One of my regular news feeds brought this item to my attention, and it struck me as perhaps a meaningful watershed.  Red Hat, the Linux software/middleware company, just announced last week the launch of its "Global Desktop" -- enterprise software at affordable prices.  Red Hat has been working with Intel to maximize performance on low-cost, Intel-based desktop PCs.  It has also been working with One Laptop Per Child to simplify the functioning of highly-sophisticated desktop suites.  Interestingly, Red Hat seems to have navigated the sometimes hostile relationship between Intel and the OLPC people for the purposes of this project.

For the open software folks, you'd think that the emerging economy markets would be a high visibility target, but the economics of their businesses are perhaps even more demanding than the proprietary software solution providers.  The development, then, of specific solutions for low-income consumers represents to me at least a significant shift in the center of gravity of the overall markets.  Admittedly the customers for this software are at the top of the BOP market, if not above, but still, it's a great sign.

Jane Nelson, who wears many hats (IBLF, Kennedy School, Brookings), spoke yesterday at a meeting of the Global Poverty Roundtable at the GlobalWorks Foundation here in Washington. Jane offered a wide-ranging, yet concise summary of all of the ways business can engage in development. Jane said [and, Jane, I beg your forgiveness in advance for this shallow and truncated version of your presentation] that the activities fall in three general categories: core business activities, competence-led philanthropy, and influence on the enabling environment for business.

On Core Business: Two broad areas: First, practice responsible business (human rights, environment, labor, compliance, accountability, etc); second, increase economic opportunities -- innovate for new markets. How? By leveraging global value chains, increasing local content purchases, creating business linkages, creative financing mechanisms which draw on core businesss knowledge and skills, and perhaps most promisingly, through more and more effective collective business initiatives -- industry-wide efforts that both set standards and create healthy and friendly competition to succeed within these new standards.

On Competence-led Philanthropy: Jane's basic observation is that even though business philanthropy is a tiny part of post-tax income, it mounts up and quickly exceeds the resources of even the multi-lateral development agencies. (Specifically, she surveyed the philanthropic budgets of 50 Fortune 500 companies and found them equal, in sum, to the total budget of UNDP). Just re-balancing where money goes, and increasing attention to funding opportunities in emerging markets (that is, giving more money where goods are created and where goods are actually sold) will have big impacts. Flagship programs are good tools to unite a highly-dispersed MNC's efforts, create real brand value, and allow for more effective philanthropy. Mobilizing volunteers -- from one's own employees to affinity groups external to the company (e.g., diaspora communities, organizing remittances for development goals) -- can be effective. For the record, the term "competence-driven philanthropy" is something that I've only heard from Jane. Is it a new term?

On Business' Role in Public Policy: While businesses are acutely aware of crossing a line -- from "statesmanship" on policy to parochial lobbying, there are good examples of how to do it, such as the Extractive Industries Transparency Initiative. Weak governments and institutions present particular challenges (a point later amplified by others - notably Bruce McNamer of Technoserve and Fred Tipson of Microsoft -- who pointed out the severe "macro" problems that dwarf the "micro" efforts of any one company). Business can be helpful in giving support to governments in achieving the already agreed-to goals for development funding, e.g., the G8's Point 7 commitment for ODA.

Lots of food for thought here. Thanks to the Global Poverty Roundtable to hosting, and to Jane for her excellent remarks.

I attended an all-day workshop at the IFC yesterday on their Grassroots Business Initiative (GBI). A half dozen of the Initiative's enterprises from Africa, Asia, and Latin America, and 30 or so GBI partners also attended, along with their program staff. The meeting was conducted under "Chatham House" rules, which means that I can't report on who said what, but allow me to share with you a few general observations, and a bit about one talk.

First, no surprise here, it's remarkable how many of the issues that are of concern to these quite small enterprises (and intermediaries helping them) are exactly those that big organizations must contend with —finding and succeeding in markets, managing for growth, balancing objectives. It's no solace to these small, struggling social entrepreneurs, but things don’t get easier when you get bigger.

Second, there was general agreement that the big issue for these fledgling enterprises is (lack of) access to some hybrid form of capital combined with technical assistance and business mentoring. Solving this problem is critical, not just for the businesses, but also the multilateral development banks who are losing — no, have already lost — their central role in financing big enterprises; there is so much private capital sloshing around the world that the MDBs need to go downstream, and fast. These are, of course, exactly the issues we are focusing on inside DTE for the foreseeable future (more on that as activities unfold).

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The Next 4 Billion includes a whole chapter on a topic for which we were unable to present a single, real number from our analysis of household surveys. Not surprisingly, the chapter is short. So, why did we include it, if we couldn’t report any numbers? And why do we recommend it to you?

Well, as these pages have shown numerous times, we believe that financial services are a breakout sector - for the BOP, for business, and for the development community. For the BOP, access to financial services means new jobs and income; the creation of formal identity (perhaps for the first time); the reduction of physical risk (it’s dangerous to carry cash on your person, or store it in your home, in many parts of the world); the economic empowerment of women, perhaps the single most critical element of development; among other positive impacts.

But wait, there's more! Special for the readers of NextBillion, something you won’t find in the chapter (we ran out of time and space….) The Inter-American Development Bank created for us a set of two graphics that represent why businesses need to look at the BOP. Here they are:

What these maps are saying, to me at least, is that there is a huge, unmet need waiting for smart businesses to serve. A lot of money is going places where there are no financial institutions. Were these not poor people, you can bet that this market opportunity would have been acted upon long before.

