Are people at the base of the economic pyramid more "green" than those at the top of the pyramid? There is an ongoing debate about this - and one of the key assertions made by those who answer "yes" to that question is that the BoP are better conservationists. Karen pointed out in her post last week that the people who depend most directly on "ecosystem services" are the ones most likely to utilize them properly and productively in a sustainable manner.

Reading this, memories flashed through my mind of traveling around highways in Mexico where brick sellers would line certain parts of the road - stacks of adobe bricks made from baked mud and straw arranged behind them.

Another BoP innovation around ecosystem services is the proliferation of decentralized biofuel generators, which have been gaining special attention recently thanks to the students who won U Texas' Social Innovation Competition with a rice husk-powered generator. A similar system that uses jatropha instead of rice husks has been circulating throughout rural India for some time.

Biofuel generators are now a hot ticket in the Western sustainable development space, and adobe has long been praised by progressives as a green building material. But what strikes me as the key commonality between these two examples, and what I liked about Karen's post, is that she makes clear this isn't about a green image for much of the BoP - it's about money.

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Guest blogger Paul Hudnut is an entrepreneur, advisor and teacher. He helped start EnviroFit International, and teaches at Colorado State University. Hudnut writes a blog, What's a BOPreneur?, where this post first appeared.

By Paul Hudnut

Allen Hammond recently hosted a blog series on scaling BOP businesses on NextBillion. In it, he proposed that extra effort is needed to scale social enterprises. It is worth reading. Hammond admits that the "numbers haunt"him when it comes to scaling BOP enterprises. Participation by a few well-intentioned, experimental MNC's, social entrepreneurs and investors is not going to be enough to change the world. Pace is a problem. What is needed, Hammond says, is strategies to transform entire sectors (health care, telecom, etc.).

Derek Newberry had asked me to join the other bloggers in commenting on this series of posts, but I was unable to do so at the requested time. He got some diverse input from others, and I will try not to repeat what they have already said. It is an important, perhaps watershed discussion. So here goes with three points that may be useful in thinking about this challenge of scalability.

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A dear friend recently brought up an interesting point when commenting a book we had both read about Afghanistan. She pointed out to me, with some disappointment, a passage that read "the reconstruction of this country has more to do with the fear of the west than with solidarity to our own species."

My father has a similar point of view. I remember him talking to his friends and students saying that "the Colombian society, not just its government, must think seriously about ways to fight poverty, and must do it for whatever reason is most appealing. Even if you don't care about the poor, roll up your sleeves and help them, out of selfishness if you like... because any business will be at peril unless they see that there are ways different than holding weapons to claim their rights."

Their words came to mind when I listened to Paul Collier's talk on the 2008 TED Conference. Along the same lines, says Mr. Collier:

"How can we provide credible hope to the billion people living at the bottom? ... I'm going to offer you a combination of the two forces that change the world for good, which is the alliance of compassion and enlightened self interest ... We need compassion to get ourselves started and enlightened self interest to get ourselves serious."

So what does it take to actually get serious and end the strife of the bottom billion? Collier's thesis lies on four pillars (aid, trade liberalization, sound security policies and good governance) which are explained in depth in his book. His TED talk, however, focuses on recommendations to tackle the governance issue.

The talk was timely, as I have been reading "Fixing Failed States: A Framework for Rebuilding a Fractured World" by Ashraf Ghani and Clare Lockhart. I found myself thinking a bit about the parallels between Collier's arguments and those presented by the authors.

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Guest blogger Tracy Smith is a communications officer for E+Co, an organization which empowers local SMEs that supply clean and affordable energy in developing countries. Tracy has an undergraduate degree in economics and a law degree from the University of Wisconsin Law School.

By Tracy Smith

A few days ago, my neighbor installed 20 feet of gleaming solar panels in her backyard. She assured me that over the next ten years the savings in energy costs would nearly pay for the panels and besides, she would be doing something good for the environment. I left her backyard thinking, you have to be rich to be green.

But as a member of the clean energy community, I should know better. I know, for example, that throughout the developing world, farmers, teachers, nurses - all kinds of people are installing solar panels on their roofs, lighting their homes with hydro electric energy, powering their equipment with biogas and generally catching onto the benefits of clean energy much more quickly than one might expect.

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If you are a manager at a NextBillion enterprise, pause and ask yourself:

• What attracted you to development through enterprise?
• What attracts members of your team to this sector?

It's interesting to see how employees bring diverse motivations. Understanding what drives them is key to retaining your top talent.

Is it the mission?
The recent buzz and interest in development has seen quality talent from countries such as the US take up positions in developing countries, often with significant pay cuts.

Is it the money?
For many loan officers at microfinance organizations such as mine, even USD 100 a month can be a great salary.

Is it a hybrid?
As a colleague told me, "I'm happy to work in this sector as long as I can manage a certain lifestyle"

Is it a short-term stint?
Development startups depend on talent working as interns or for short stints ahead of graduate school, or a career change.

When I first considered the sector, driven by Prof. C. K. Prahalad's HBR paper on "Serving the World's Poor, Profitably", what attracted me was the elusive idea of doing good and doing well at the same time. While market mechanisms may not always work from the get go, it was a concept that I found very attractive.

