With the Year of Microcredit behind us, and investments in the sector accelerating, rarely do you hear criticisms of the much lauded poverty alleviation tool. One notable exception is a recent piece by Thomas Dichter, long-time practitioner in the international development industry and author of Despite Good Intentions: Why Development Assistance to the Third World Has Failed.

He cautions that “microcredit is an almost perfect case of a phenomenon that has come to characterize much of development assistance - a widening gap between reality and propaganda.”

Dichter argues that in the rush to scale up microfinance offerings, many newcomers to the field might actually be doing more harm than good. He points out a number of flaws with the current approach to microfinance, cautioning that there is little historical evidence for the developmental role of credit to the poor; that there has been little rigorous evaluation of the overall benefits of microfinance to a person’s quality of life; and that the poorest of the poor are by definition the ones who "need" credit the most, but can do the least with it.

The Inter-American Development Bank’s (IDB) annual meeting opened this week in Brazil amidst violent protests against the agency’s lending practices. Critics contend that the bank's loans typically help big business, and do little for the masses of Latin American and Caribbean citizens living in dire poverty. Mega-projects like large dams and pipelines also frequently cause displacement and environmental destruction. As a result, decent economic growth has failed to reduce the large gap between its rich elite and huge numbers of poor.

The laundry list of meeting agenda items sounds instantly familiar. Delegates plan to discuss how the bank can improve the region's crumbling infrastructure, increase trade, boost economies, promote regional integration and improve living standards for those living in misery. While some – including Bolivia's first Indian leader – lobbied for debt relief to achieve the latter, a more interesting approach was proposed by Clay Lowery, the U.S. Treasury Department’s assistant secretary for international affairs.

When I meet people and they ask what I do, I’m often met with a skeptical eye when explaining my promotion of private sector strategies for development. This recent article succinctly describes why. It’s an interview with John Perkins, author of Confessions of an Economic Hit Man.

Perkins worked for 10 years as a highly successful ‘economic hit man’ for a major American engineering and construction firm. “An economic hit man works by making excessively optimistic projections of economic growth in a developing country, seducing the business and political elite into borrowing vast sums for hydroelectric projects, road building, industrial development and the like. The net result enriches the elite while despoiling the environment, eroding traditional indigenous life and casting much of the population into abject poverty.

I attended last night's Ashoka Changemakers award ceremony for the Social Entrepreneurship & Innovation Competition, which was well-attended by business and non-profit fans of social entrepreneurship alike. The Ashoka speakers were self-effacing and concise; first was Sushmita Ghosh, Chair of Changemakers.net, who talked about Changemakers' 5-step strategy for impact. Bill Drayton, CEO and founder of Ashoka, highlighted the hybrid value chain of impact that Ashoka creates by creating a space where social activism meet business principles, policy, and citizen groups. Third was Valeria Budinich, VP of Full Economic Citizenship, who introduced the 11 finalists (three were absent).

Most of the finalists are probably well known to Nextbillion readers--Rebeca Villalobos and Wayne Farmer on the health care beat with ASEMBIS eyecare and HealthStore; improving farming productivity with Sadangi's International Development Enterprise ; Honeycare Africa employment and guaranteed income; SELCO solar energy for the BOP; sustainably harvested Acai berries to make Sambazon drinks (by "antisocial social entrepreneurs" Black and Baumgardner); "RUGmark" labels to sell products made without child slavery; microbanks to empower rickshaw drivers and women.

Craig Esbeck's story was touching: a high school teacher with an existential crisis, he went to Uganda with the Peace Corps, stayed post-evacuation, and used his Peace Corps "readjustment" money--$2,500--to launch Mango Tree Educational Enterprises.

But by far I was most inspired by the Sulabh project, which provides the unglamorous service of sanitation. This may well pave the way for Quadruple Bottom Line standards: green, profitable, social, and also breaks down class barriers.

Friends often ask me how profit can co-exist with good social and environmental practices, especially at the BOP. After all, we have a hard enough time here in the so-called “advanced” economy of the United States doing it – with the compound pressure of poverty, won’t social and environmental standards fall by the wayside?

There’s no simple answer to the question, but Egypt’s SEKEM might shed some light. Since 1977, the firm has been working to reclaim desert as farmland using organic agricultural techniques. Emphasizing training in modern farm management, organic cultivation and the negotiation of long term supplier contracts, SEKEM currently provides reliable employment and income to 900 small and medium scale family farms while reclaiming over 3,000 hectares of farmland.

Building on its early economic and environmental success, SEKEM now runs health care and education programs that emphasize participation, integration and the need to foster long-term independence and self-determination of community members.

