I came in today thinking, "wow, what a range of takes on the new World Bank study (pdf) on Latin American remittances released yesterday." We reported last week on the IADB remittance report and the reaction from CNN and Lou Dobbs, in which an immigration and values debate provided the frame for a fundamentally fact-based study of remittances volume. The same thing is happening with the World Bank study. Both FT and Wall Street Journal have published articles in the past 24 hours. The Financial Times emphasizes the negative parts of what is essentially a mildly positive study by the World Bank - namely that remittances aren't 'manna from heaven' nor a substitute for sound macro- and micro-economic policies in the recipient countries. The Wall Street Journal takes the negative impacts downstream, and with their usual good reporting, talk a lot about economic dependency and crime that, they suggest, are results of remittances.

In my view, these press reports are serving to cloud, not clarify the issues. Remittances are not the cause of economic migration, brain drain, economic dependency, or crime. All these predated remittances, and the press is setting up straw men to knock down. Nobody I know of is claiming that remittances are a panacea or cure-all, only that they exist, they are large, they are important both to the senders and recipients, and they have development potential that is under-explored.

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While it may seem cliché, I’ve always enjoyed the proverb advising that "when life deals you lemons, make lemonade." The phrase was my first thought when I saw a recent story out of Ethiopia about Azmarew Zeleke’s burgeoning coffee business; in this case, replace "lemons" with "spent mortar shells" and "lemonade" with "coffee machines". It may not have the same ring as lemons-lemonade, but you get the idea.

At a time when most of the coffee-related news out of Ethiopia has to do with a nasty trademark dispute between local farmers and Starbucks, Zeleke's story stands out for its inspirational tone. He and his six staff take spent shells left over from the 1998-2000 Eritrea/Ethiopia conflict, transforming the shells' aluminum cylinders to channel water, milk, and coffee instead of explosive powder.

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Today's New York Times has an editorial "Wiring Development" that, to my mind, picks up on what is really important from the IADB remittance study, "Sending Money Home", namely the opportunity for Latin American banks to turn remittance recipients (and senders, too) into real, creditworthy customers, and to add a substantial part of the money stream into productive working capital, deepens the financial sectors of recipient countries, and begins to provide the financial literacy so critical to poverty alleviation. After a spate of mis-directed coverage, it's gratifying to see that the newspaper of record sees the positive big picture.

Let me share with you my state of mind after finishing a careful reading of the full World Bank report on Latin American remittances, Close to Home: The Development Impact of Remittances in Latin America. On the one hand, it is a closely reasoned, and (as far as this non-economist can determine) a fair-minded analysis of the data. I would expect no less from the Bank, and I applaud the authors.

On the other hand, it leaves me unsatisfied, hungry for more. Why? The conclusions and recommendations are appropriate to the evidence examined, but as the quite extensive and prominent news and analysis coverage of this issue suggests, there is an appetite for more, and one wishes that the authors had not felt so constrained, but rather, had taken a more expansive view of the potential for the study. But, for whatever reason, that was not to be, and one can't really criticize them for "staying within the lines."

That doesn't mean we have to. So, this post is a call to our readers to make the sort of suggestions that the authors of the Bank report did not. Let's design the "manna from heaven" which the Bank does not find today. I for one accept the essential Bank conclusions that countries should continue to encourage the deepening of financial services to recipients, to increase competition among remittance service providers in order to lower costs, and to improve the "doing business" environment. All these are good, but in your view, what are the additional big ideas that are appropriate to the need?

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It is a familiar story: post-college volunteer (Peace Corps, etc.) returns from the developing world with a desire to help the community in which he or she has been staying.  The subsequent projects are also familiar – they often involve selling local handicrafts to first-world markets, or aggregating donations of used computers and cell phones to send back to the community.  I don't question the motivation behind such initiatives, and I applaud some of them for attempting to bolster the local economy or jump-start development with first-world technology.  More often than not, however, these small projects operate much like typical top-down development projects; that is, they depend on human and physical capital that only the donor/benefactor can provide.  In order for such projects to become truly sustainable, they must be able to stand on their own.

