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The debate around SME finance is rapidly maturing. Development professionals and socially-minded investors are well aware of the difficulty entrepreneurs in emerging economies have in securing capital larger than microloans.

A World Bank conference to be held next Monday and Tuesday in Washington, DC takes the conversation forward - from acknowledging the challenges of SME finance to getting into the specifics of how to make SME finance work. Speakers including:

• Thorsten Beck - World Bank
• Allen Berger - U. South Carolina and Wharton; and
• Meghana Ayyagari - George Washington University

will discuss best practices and new mechanisms for channeling capital to this sector. See the IFC site for more details.

Via PSD Blog

A key concept when operating a business at the base of the pyramid, or in any place for that matter, is contextualization. And by contextualization I mean a deep understanding and embrace of local culture. A simple example of contextualization in business can be observed by comparing the McDonald's menus in Asia and the United States. For instance, it would be impossible to find any McDonald's in the state of Michigan serving a curry burger. Why? Because people in the state of Michigan don't have a taste for curry burgers and wouldn't buy the product. Indeed, it is critical that businesses be aware of local patterns of human behavior – such as lifestyles, tastes, and social involvement – and develop products and services that suit these behaviors.

What I have mentioned thus far is nothing new and probably very elementary to the NextBillion community. However, I would like to suggest that we have left out of the conversation a very important component of culture: religion. It is a subject that is very polarizing and often taboo to discuss in business. But it is important to bring up because religion is very important to people in the communities that we in the NextBillion community are trying to serve.

Recently, this dawned upon me as I listened to a presentation by some MBA students from the Ross School of Business on improving the penetration of insecticide treated nets in Ghana. One recommendation that particularly jumped out at me was the following: leverage the church's influence. The presenters noted that in Ghana, Christianity is widely practiced, and as a result, the church is a very powerful and influential social institution.

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The WBCSD-SNV Alliance recently released a fantastic video introducing their work in the promotion of inclusive business models across Latin America.

Besides profiling interesting models that bridge the interests of MNCs and the base of the pyramid, the video highlights the role Governments are playing in promoting market-based approaches to poverty alleviation. It is indeed a sign of promising trends to hear about Ecuador's transition from a "Ministry of Welfare" to a "Ministry of Social and Economic Inclusion". 

Kudos to the alliance and the work being done in Latin America!
I hope you enjoy watching this, as I very much did.

As I turned the corner, it appeared almost out of nowhere - a monument to the successes (and failures) of capitalism - the New York Stock Exchange. I had ventured downtown to attend the premiere of Carol Pineau's new documentary, Africa Investment Horizons, which was being screened inside the Exchange. As first impressions go, you could do no better: it's impossible not to take Africa's investment potential seriously when you're talking about it inside the center of the financial universe.

Even the security line was interesting: long but vibrant, an impromptu salon of Africanists, investors, expatriates and activists, all of whom share a passion for the business of Africa. Not surprisingly, I saw a number of base of the pyramid and NextBillion allies: Liz Wald, of EDI Imports; Emeka Okafor, of TED and Timbuktu Chronicles fame; Joy Sun, COO of Market for Change. This was going to be a good event.

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It was sunny, and tempting to sit outside at the University of San Diego to enjoy the weather. Inside, however, a group of global practitioners and scholars - organized by Patricia Marquez of USD and Carlos Rufin of Sussex University and Babson College - were discussing the role of utilities at the Base of the Pyramid. (See 'attachments' at the end of this post, where I have uploaded the meeting's full agenda as a PDF.)

Utilities provide basic services - telecommunications, water, power - that are essential to people's lives and increase their productivity. But a decade ago, many utilities in emerging markets were failing—service to low-income communities was poor, and many of their customers simply didn't pay or acquired the service informally.

The picture that emerged in San Diego, however, was more optimistic. A number of utility companies have engaged BoP communities and increased their willingness to pay, in return for investment that improved service quality. Codensa, a power utility in Columbia with 400,000 non-paying customers (out of a total of 2 million), reduced non-paying customers dramatically. Manuel Bueno has an excellent analysis of the Codensa case in his post, "The Codensa Case: Electricity and Related Services for the BOP in Colombia," from December, 2007. And mobile phone companies improved service and access to service dramatically compared to legacy fixed-line telecom companies (sometimes another branch of the same company).

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As Ana first reported back in February, Ashoka's Changemakers and the Global Water Challenge have partnered to open a worldwide search for ideas and projects with the potential to transform the provision of sanitation and water worldwide.  The search, entitled Unclogging the Water and Sanitation Crisis, began with a call for projects and culminates this Sunday, when voting closes.

This is a competition through collaboration, meaning that the Changemakers community gets to nominate projects, vet them and vote for the winner.  (If you've never heard of Changemakers, check out Leslie Berger's concise profile of their work in the Stanford Social Innovation Review.) 

The water and sanitation competition is coming to a close; 9 finalists have been selected by the community, and voting is open.  If you haven't already, drop by the Changemakers site and vote - it only takes a few minutes, and your voice actually counts (the winner gets $5,000 cash and is eligible for up to $1 million worth of Global Water Challenge grants). 