Indeed, understanding and being true to your motivations might help you be satisfied. Especially in a context when business schools applicants like my friend ask, "How important is it to do some non-profit work?"

It's an exciting time as the development sector is changing very fast and will look very different in a couple of years.

With NGOs converting to market-driven structures or philosophies, some of our favorites on NextBillion are making a big transition - in terms of their vision, capital and team structure - bringing unique challenges from inertia to compensation policy!

For quality talent considering the sector, the opportunity to work on highly entrepreneurial assignments with a lean, high caliber team remains a great draw.

Most of NextBillion's visitors have heard about the current jump in food prices. These higher prices have already triggered responses locally in the form of riots in countries such as Haiti, Egypt and Bangladesh. The OECD and FAO have recently issued a report predicting that food prices have moved permanently to higher levels compared with past prices (the Financial Times offered an advance of the study's highlights some time ago). Although the reasons for this trend are beyond the scope of this post I suggest readers who are interested read this article.

In this post, I would like to explore the likely effects of higher food prices on the budgets of Base of the Pyramid consumers. An argument widely heard these days is that such food rises at least might improve the plight of poor farmers in developing countries, however, a recent study (which due to lack of data available includes only 16 countries) from the World Bank claims otherwise.

Price increases have a negative effect on urban areas since they are net buyers. In most rural areas, the effects are negative too. The overall impact in rural households is negative since possible benefits depend not on what they produce, but on the net sale of these goods. Often rural households have to acquire other goods for which the price has risen too, so the increased income is more than offset by the other price rises.

Most poor people are net consumers of food, and not net producers.
The only exceptions might be rural Peruvians thanks to high maize prices and rural Vietnamese thanks to high rice prices (although the Vietnamese government has set restrictions on rice exports to keep national prices under control).

At any rate, in every country taken into account by the authors of the study, the poverty rate increases and people who were already poor are made even poorer by high food prices.

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A spate of blogworthy mainstream media articles have come out recently, prompting this base of the pyramid news roundup:

Over the weekend, the Financial Times ran two pieces side by side.  The first, entitled 'Investing in People' by journalist Sarah Murray, smartly discusses the role of Ashoka, Endeavor and Acumen Fund.  Jacqueline Novogratz - my boss - described it as one of the best treatments of the BoP concept she's seen yet.  I tend to agree.

On the right column, next to Murray's piece, was an opinion column by Michael Edwards, author of Just Another Emporer: The Myths and Realities of Philanthrocapitalism.  His article, entitled 'Misguided Calls for Business Thinking', rails against the trend of non-profits behaving more like businesses. 

Read these two - Murray's and Edwards' - side-by-side for full effect.

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Welcome to part II of the “Endeavor” series. You may recall that part I involved a rather interesting conversation with Dan Isenberg, a Harvard Business School professor who had written a case about Endeavor entrepreneur, Lapdesk. Given that dialogue, it seemed only natural to continue the dialogue with Shane Immelman, founder and CEO of Lapdesk. So with no further ado, let’s have a chat with Shane.

Tayo Akinyemi, NextBillion.net:
What inspired you to found Lapdesk?

Shane Immelman, Lapdesk:
Simply put - if we ever hope to meaningfully address global poverty, then the answer must be to provide children in emerging markets with quality education - by doing so we will at least ensure that these children will be equipped to participate effectively in the societies within which they live, and will then have the opportunity to create a better future for themselves. The Lapdesk Company was founded with this in mind, as tens of millions of children the world over lack basic infrastructural equipment that will contribute to their quality education - a classroom desk.

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Microfinance, in its for-profit avatar, is attracting capital, talent, blogposts - you name it - and a fair bit of criticism. So when Alex Counts, President & CEO of the Grameen Foundation proposed his vision for Reimagining Microfinance in the Stanford Social Innovation Review, he targeted the right issues. The problem, as I see it, is that elements of Counts' vision are simply not realistic.

I agree with Alex that microfinance is better placed as a platform from which to develop and distribute a range of products and services—not just financial ones. I also agree that microfinance institutions stand to gain by structuring themselves to gain from high volume, not high margin models. This will help not just in terms of revenue, but also in terms of managing what can be a precarious political environment for MFIs and their investors.

An excerpt from an article (The Big Trouble With Small Loans) in TIME Magazine illustrates the line MFIs must tread:

Consider the time a bank chairman asked if SKS could raise its interest rates. Akula said yes (in most markets it has a monopoly) but that SKS wouldn't do so because it would be exploitative. The banker scoffed that Akula didn't understand economics. Akula shot back that the banker didn't understand customers, who would turn on SKS if they felt abused. "We're maintaining a loyal customer base that will stay with us as they get out of poverty," says Akula.

(Full disclosure: I work at SKS Microfinance)

However, in my view, Counts goes too far and becomes too idealistic in the proposals that follow.

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A quick tour through my RSS feeds yielded some very rich content today.  Here's a brief overview:

The latest issue of Development Outreach has come out.  The magazine, published by the World Bank Institute, straddles the line between academic publication and public interest periodical (that's a long-winded way of saying that it's readable but full of serious content).