We’re happy to announce that NextBillion.net has been nominated for Best Business Blog of 2006 in the 10th Annual Webby Awards! Hailed as the "Online Oscars" by Time Magazine, The Webby Awards is the leading international award honoring excellence in Web design, creativity, usability and functionality.

As a nominee for a Webby Award, NextBillion.net is eligible to win a People's Voice Award. Voting is open to the public from April 11th to May 5th. Show your support of NextBillion.net by casting your vote today! Winners will be announced May 9th.

"The Webby Awards honors the outstanding web sites that are setting the standards for the Internet," said Tiffany Shlain, founder and ambassador of The Webby Awards. "Nextbillion.net’s Webby Award nomination is a testament to the skill, ingenuity, and vision of its creators."

We’re thrilled to be nominated, and want to thank all our loyal readers and members for helping make NextBillion.net such a success! We look forward to making the site even more useful to you in the coming year.

The Kenyan Development Network Consortium held a “co-creation” workshop on Friday and Saturday, April 7-8, in Washington DC. (KDNC was founded by Macharia Waruingi, a long-time member of NextBillion.) Participants were mostly members of the Kenyan diaspora, working professionals with a passionate interest in bringing development benefits to Kenya through private sector vehicles. The event’s agenda focused on the health, agriculture, housing and ICT sectors, and appropriately drew attendees whose careers were in these fields.

Dr. Wilson Endege, a biotechnology researcher at the Harvard Institute of Proteomics, and Sam Njoroge, a Manufacturing Engineer of medical devices at MEDEFAB, discussed the possibility of establishing in-country manufacturing facilities for basic drugs and devices. The workshop was attended by several highly experienced ICT professionals and entrepreneurs who discussed ideas to bring connectivity to Kenya. Present were Joseph Manthi, CEO of Wanza Technologies; William S. Odongo, President of TKN Global Spectrum, a company specializing in management information systems (MIS) applications; and Peter S. Maina, President and COO of GeoNet (satellite-enabled low cost, high speed Internet and telephony).

We received a notice recently that the Acumen Fund was celebrating its 5-year birthday. That's remarkable, because the organization, with a mission to create and support sustainable enterprises that deliver affordable healthcare, water, and housing to the poor, has accomplished an amazing amount in so short a time, including:

• More than six million Africans each year have access to life-saving long-lasting insecticide-treated malaria bednets.
• Almost 7,000 farmers have seen their crops and incomes improve significantly through the purchase of drip irrigation systems.
• 12,000 women in Pakistan have access to credit and borrowed to build their small businesses and improve their incomes.
• 430,000 low-cost healthcare services have been provided to rural Kenyans
• 18,000 South Africans are receiving anti-retroviral treatments through networks of private clinics.
• More than 5,000 people in Southern India have access to affordable, clean water for the first time.
• More than 2,000 people, most of them women, now have steady jobs.

In the last couple of weeks a number of issues near and dear to my heart
have gone mainstream...or at least they are getting a little more of the
limelight, which is fine by me. But, how did this happen? And what
does it have to do with emerging market investments in sustainable enterprise?

HBO recently debuted a movie in Washington DC called "Too Hot Not To Handle" that featured scientists talking about climate change. It was
well attended and featured speakers Senators McCain and Lieberman. Wait, what!?

Something seems out of place. HBO, the home of "The Sopranos" produced this film? Well, yes, and not only because of Laurie David, but also because climate change has become an issue that interests even an audience who spends their sunday night's watching the mafia murder someone.

E-commerce has long been hailed as a means of providing sustainable livelihoods to artisans in developing countries. Historically, these artisans have marketed their wares directly to local consumers, tourists and to export markets. To reach these global markets, local artisans have had to work with middlemen who mark up the prices significantly, leaving the local producer with only a fraction of the profit. Over the past decade, however, a number of initiatives have begun to harness ICTs to give artisans a competitive alternative to this exploitative system.

The most exciting and useful of these tools that I’ve found is CatGen, an open-source e-commerce platform created by PEOPLink. I had a chance to hear Dan Salcedo, founder of PEOPLink, talk about his software yesterday at USAID. Based on the information presented, CatGen has proved to be a great success.

Three members of the New Ventures team (Virginia Barreiro, Mareike Hussels, and Rodrigo Villar) attended the recent Latin American Venture Capital Association (LAVCA) meeting in Belo Horizonte, Brazil. The conference featured more than 20 speakers from venture capital firms and development banks (incl. Stratus, Actis, MIF, & Aureos) who highlighted new trends in the investment environment in Latin America and how policy can support its growth.