Peter Haas knows this story well, having spent years traveling to and volunteering in low-income communities, where well-intentioned development projects often failed without constant donor intervention.  With his first-hand knowledge of the problem, Haas set off to find a solution, founding the Appropriate Infrastructure Development Group (AIDG) in 2004.  The AIDG web site describes exactly what it is they do:

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New Ventures India is wrapping up its annual Investor Forum, linking some of the country's most outstanding small, sustainable enterprises with the capital and managerial training they need to grow and expand.  Some initial highlights from the event include rousing discussions from Michael Owen and T.C. Venkat Subramanian of the Export/Import Bank as well as a host of panels filled with key representatives from the private sector including Microsoft India and Hindustan Lever (Unilever's Indian branch). 

Ten of India's most promising small entrepreneurs presented their business models to a packed house of 200 investors, corporate leaders and policymakers.  Their products ranged from high growth clean technologies entering the mainstream, such as CleanStar Energy's rural energy production systems, to the offbeat but surprisingly intuitive (I had never heard of Edible Cutlery before BK, but apparently they are in discussions to supply a major Indian hotel chain). 

Elizabeth Economy and Karen Monaghan write in the International Herald Tribune (The perils of Beijing's Africa strategy) that China is quickly creating blowback in Africa despite its purportedly "hands off politics" approach.  You would be hard-pressed to design a more anti-BOP strategy than much of what China is doing - obsessively chasing resources for China's own benefit, without regard for the environment or the interests of local populations; bringing in its own workforce so little money even reaches the citizens of the country where they are operating. China clearly needs some fast education on sustainability and corporate responsibility. Chinese leaders, we're an NGO....and we're here to help.

Friday's Wall Street Journal featured a front-section story, Tech Firms Woo Next Billion Users (subscription required), describing the aggressive BOP strategies of tech firms Intel and Microsoft. In it, we learn that Microsoft is rolling out 50,000 entrepreneur-run computer kiosks throughout India; Intel, meanwhile, has already trained 1.3 million Chinese and Indian teachers on classroom technology use. Teacher training and kiosk development aren’t profit centers – at least in the short term. But both firms have taken a strategic, long-term approach to market and product development. Microsoft India chairman Ravi Venkatesan is quoted in the article:

"This is a good way to do long, long-term business development...We are under no illusions that this is going to generate a quick payoff."

Another excerpt cements the long-term strategy:

Their aim is to reach what executives call "the next billion users" of consumer technologies like the Internet and cellular phones. The images of executives helping the poor can also help maintain good relations with the government, a critical part of doing business in both China and India...Getting technology to rural residents isn't easy. It requires navigating local bureaucracy, offering extremely inexpensive products and teaching people who may not have easy access to electricity the benefits of the chips, software and computers. And executives acknowledge that their efforts won't necessarily show up on the bottom line right away.

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As a site dedicated for the past year and a half to the "next billion" and the business strategies that can empower them as micro-consumers and micro-producers, its good to see the Wall Street Journal using that headline in a mainstream business story about tech firms and their strategies in low-income parts of developing countries. The story is even better than the Journal’s generally excellent reportage indicates. Microsoft, for example, is not just experimenting with low-priced versions of their software—it is rolling the product out in over 50 countries and already piloting "pay-as-you-go" business models to enable BOP consumers to buy computers. Intel is piloting its WiMax communications tools as well as low-cost PCs. And it’s not just the IT and communications tech industry, either—British Petroleum is now selling low cost cook stoves in India that can switch effortlessly between biofuels and propane, and building a propane delivery network as well.

Increasingly, smart large companies get it—their next billion customers will come from the BOP, whose needs require novel solutions, new business models, and often whole new business ecosystems. That in itself is a real change. Back in the fall of 2000, when we hosted a conference called Creating Digital Dividends to introduce the tech community to the potential of these new markets, there was a lot of enthusiasm but also a lot of skepticism—famously, Microsoft’s Bill Gates told the conference that "poor people don’t need computers." Fortunately, Mr. Gates rapidly changed his mind. But we knew at the time that it would take years (and more conferences) for companies to learn how to take on the challenge successfully. We're amazed and delighted with the accelerating pace, and with the growing press coverage of this business trend.

As you probably know, we've been following the recent flurry of news stories about remittances for development quite closely.  NextBillion staff writer and DTE deputy director Bill Kramer has written a series of blog posts outlining what he feels is being done well and what's been done poorly (notably, Lou Dobbs' spinning the story into a bizarre anti-immigrant angle).  I'm willing to bet that Bill's not the only one with strong opinions here – and evidently, the World Bank is willing to bet on that, too.  

