This is the second post on CGD’s event – check out yesterday’s post to read more.

At the Eyes Beyond the Prize event yesterday several major themes emerged: how to keep the spirit of microfinance present as it grows and incorporates external forces like governments, investors, and development agencies; how to promote efficiency, improve distribution channels, offer more diverse services, and increase transparency and regulation; which business models should be built upon and which are outdated; how to promote growth rather than just improving quality of life.

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The Center for Global Development’s (CGD) event this morning, Eyes beyond the Prize: Envisioning the Next Thirty Years of Microfinance, offered diverse and fascinating perspectives on the future of microfinance. This post will be done in installments to capture the wide breadth of ideas broached at the event.

Elizabeth Littlefield - CEO, Consultative Group to Assist the Poor (CGAP) – started things off by describing four powerful trends that the microfinance industry will have to face in the next thirty years:

1. Demographics. In the next decade over 2.5 billion young people in developing countries will be looking for jobs. They will be mobile, urban, and informed. This has major implications for community lending models, remittances, and development of SMEs.
2. Wireless technology. As NextBillion readers know well, wireless tech has seen enormous growth at the bottom of the pyramid. Cell phones and other technology have the potential to reduce transaction costs and reach remote clients. At the same time it should not distract us from continuing to engage with groups that have not yet been reached by wireless technology.

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Mobile phone companies have found innovative ways to give consumers at the bottom of the pyramid the services they need in a cheap, barebones way that takes few resources or knowledge to use. Despite efforts to tailor designs to the BOP in a similar way, the makers of cheap PCs are far from penetrating the market with the depth of cell phone technology. Novatium has recently rolled out a server-based PC that offers an answer somewhere in-between the two – the question is: how to reach the BOP?

Nova netPC is a network computer, designed on a completely new hardware platform without using any of the typical PC or thin client components. Check out “Novatium unveils pilot of low-cost PC” in the newsroom for more info.

The technology addresses a number of important issues for SMEs in emerging markets:

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The Center for Global Development (CGD) is hosting an event next Wednesday entitled Eyes beyond the Prize: Envisioning the Next Thirty Years of Microfinance. The talk will look at critical issues for microfinance institutions including: What changes will technology bring? Which new products ought to be pursued, and for whom? How great is the threat of backlash against high interest rates?

The discussion promises to be quite interesting, featuring speakers:

• Alex Counts - Founder, President, and CEO, Grameen Foundation
• Elizabeth Littlefield - CEO, Consultative Group to Assist the Poor
• Elisabeth Rhyne - Senior Vice President, ACCION International
• Damian von Stauffenberg - Founder and CEO, MicroRate
• Moderated by David Roodman - Research Fellow, Center for Global Development

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The news from the start of the World Economic Forum this year is full of stories from climate change to hedge funds to a dearth of celebrities- interspersed with the occasional obligatory discussion of poverty. Yet hints that the world’s economic and political powerhouses are starting to take the BOP markets seriously have crept in.

Of particular interest is an interview with Hector Ruiz, CEO of AMD, posted on the World Economic Forum website. Ruiz has excellent insights on how the alignment of social and business goals produce value. When asked about prospects for global growth, he pointed out the potential of reaching underserved markets:

First, we must understand that the way to unleash growth in high-growth markets is to focus on precisely how people and organizations in those markets think about and use technology…There are places in Africa, for example, where the power of a computer is limited by the viability of the local electrical grid. So we need to understand these differences and develop new devices and new business models tailored to a variety of different needs, tastes, economic conditions and cultures.

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The William Davidson Institute at the University of Michigan and the Center for Sustainable Global Enterprise at Cornell University will be hosting a conference entitled “Business with Four Billion: Creating Mutual Value at the Base of the Pyramid.” The conference brings together BOP business managers, policy makers, social entrepreneurs, academics, and non-profit leaders. The main conference topics are: understanding the landscape of the base of the pyramid; evaluating the development implications of enterprise-based approaches to poverty alleviation; and exploring the capabilities organizations need to develop successful BOP-oriented ventures.

The conference has a solid lineup of speakers, including some big names like Amartya Sen on the invited list (cross your fingers). Some of those near to Nextbillion’s heart include Al Hammond, Stuart Hart, and C.K. Prahalad. If the recent publications and research by these figures is any indication, conference attendees can expect to hear topics such as “Exploring the best leverage points for employing enterprise-based approaches and social entrepreneurship at the BoP” addressed with solid empirical analysis and excellent insights.

The bad news is that it won’t be held until September 2007 (although you can register now). If you’re feeling impatient in the mean time you can always read this or this.

The Rockefeller Foundation is partnering with InnoCentive to offer an innovative way of solving the science and technology challenges faced by the world’s poorest citizens.

InnoCentive is a privately-held company that provides a web-based service to Fortune 500 companies to tap into a global community of scientists for solving R&D problems. From the “seeker,” InnoCentive collects an annual service fee for the use of its platform and also for posted questions. In addition, InnoCentive receives a commission on awards made by the “seeker” to the “problem solver.” So, for a relatively modest fee and comparatively minor effort (to formulate the R&D question and vet solutions), “seekers” significantly increase their research capacity.

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Ashoka Fellow Darin Gunesekera has succeeded in securing deeds to a brand new condominium to more than 670 families – 4,000 people - in Sri Lanka who formerly lived in a slum. Property and regulatory system reform has gained momentum in recent years, and this model suggests significant potential for adoption by governments and landowners worldwide. Yet the challenges of replicating this successfully completed project speak to the immense difficulty of untangling the complex legal and social barriers to property regulations in the developing world.