In an era when most decisions - political, business - are made in back rooms away from our inquiring eyes, Changemakers represents real change.  By opening up the decision making process to anyone with a web connection, they are democratizing (and crowdsourcing) at the base of the pyramid.  Happy voting...

This post is the first of a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I introduce the conceptual framework for this innovative poverty-alleviation model.

"It doesn't exactly keep me up at night, but I do think about it a lot." Jacqueline Novogratz, head of Acumen Fund, and I were talking about getting to scale - about expanding private sector business development and investment aimed at empowering and providing basic services to the poor to the point of making a real impact.

I felt exactly the same, and I've had similar conversations with colleagues at Santa Clara University, at Ashoka, at private investment funds, and elsewhere. Ever since we finished our report on The Next 4 Billion, the numbers haunt me. How do you meet the unmet needs of four billion people?

Convincing a dozen multinational companies to take this market seriously isn't enough. Doubling or quadrupling the capacity of the organizations that mentor social enterprises and BoP-serving small and medium businesses won't do it either. Even investing hundreds of millions of dollars in individual enterprises in this sector doesn't guarantee success. I think the goal has to be to transform whole sectors in ways that catalyze mainstream investment in BoP economic activity and unleash market forces. To get there, I think we need a more systematic approach.

A Next-Generation BoP Approach: Transformative Sector Models

In this and subsequent posts, I'm going to suggest one such approach that I and my colleagues at WRI and elsewhere have been developing for several years, and that we are now starting to take into the field. I'm proposing this scaling model tentatively, and asking for feedback and for comparisons to other scaling models.

The approach builds on the perception that there is a growing amount of public and private capital available to fund BoP strategies - almost every month now I hear about a new BoP private equity fund - and the conviction that the bottleneck is a shortage of solutions in the form of investable enterprises. In venture capital jargon, what's missing is the "deal flow." And I'm suggesting that the way to create that deal flow and unleash a rising tide of investment is to focus not on individual entrepreneurs, not on individual companies, but on economic sectors.

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Position: Senior Researcher, BoP Energy Sector Analysis, Institute for Financial Management and Research (IFMR)

Location: Chennai, India

Organization: The Centre for Development Finance of the IFMR is a development economics research and action centre. It was formally established in February 2006 with a mission to support development finance - the conversion of finance into development. We primarily focus on sustainable models for financing infrastructure and services, as these are essential inputs into any vision of equitable development.

Description: The senior researcher will be responsible for research and related activities analyzing the Base of the Pyramid energy sector in India. The senior researcher would be expected to undertake a comprehensive study to quantify BoP energy needs and existing uses, conduct stakeholder and expert interviews, conduct focus groups, and perform a competitive analysis of emerging and established off-grid and household energy technologies in order to develop a strategy and series of projects for improving access to clean, sustainable energy at the BoP.

For more information, see the full job description. To apply, send a cover letter, writing sample, and resume to shaanti.kapila@ifmr.ac.in.

This post is the second in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I tell the story of a rural connectivity pilot project; an example of this new model for development in action.

A Last Mile Model for Rural Connectivity

Son Tay commune, Quang Ngai Province. I was sitting across a table in a remote rural outpost of Vietnam, negotiating (via a translator) with the manager of a local radio station about access to his tower. He asked a series of technical questions and seemed satisfied with the answers, but then he wondered aloud: "Can we get Internet access here?" He didn't just want it for the radio station, it emerged, but for the surrounding small community - even though nobody there yet owned a computer. The manager understood that internet access could help transform their opportunities. And when we agreed to mount a small antenna to serve the community, the tower was ours.

The negotiation was part of a two year long process to pilot a novel approach to rural connectivity. It involved building an advanced, broadband network in three communes (groups of villages) in a very poor province in central Vietnam to provide Internet-based phone service and Internet access. Quang Ngai Province has no Internet access for its million-plus population outside of the provincial capital, and phone ownership is about 3 percent.

But the province does have an AUSAID-funded rural development project (RUDEP) that had built trust by doubling farmer's incomes in many communes, and optical fiber to every district capital (owned by the national electric utility, EVN, which also owns a mobile phone company, EVN Telecom). Ultimately all of these became partners in the effort, as did USAID's Last Mile Initiative, Intel and other equipment providers.

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Do you run a small-to-medium size enterprise operating in India, Indonesia, China, Brazil or Mexico? Does your company have an innovative business model that delivers strong environmental and social benefits? Are you seeking debt or equity capital in order to grow your business?

If so, apply for the New Ventures program in these countries. The New Ventures program of the World Resources Institute supports the growth of businesses that deliver social and environmental benefits by providing business advisory services and access to capital. Enterprises that have been supported by New Ventures have raised $120M in capital. Moreover, 98% of New Ventures enterprises are still in operation.

The application deadlines for each country are:

• India: May 15th
• Indonesia: May 16th
• Mexico: June 30th
• China: TBD
• Brazil: TBD
  

For more information and access to the application form, please visit the specific country websites. For an English language version of the Indonesia application form, please contact slall@wri.org.

This post is the third in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I describe how this strategy could transform the health sector in emerging economies.

