When I first read the seminal article "Serving the World's Poor, Profitably" in HBR, I found the direction it pointed to elusive. Instead of tugging at sympathy, the paper pointed to an exciting and fast growing market - the immense collective entrepreneurial capabilities and buying power of the world's poor. Looking back, made easy by NextBillion, I wonder how organizations are using different approaches (read - for profit and non-profit) to social innovation.

According to Prof. Reuben Abraham at the Indian School of Business, Hyderabad, the first step to understanding BOP Markets is to "Forget the Moral Imperative."

Point number one is forget the moral imperative. Let’s look at the economic imperative of why this market is important. Everybody tends to emphasize the moral imperative of why economic growth needs to spread, but I think there is a strong economic imperative why growth needs to expand beyond the 15 per cent, say, in India that actually enjoy the fruits of the current economic growth. Because ultimately, if there are a billion people and only 150 million people are participating, that is not sustainable. That is not sustainable for a bunch of reasons because there will ultimately be saturation, and there will also be all sorts of political ramifications to this as there is a disconnect between aspirations of people who live in these markets and the elite in these countries. So, there is definitely an economic reason for why we should look at these markets.

The questions are: Are we doing this? And indeed, should we? After all, some organizations might pride themselves on their non-profit approach - right?

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I found Peter van Dijk's comments on Ana's report from the Mobile Banking Conference interesting but not convincing. Not surprisingly, the evolution of mobile phone banking has not been without false steps, fraudulent operators, and systems that have flaws. But evolution also tends to produce winners that survive because they solve those problems. And the experience with G-Cash and Smart Money in the Philippines, with M-Pesa in Kenya, and, yes, with Wizzit in South Africa is that customers on the whole find a significant value proposition.

If these systems didn't work, didn't protect their customers' money, and didn't deliver value, they would hardly be growing at the rate they are. M-Pesa already has over 1 million customers (in 9 months), and the buzz on the street is very positive. But let's not pretend that these services are perfect, yet, but rather ask: What is the alternative for the several billion people who are unbanked?

Microfinance has had decades to fill that need, and has not--yes, it is very high value for most of the 100 million customers it does reach, but still a drop in the bucket. Mobile phone banking, on the other hand, has a realistic potential to add 1 billion customers to the banking system in the next 5 years (indeed, more than 1 billion low-income people in developing countries already own mobile phones). That potential is the big picture--the forest. It is especially important to many rural people who live far from banks and from micro-credit sources.

Of course, the evolution of mobile banking systems is hardly finished. A big remaining piece is enhanced security--to protect customers against fraud, and to protect banking systems against money laundering and other sophisticated criminal activities. But even this issue will yield to progress. In fact, we at WRI have recently completed research that suggests a biometric identification system on mobile phones is within easy reach--and we will be publishing that research next month.

We believe that much more secure ID for mobile transactions (including remittances) will greatly improve consumer protection and up the barriers to criminal activity--thus removing one of the main hesitations of banking regulators to the rollout of mobile banking. That in turn should accelerate what already seems like the next big wave of value-added services over phones in developing countries, with growing activity in Africa, Latin America, and Asia.

Julia Tran mentioned in a previous post some Boston Consulting Group (BCG) publications related with the “Next Billion”. Two more studies were published in November –“Decoding Next Billion Consumers” and “A Road Map to expanding Financial Inclusion in India” (this second one looks good and I am planning to read it soon).

Recently, NextBillion posted a news item published by The Economist related to the latest BCG publication about emerging markets called “The 2008 BCG 100 New Global Challengers”. This time, it referred to emerging countries’ multinationals and their international growth strategies as a means of becoming world leaders in their markets.

The rise of emerging market multinationals is of no surprise to anyone in the business world, especially in the case of large national firms based in Brazil, Russia, India and China –the BRIC economies.

The BCG Publication (this document is an executive report available on their webpage, I have ordered the full report, but have not received it yet) disappointed me in terms of their methodology and selection process for what they call the “Top 100 Global Challengers”. It does, however, give an interesting overview of these firms’ business models and their core strengths.

BCG selected their Top 100 from 14 countries. These 14 countries, or “Rapidly Developing Economies” (RDEs) as they call them, have been selected on the basis of their increasing share of global trade and their total GDP. However, the authors have given themselves ample space in selecting countries that are clearly not comparable to each other. Stating that Poland (member of the EU) and Hungary (to join the EU on 2008) are as “emerging” as Egypt (long time dictatorship and notorious human rights violator) or Indonesia (largest Muslim population in the world) seems a bit of a stretch. Likewise Chile has been included alongside Brazil and Argentina. I strongly doubt that companies from such different business environments can be compared and studied seamlessly.

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