The Bank has organized an online discussion that will kick off tomorrow morning on the topic of remittances and development.  Pablo Fajnzylber and J. Humberto López, senior economists from the World Bank’s Latin America and the Caribbean region and authors of Close to Home: The Development Impact of Remittances in Latin America, will be on hand to answer questions.  Log in starting at 10:00 am EST to see it unfold; for now, you can submit your questions in advance.

Thanks to Christine for the reminder.

Guest blogger Brian McBrearity will be reporting from time to time about his experiences working in Zambia on SME and financial services development. His Zambia Journal posts will appear about once a week here on NextBillion.net. This is the third in the series; read his previous posts here and here.

My past posts have offered questions without answers, observations without insights, reality without reasons. While the economic picture of Zambia is still a murky haze in my mind, a few lights are beginning to shine.

There seems to be a cultural rejection of risk and aggression in Zambia, which carries over to the business environment. From my business experiences here, few local managers exist. Those that do lack the confidence to make decisions with conviction, lack the willingness to accept the risk that comes with those decisions. They defer to others, or make decisions by consensus opinion. This weak management style leads to second-guessing, and overall inefficient business practices.

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Over at Marginal Revolution, Tyler Cowen has written a long and worthwhile piece on the economics of remittances. This is must-read stuff for any of us who have been following the recent debates in the press (and on this site) about remittances and development. The comments are already flying over at MR. An excerpt:

Yes, in many regards remittances are more like inflation -- albeit in a parallel currency -- than like real wealth transfers. But there are also some important efficiency gains.

We also should not assume that distribution and efficiency are fully separate. Perhaps the remittances go to people who know better how to invest the money. Perhaps not.

Acumen Fund's Eric Cantor reports on the recent AirJaldi Summit and points to the revolutionary potential of wireless mesh networks to empower communities. Our own work on a new model for rural connectivity points in the same direction. WiFi mesh can be deployed easily, without sophisticated engineers. Some of the newest equipment has very low power needs, so can be readily and affordably paired with solar panels.  Advanced mesh also has much expanded range, throughput, and interference management—so it can manage 10 hops with no loss of capacity, cover areas a mile square or greater, provide 15 Mbps bandwidth or more. By empowering a range of user devices—phones and PDAs as well as computers—mesh is more broadly accessible, even to those for whom literacy is a barrier.

Most importantly, WiFi mesh offers the potential of radically lower costs, especially for rural areas: in a pilot we are developing for a province in rural Vietnam, we project a cost of access (and in-network VOIP telephony) of less than $1 per household per year. Whether as stand-alone entrepreneurial efforts, community-owned systems, or low-cost extensions to mobile networks, we believe that mesh WiFi networks are the means to bring low income rural areas into the global conversation and the global economy.

Paul Braund is Co-Founder of RIOS Institute (Research and Innovation for Organizations and Societies Institute) in Berkeley and Silicon Valley, California. He has worked as an architect and award-winning industrial designer and has developed numerous patents. He has spent 20 years working in technology research and development in Silicon Valley.

He has spent the past 5 years working on social development and finding appropriate technology transfers for developing countries, particularly in communications technology. He has supported and represented the UN-World Bank at conferences and various fact finding trips and workshops in developing countries, while maintaining independent work with numerous NGOs, small community groups and academic institutions who are helping to bring more human-centered innovation to development.

I had the pleasure of speaking with Paul in advance of the Silicon Valley Challenge Summit, which will bring together Silicon Valley’s unique pool of talent, creativity and ambitions to further transform the region into a hub of the international network around the use of ICT for global development.

Please click "Read More" for the text of my interview with Paul Braund.

"It's a moment to balance the global with the local." - Dr. Abhay Bang, director of SEARCH

NextBillion’s news section contains 4 new items, all of which pertain to “risk” in relation to the BOP community. But this risk I am referring to is two-fold. These news items address the wrongly perceived notion by commercial banks and insurance companies that the poor are 'high risk.' But the flip side, the newsworthy aspect, is that now these companies are seeing opportunity instead of risk. In fact, they are making it their job to reduce the risk to the poor using multiple approaches.

Click "Read More" to read about these approaches...