Last Mile Health Care Delivery

Talk to people in the rural communities of southern Mexico, in the new urban communities on the southern edge of Bogota, or in almost any village in rural Africa about getting decent access to healthcare, and their answer is the same: it usually costs more to get to a clinic, a doctor's office, even a pharmacy, than the cost of the service itself. In Bogota, most of the government-supported health services are in the north of the city, such that it can cost people in these new refugee communities a day's work plus bus fare across town and back to get help. Lack of access defines part of the last mile health care dilemma, and that means distributional business models, such as franchising, can be important.

Talk to Health Stores in Kenya, an enterprise trying to staff small pharmacies with nurses, and another part of the problem becomes clear: the sheer lack of doctors, nurses, and pharmacists in emerging markets. There are not anywhere close to the number of skilled professionals needed to cover rural areas, and these health workers overwhelmingly refuse to live either in rural areas or in urban slums. So technologies, organizational models, and legal changes that enable local diagnosis and remote practice by doctors and pharmacists could play a critical role.

Still a third factor leaps out from the data in The Next 4 Billion report that shows clearly that low-income households spend between a third and a half of their out-of-pocket health care expenditures on drugs. They typically don't go to doctors or clinics or hospitals, but rather to pharmacies or some other source of medicines and seek to self-medicate. That means they often get a guess as to what's wrong with them instead of a diagnosis.

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This post is the fourth in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I discuss the common characteristics that make BoP business models in different sectors scalable solutions.

Searching for Transformational Models in New Sectors

If building the missing infrastructure could transform rural connectivity and health care, what about access to clean drinking water, especially for smaller rural and peri-urban communities? That's a proposition that WRI and Santa Clara University's Global Social Benefit Incubator are researching. There are some promising models in the field, such as Water Health International, that are beginning to scale. There are a number of additional enterprises, five of which will be mentored intensively in this year's incubator class. There are some promising new filtering technologies that use less energy than existing technologies, as well as other interesting approaches that have yet to be applied in emerging markets; we are undertaking a detailed comparison of both existing and newer technologies.

A number of community-initiated business models have produced good results, but they aren't easily replicable and don't scale. So we are analyzing both franchising and public-private partnership business models. Many of the elements that make rural connectivity and rural health care promising appear to be present in the water sector. It is too early to say what will emerge out of the research, but the scale of the unmet need is clear - a billion people without access to clean drinking water.

And after water, why not BoP energy? Our preliminary thinking is that there at least three sub-sectors of interest: Off-grid power and lighting, from mini-hydro to LED lighting; efficiency improvements in energy-using devices, such as cook stoves and motorbikes; and locally-grown, produced, and consumed biofuels that don't compete with food. We know of prototype enterprises and projects in each sub-sector, some of them already beginning to scale. We believe that the recent, rapid evolution of technology options will continue and can be adapted for the BoP. And we know that the unmet need is very large.

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Guest blogger Brian Trelstad is the Chief Investment Officer of Acumen Fund. Before joining Acumen Fund, Brian spent four years at McKinsey as a consultant in the healthcare and non-profit practices and as an editor of the McKinsey Quarterly. Prior to McKinsey, he worked as a case writer at Stanford University's Center for Entrepreneurial Studies and was the lead environmental staffer for President Clinton's AmeriCorps program.

In this post, Trelstad responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond.

By Brian Trelstad

Al Hammond's enthusiasm for the bigger picture is refreshing. His transformative sector strategies are a bit of a departure from the norm for someone like me, who spends most of his time evaluating individual investments and, as a result, often loses the forest for the trees. I am surprised, however, to hear that this topic doesn't keep Jacqueline up at night, as the entire Acumen Fund team is constantly thinking about how to take businesses - even those serving upwards of a million people - to the next level of scale.

Our strategy is to find great models like Medicine Shoppe or Water Health International and build them into profitable companies that are providing critical goods and services to the poor at scale (defined as 1 million plus customers). It's also critical for us to share the lessons and insights gleaned from the investing/management experience with the private capital markets and public sector to help shape the next generation of investment strategy and public policy.

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Guest blogger Blair Miller is a Manager of Business Development at Acumen Fund. She has lived and worked in Senegal, South Korea, India, and El Salvador. Her pursuit of a literature degree the University of Virginia opened her mind to the importance of social change and her MBA from Michigan gave her the practical skills to make that change a reality.

By Blair Miller

As I walked into Desmond Tutu Center in New York on Thursday night, I wasn't quite sure what to expect from the social networking event hosted by Good Capital. Good Capital is an investment fund aiming to accelerate the flows of capital to social enterprises, and they successfully convened an incredible group of colleagues, investors, and friends.

Just to give you a sense of the event, my first conversation was with two women from Scojo Foundation, an Acumen Fund investee that reduces poverty and generates opportunity through the sale of affordable reading glasses. I then had the pleasure of talking with Tim Freundlich, a partner at Good Capital, who - among other things - told me of the upcoming conference they are hosting in San Francisco in October. This was followed by a conversation on community building with Jed Emerson, one of the leading thinkers on Blended Value and also an Acumen Fund and Good Capital Advisor.

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