The June 2008 issue of Development Outreach is subtitled "Business and Poverty: Opening Markets to the Poor" and features a number of worthwhile articles written by names familiar to BoP aficionados.  To begin with, the opening guest editorial is co-authored by V. Kasturi Rangan, a Harvard Business School professor who has been pushing BoP curriculum and research aggressively for the past few years. 

Other pieces feature BoP business in action, including features on Project Shakti (again?) and Patrimonio Hoy (these examples are beginning to get old - no?).  Despite some business-as-usual content, Development Outreach is worth reading. 

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Thanks to Dana Krechowicz, Associate, Markets and Enterprise Program at WRI, for providing the background on Socially Responsible Investing.

In April of this year, The Opportunities for the Majority Office of the Inter-American Development Bank (IDB) and Innovest Strategic Value Advisors (Innovest) announced the completion of a groundbreaking project – to create the Opportunities for the Majority (OM) Index of publicly traded national and multinational firms operating in the Latin American and Caribbean (LAC) region that are engaged in BoP activity.

In Latin America and the Caribbean, the majority of people, estimated to be over 70 percent of the population, lives on less than $3,260 a year (about $9 per day). The Opportunities for the Majority program was launched to engage the private sector in addressing the needs of this population. According to the IDB, in Latin America and the Caribbean, this market represents a combined purchasing power of $500 billion USD per year.

The IDB’s partner in creating this index, Innovest, is a financial advisory firm with substantial experience in what it calls "sustainability-enhanced" and "community investment" indices.

Although the new OM Index is not a fund that you can invest in today, it attempts to create a benchmark for comparing large-scale companies that claim to be serving and engaging with BoP markets.

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I recently had the pleasure of spending some time speaking to Leila Chirayath, founder and CEO of Samasource (previously Market for Change), an organization that promotes socially responsible outsourcing to fight "the waste of talent" around the world.

This first part covers Leila's background, the experiences that led her to become an entrepreneur and identify outsourcing as a vehicle for positive social change. The second part of the interview explores Samasource's business model, and its perspectives in more detail.

I hope you enjoy learning about this story, as I very much did.

Francisco Noguera: Leila, what is your background and how did you become a social entrepreneur?

Leila Chirayath: I'll start with a story on why I care about development to begin with, and why I think that waste of talent is the biggest challenge in development that we have yet to tackle.

In my senior year of high school I got a scholarship to go and volunteer in Ghana; I graduated early and went there for six months to volunteer as an English teacher in a small province north of the Capital, which had no electricity, no running water and one telephone for a whole village.

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File this under the eye-catching-BoP-design category and add it to the list of fascinating cycle innovations intended to meet multiple needs for the poor - in this case, the challenges of water filtration and transportation.

The product is called the Aquaduct, a tricycle designed by a team of five at IDEO that stores water in a twenty gallon tank in the back of the bike's wide, blue frame. As the user travels back home, the energy they expend pedaling is used to filter the water into a removable two gallon tank that rests in front of the handlebars.

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In my previous post, I suggested that BoP enterprises should consider partnering with faith based organizations (FBOs) on the ground, particularly in countries where religion plays a large role. In this post, I’d like to put forth another distinct, but similar idea: FBOs in the West can play a large part in the overall BoP Movement. Crazy, right? Maybe not.

A recent article in the Stanford Social Innovation Review highlighted the results of a survey on charitable giving in the United States. The survey showed that there is a gap between donor intent and actual giving. 47% of the respondents to the survey stated that they gave money in order to assist the needy. However, in actual giving, only 6% of donor dollars was given to organizations that primarily seek to meet the basic needs of people in the United States. Internationally, only 2% of donor dollars was allocated to assisting of those in need. So where is all the money going? Answer: FBOs.

Time to sound the alarm, right? “Wake up, donors! Smell the coffee. Start channeling your money elsewhere.” This is probably the reaction most on this blog would have.

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Paradox: I have used a tiny surplus of time this week to be more diligent about reading my RSS feeds. As a result, I have added quite a few "to-do" or "to-blog" items to my list, thereby creating more work and crunching my time. Paradoxical or not, I've been coming across some very relevant blog posts, reports and other items of interest. Without further ado, a quick roundup:

Over at Green Light, Daniel Englander dives deeper into the nascent IGNIA Fund (which we've mentioned before). NextBillion regulars will remember IGNIA as the $75 million 'base of the pyramid'-focused equity fund started by Alvaro Arregui and Compartamos' Michael Chu. Check out Green Light, as Englander offers some sharp analysis in addition to the latest news. Hat tip to Aman Bhandari for the referral.

Design and Reach - written by NextBillion ally Jocelyn Wyatt - highlights two new reports on Design for Social Impact. The reports are outputs from a recent meeting on the subject, convened by IDEO and The Rockefeller Foundation (Wyatt now works for IDEO). Full disclosure: Acumen Fund, my employer, helped fund this exercise and took part in it. Check out both PDF files, which represent the first cumulative effort to guide design firms' work in the social space. And stay tuned; these guides deserve - and will receive - a longer post.

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