In Colombo, Sri Lanka, the high cost of land forces low-income residents to squat illegally on public or private land. The squatter has physical occupancy of the land, but his opportunity cost is high because he cannot obtain services or invest in his house as long as he is there illegally; the landowner has legal title to the land but his opportunity cost is also high because he cannot realize the value of the land as long as the squatters are there.

The crux of Gunesekera’s Stock Market Housing Exchange is a deal in which squatter and landowner trade in their main items of value - physical occupancy and title - in order to unlock these opportunity costs. The land is sold and former squatters receive the rights to condominiums in a new building financed by the proceeds of the sale. The landowner receives the difference between the sale price of the land and the cost of the new construction. Former squatters choose the new building's design: bidding developers submit proposals and the winner is selected by vote.

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The BBC reported yesterday that Global Alumina – a Canadian-listed corporation – has partnered with the US-sponsored African Development Foundation (ADF) to structure a triple bottom line approach to mining in Guinea. The small West African country is among the poorest in the world, but it is rich in bauxite. When refined into alumina - the aluminium ore from which aluminium is made - bauxite can fetch a price that would give its beneficiaries a significant economic boost. Global Alumina’s plan would channel the spillover effects of these profits toward tens of thousands of workers in Guinea.

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The four newest organizations in the activity database have remarkably different business models for engaging with the BOP, yet they all do so successfully. Equal Exchange has shaken up traditional distribution chains and created value by cutting out multiple intermediaries and sharing risk with coffee producers. Along similar lines, TransFair USA has benefited the BOP through proving the demand for fairly traded goods. On the other hand, Population Services International has shown that rigorous application of traditional for-profit business techniques can be extremely effective for achieving social goals. MicroCredit Enterprises has mobilized private sector investment to support microfinance institutions, further illustrating new applications for old models. Check out more detailed descriptions below and in the activity database.

MicroCredit Enterprises

MicroCredit Enterprises is committed to reducing poverty by mobilizing private investment capital to finance micro-businesses of poor families throughout the developing world. MicroCredit Enterprises gears its entrepreneurial results to produce jobs, sustain micro-businesses and improve human lives.

MicroCredit Enterprises leverages the collateral assets of individuals and institutions to borrow debt capital in the United States which is channeled through overseas, locally-run, non-governmental microfinance organizations in order to make thousands of tiny business loans to local entrepreneurs. MicroCredit Enterprises' reverses the cycle of poverty in economically distressed countries using the tools of the marketplace to provide self-help opportunities to millions of impoverished women and their families.

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When it comes to marketing to the BOP, the challenges go well beyond simply finding a product or service that is useful. Successful organizations have spent years refining their models before finding an effective way to reach the poor as consumers. Those organizations that have found innovative ways to reach the BOP have been well rewarded (see yesterday’s post about WaterHealth International).

In concert with increasing attention by development practitioners, behavioral economists are turning their efforts toward the BOP market. A recent article in Harvard Magazine describes the work of one such economist, Nava Ashraf:

Ashraf is now working with Population Services International—a nonprofit organization that seeks to focus private-sector resources on the health problems of developing nations—on a project in Zambia to motivate people to use a water purification solution known as Clorin. “We can use what marketing people have known all along,” Ashraf says. “There are ways of manipulating people’s psychological frameworks to get them to buy things. How do you use this knowledge to get them to adopt socially useful products or services? It’s so practical, and very important in development, for anybody who wants to help people reach their goals.”

At a time when development organizations and businesses are increasingly finding success through engaging with the BOP as consumers, attention to this market couldn’t be more important.

WaterHealth International (WHI) has recently attracted over $11 million in venture capital from investors including Dow Venture Capital, ICICI Bank, Plebys International LLC, and SAIL Venture Partners, L.P.. WHI provides innovative business solutions to one of the world's most desperate health crises, the lack of safe, clean and affordable water for the more than two billion people who have little or no access to it.

WHI has developed a model that incorporates an innovative, cost-effective technology designed for the poor, with a franchise model to streamline marketing and distribution and assure uniform water quality and service. The model can be customized to take into account the needs of rural and urban markets for low-cost safe water. WHI invests in health and hygiene education programs as part of its normal business practices to combat waterborne diseases in the communities it serves.

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It’s a classic non-profit problem: organizations find themselves bowing to the needs of their funders rather than their constituents. And of course, there is never enough funding. NESsT is taking an innovative and holistic approach that helps nonprofits increase their long-term viability and independence by generating some of their own resources through social enterprise.

In some ways NESsT is similar to Unitus – another Social Capitalist Awards favorite (NESsT was a finalist in 2006). Using a philanthropic investment fund NESsT provides financial and capacity-building support to a select portfolio of social enterprises owned and operated by civil society organizations in Central Europe and Latin America. NESsT works to develop techniques to generate revenues that diversify the financing base and further the mission of the parent nonprofit organization.

Montgomery County in Maryland is struggling with community backlash from efforts to provide employment structures and services to day laborers. According to yesterday’s Washington Post, city officials are hoping to eventually alleviate the tension by training workers to run their own enterprises, but in the mean time negotiations for a structure continue. This tension is far from unique to Maryland – all over the world day laborers congregate to offer their services. Yet for communities that struggle with ‘not in my back yard,’ constructively engaging with day laborers can prove to be a win-win solution, as an innovative South African organization has shown.

Taking a page from Thomas Friedman’s The World is Flat, a group of business students in India are piloting a new idea to share some of the data processing wealth of India’s urban centers with its villagers. The team, Profits for People (also known as ProGreen), has developed a model whereby small rural and semi-urban cooperatives can do the data-entry and conversion services of large Business Process Outsourcing (BPO) companies at a fraction of the cost.