of the pyramid. Happy reading, and thanks again, Ethan.

Antony Burgmans of Unilever gives an excellent speech on the role of private investment, businesses and governments towards meeting the MDGs. His beef: broad taxes ( a la French air passenger tax to alleviate African poverty) with little impact. His hopes: the current WTO Doha round will focus on BOP-oriented strategies.

"Let me make some remarks on the role of both business and government in this respect. I am convinced that both have a major role to play, both in their own right and through public-private partnerships, also including civil society such as Non- Governmental Organizations (NGO’s)."

"I’ll give you some examples from my own experience. Unilever – the company for which I have been working throughout my life – operates in most parts of the world, including Africa, where we employ some 50.000 people and as such are one of the largest employers on the continent. Unilever – with a long historic presence – has always attached great importance to further development of living standards in Africa, both from a business and humanitarian perspective, and has started activities in areas such as training and scholarships, partnership with UNICEF on fortified food, HIV/AIDS progammes and working with smallholders in tea to promote sustainable tea."

Another “in case you missed it” entry, this time about Tanzanian A to Z’s long-lasting malaria net enterprise mentioned in blog posts and activity capsules past. The nets – as well as the underlying for-profit business model – are featured in a nice column by the Guardian’s Jon Snow. Excerpts:

The source of malarial relief is the A to Z plastics factory in Arusha. The revolutionary net is being produced here on a truly dramatic scale. The net is made of extruded resin sold at market price by Exxon Mobil. Hardly at the forefront of altruistic repute, Exxon too is a member of the global partnership to "Roll Back Malaria". The money it makes from the Saudi-produced resin, Exxon gives back to Unicef to buy more nets, to try to create a mosquito net market. Sumitomo hasn't given money. Instead it has made a free technology transfer of the secret ingredient that gives the net its long-life properties... Anuj Shah, who runs the company, is no do-gooder [either]. He's in it for profit and is determined that net making in Africa is a seriously commercial activity. Currently producing 3m of these nets a year, he expects his new factory, which is under construction nearby, to start producing 7m a year by April. After that he hopes to expand to 20m - a tenth of Africa's entire need.

DuPont’s food division, Solae, is working with the BOP Protocol team at Cornell University to set up a pilot project in Hyderabad, India. The project is looking to hire four dedicated, paid interns. An excerpt of the description, which can be found at Zoo Station, mentions that

[i]n terms of background, we are looking for someone with a serious interest in catalyzing economic development in India through sustainable private enterprise. Ideally, you will will have expertise in one of the following areas: business and social entrepreneurship; social work; development nutrition. Knowledge of Telugu is a plus, though not a requirement.

The second opportunity is with the Grameen Foundation USA to run a pilot of their Village Phone program in the Philippines.

The International Finance Corporation turns 50 this year. To mark the occasion, the group released an article that talks about the IFC’s investments – past, present, and future. Its prognosis for 2006? Emerging markets are headed for a banner year.

Lars Thunell, executive vice president of IFC notes that the flow of private capital into the developing countries – at roughly $350 billion – is now more than four times the amount of international aid. What isn’t clear is how much of this money is actually flowing to BOP industries or creating BOP jobs. My guess – based on the hype surrounding large-scale manufacturing in China and back-office outsourcing in India – is relatively little.

In the news release, Thunell himself notes that the development community needs to do a better job of using market-based solutions to reduce poverty, address social needs, and preserve the global environment.

The New York Times posted an interesting article today talking about the politics of open-source software, and its consequences to the much vaunted One Laptop Per Child program.

According to the article, Dr. Negroponte’s decision to furnish his program’s inexpensive laptops with open-source Linux software instead of the proprietary Windows operating system has “ruffled a few feathers” at Microsoft. Negroponte insists he chose Linux not because it was free but because of its quality and maintainability.

“I chose open-source because it’s better,” he said. “I have 100 million programmers I can rely on.”

Not to be dissuaded, Microsoft has now started discussing what they say is a less expensive alternative: turning a specially configured cellular phone into a computer by connecting it to a TV and a keyboard. The company has even gone so far as to demonstrate a mockup of the cellular PC at the Consumer Electronics Show in Las Vegas earlier this month.

Following up on my job announcements post the other day, I hear through Zoo Station and New Ventures that there are some other promising opportunities opening up in the BOP realm. Acumen Fund is looking for 10 post-graduate fellows to learn about and help manage their portfolio’s wide range of social investments. The fellowships last for 12 months; an excerpt from the job description (PDF) notes that

Fellows will spend one year working with our team and with local entrepreneurs, gaining intensive experience in price performance, logistics, distribution systems, scaling and innovative technology. Fellows will learn and apply these skills while enjoying an unusual level of responsibility both at Acumen Fund and within our portfolio organizations.

GFUSA, meanwhile, expands on its Village Phone job opportunity and is advertising for a Software Development Manager for a new open-source microfinance platform currently in development. Zoo Station reports that

“There will come a day when you will not be able to tell the difference between a for-profit and a nonprofit organization.” Those words, spoken by the late Peter Drucker to the Harvard Business Review in 1993, planted the seeds that have led to Value, the first new business magazine in a decade.

Value offers a new lens on tomorrow’s markets, enterprise and investment. According to the editors, “A large part of value creation has to do with maximizing economic value and financial returns for shareholders. Yet, it is increasingly obvious that in order to maximize economic value one must consider not simply the easily defined indicators we have traditionally relied upon, but rather the less easily defined aspects of value that are extra-financial often social and/or environmental in nature.”

John’s discovery of Value and subsequent post prompted me to probe a bit deeper into the site. First of all, it’s nice to see a business magazine that has the phrase “Tomorrow’s Markets” in the sub-title. Nicer still is that Value provides content of...well, value. Take for instance this excellent interview, The Global Economy's Immune System, conducted by John Elkington with Paul Hawken, the noted environmentalist and businessman.

Their conversation gets right to the point, and Hawken expresses some serious criticism of the bottom of the pyramid hypothesis. Excerpts:

I’m also more than a little concerned about the thinking that there are three billion new consumers out there, that the next big thing is the “bottom of the pyramid.” From the view of the global south that is not trained in corporations and business schools, it smacks of colonialism and imperialism all over again... It is about this idea that we can open up the bottom of the pyramid to a flood of Western-made goods that will vault them into the lower to middle classes. But then what? What the poor want are rights, not foil packets. I hope that you take these issues head on.

Thanks , Rob, for submitting a news story on water research that highlights what is (hopefully) a trend: the delivery of clean water to the BOP and the increased efficiency of water usage during production of other goods.

For those of you who do not check the activity database faithfully, you might have missed the recent changes (Courtland and I updated and recategorized the 280+ activity capsules last week). There is now a "water" category, owing to the growing number of water-related activities. Some of these are focused on low-cost pumps for the BOP, others on individual or household water filtration , a village-wide solar-powered irrigation systems with delivery via "water credit cards." , and nutritional supplements to mix with water.

The 2006 Transparency International report is out, and this year's focus is on health services--apparently a sector particularly prone to corruption.  Why? The executive summary highlights three reasons: imbalance of information (health professionals know more than patients, and pharmaceutical companies know more about their products than public officials),  uncertainty in health markets (how many people will fall ill , where/when humanitarian disasters will strike makes it hard to manage resources), and the opaque, complex relations within the health system.