David Thomas, Chairman of LAVCA and Managing Director of Intel Capital Latin America opened the conference, followed by the keynote speaker Ricardo Malavazi, Director of Petros, the pension fund of Brazil’s national oil company Petrobras and the second largest pension fund in Brazil. In order to diversify their portfolio, Petros has very recently entered the Private Equity market with 5-10% of their investment. It will be interesting to see if other pension funds follow suit and insert new capital into the private equity market. Other panelists spoke to the importance of raising the Brazil’s profile as an investment destination. Álvaro Gonçalves, President of the Brazilian Association for Venture Capital and Private Equity stressed the importance of national and regional associations working together to promote Brazil’s many success stories abroad.

Sara’s recent post about the mainstreaming of green investment got me thinking about the mainstreaming of base of the pyramid (BOP) trends. Is it fair to use that word for such a niche hypothesis? Two projects, both with new web sites, suggest that it may be.

Enterprise for a Sustainable World and the BOP Protocol are both outgrowths of Stuart Hart’s BOP center of excellence based at Cornell University. (Full disclosure: World Resources Institute is an institutional partner in both projects.) E4SW, as the first is called, is a recently-formed non-profit group headed up by Stu to undertake “action research, education, and organizational change for corporations (as well as governments and NGOs) interested in transformation toward sustainability.” They’re not the first group to do this, but an excerpt of their mission statement leads me to believe that they might be onto something bigger and better:

We believe that leapfrogging to inherently clean technologies through disruptive business models at the base of the pyramid can enable companies to confront directly the two biggest problems facing humanity: poverty and global-scale environmental degradation. These also provide the basis for the repositioning and growth that will be needed for companies to thrive in the future.

This two-sentence excerpt effectively sums up much of Hart’s research and writing – some of which can be found in the E4SW Papers section. His staff includes NextBillion members/allies Patrick Donohue and Justin DeKoszmovszky, both of whom have a wealth of on-the-ground BOP experience. Keep an eye on these guys – they’re doing great things. (Patrick’s off to India shortly to work with Solae’s BOP project).

Just a short posting for those of you interested on what is being done to scale up biodiversity friendly businesses.  This was sent me to me by Mareike Hussels my colleague at WRI's New Ventures program, a business accellerator for sustainable business.  She attended an event in Brazil on biodiversity and enterprise creation and was particularly impressed by the caliber of the participants at the event.  Mareike thought that the meeting could represent the start of a renewed interest in SMEs that offer biodiversity-related services.  Check it out to see if you agree.

Thomas Dichter, a returned Peace Corps volunteer and development consultant to USAID and the World Bank, has written what Alex aptly calls a “provocative and controversial essay…in which he claims that microcredit is not nearly as good a tool as it's made out to be, and that what the world's poorest most need are good governance, clearer laws, less corruption and more development.” NextBillion readers will find Dichter’s essay, Hype and Hope: The Worrisome State of the Microcredit Movement, interesting in part because he calls for increased attention to mesofinance, an area we’ve written about before. You may recall that mesofinance is the oft-unserved gap between small microfinance (<$5000) and commercial finance (>$500,000). Dichter accuses MFIs of leaving promising entrepreneurs behind because “they are not poor enough”:

Indeed, in part because of what has been aptly called "microfinance evangelism," the prospect of significant returns from microcredit made available to solid enterprises has become less likely. This is because those who can really leverage a small loan -somewhere between poor and well-off - who have already got a genuine business going against all odds are often left out of microcredit basically because they are not poor enough. (My emphasis)

Dichter concludes:

I was just finishing college in the late 90s when I first heard of the phrase ‘race to the bottom’. A few activist friends of mine had arranged a screening of Global Village or Global Pillage, an award-winning documentary that examined the harsh consequences of unchecked globalization. In spite of its underlying optimistic message about community organizing and empowerment, it painted a bleak picture of the private sector’s unquenchable thirst for profit and market domination.

“Today's global economy lets corporations pit workers and communities against each other to see who will provide the lowest wages, most abusable workers, cheapest environmental costs, and biggest subsidies for corporations. The result: a race to the bottom in which conditions for all tend to fall toward the poorest and most desperate.”

At the time there seemed to be a certain inevitability to it all, and part of me couldn’t help but hope that corporations sped up their efforts, because the sooner they hit the bottom, the sooner they could start moving back towards the top. But then a funny thing happened on the way to the bottom - a number of companies began to realize that the quest for continued profitability and growth in the next century might actually lie at the top!