For business, the increasing understanding that the poor need more than microcredit opens their eyes to what I believe is likely a trillion dollar market at a minimum. Why a trillion? Just the tracked country-to-country remittances are approaching $350 billion; most informed observers are confident that this underestimates the between-countries market by as much as 50%, which gets us around half a trillion.

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Let me add my thoughts to Bal Joshi's fine post of 12/6 and AnnaLee Saxenian's reply of 12/8. I couldn't agree more with most of the points made in both. The notion of remittances as a development platform is just right, in my view, and Ms. Saxenian strikes a fair balance on "good" and "bad" remittance impacts. When remittances become just another form of dependency, they get in the way of real development. I take note, however, of what might be a few hidden traps buried in Bal Joshi's post.

Bal offers three primary justifications for them. First, it reduces costs; second, it increases sender control, "lowering waste and misuse"; third, it offers "the sender more options" for productive use, such as savings, build-up of capital, etc.; and fourth, it fosters creativity in the pipeline. My concern comes in points 2 and 3, as both are, to my perhaps over-sensitized ears, reminiscent of the "top-down" and "north to south" control that has so plagued development policy in the past. A considerable amount of criticism of the BOP agenda (particularly as relates to Prahalad's enthusiastic portrayal of creating the capacity to consume) has revolved around "misuse" of this new-found buying power. This approach can, and often does, take on a moralistic tone; however well intentioned, this kind of guidance is usually counterproductive.  Economic empowerment is all about choice, and yes, some of the choices will be less than fully efficient, or productive, or even healthy.

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NB's Chapel Hill NC correspondent, Jacob Kramer-Duffield, has sent an interesting job posting our way.  Jake, a former sometime WRI staffer, and now a PhD student at UNC's School of Information and Library Science, keeps close tabs on the goings-on at Google.  Google.org, the company's hybrid NGO/for-profit philanthropy/investment facility, is seeking candidates for their Global Poverty & Sustainable Development programs.  As Google describes it, the new team will work "to innovate, establish and support sustainable models for global development" using "market-based, entrepreneurial approaches that promote sustainable economic growth and empowerment."  It is a "poverty alleviation strategy" combined with an active "portfolio of grants and investments."  Hmmm...

NextBillion has spoken with 50x15 project management, and has been told that the press report of the project's demise is not correct. AMD representatives claim that the report was generated due to a misrepresented SEC filing. AMD says that the PIC will continue, 50x15 is still a goal, and there are other products and projects in the pipeline. Perhaps AMD will put out its own press release to set the record straight.

Oxfam International has just published a report, "In the Public Interest: Health, Education and Water and Sanitation For All." One can hardly dispute some its assumptions - it's a scandal that people go without basic services, the money is theoretically there to solve problems, aid policies are often misguided, local governments have often proven incapable, incompetent, corrupt and uncommitted to their own citizens' welfare.  But one can argue with their solution set...it's like going back to the future.   

As I read this report, the private sector is seen as the enemy at worst and a wild beast to be caged at best, the profit motive as antithetical to welfare, and more aid as the solution.  The past and current failures of the public sector in the developing world to make headway in solving these problems for billions of people across all regions are acknowledged but then largely ignored.  The Oxfam doctor's prescription is to throw more money at these self-same entities - but more consistently and in larger amounts. 

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Of the MNCs with which we have worked, none goes to greater lengths than Vodafone to create opportunities to listen to its "stakeholders" - and the company counts us as one.  I attended such an occasion in New York Wednesday evening, linked to the publication of a new Vodafone report, "Economic Empowerment Through Mobile," (pdf) to which we contributed a piece.   Cynics will say that these gestures are mere flattery, or worse, bribery, designed to disarm potential critics, and no doubt many companies do just that, but in the case of Vodafone, I don't buy it.  Vodafone understands what it takes to generate innovative ideas - and it's not gathering only like-minded folks to reinforce everything they already know.  In my experience, the company actually listens hard to what outsiders say, and they try to respond.  As Vodafone is a big company, and there are lots of competing interests and priorities - and the demands of the market (Vodafone has had a few bad years, and it has slowed them down) - but, in the main they are inclined to be responsive, and that puts them in a class of company with few peers.  And by the way, read the report, it's good, if we must say so ourselves.

Continuing the social butterfly circuit, I returned to DC to attend yet another soiree related to the release of the full study of Wizzit, the South African BOP-focused cell service on which we have previously reported, that is contained in the aforementioned Vodafone publication.  This study, "Mobile Phone Banking and Low-Income Customers: Evidence From South Africa", (pdf) was done in cooperation with CGAP and UN Foundation.  CGAP's Elizabeth Littlefield made it abundantly clear why mobile phones are the platform of the future for all manner of BOP-related activities, including financial services.  It's just in the numbers - try 20 million total existing outlets worldwide for financial services as traditionally defined, and 2 billion mobile phones today, with the number rising by the hundreds of thousands a day, mostly from growth in emerging economies. 

Elizabeth Economy and Karen Monaghan write in the International Herald Tribune (The perils of Beijing's Africa strategy) that China is quickly creating blowback in Africa despite its purportedly "hands off politics" approach.  You would be hard-pressed to design a more anti-BOP strategy than much of what China is doing - obsessively chasing resources for China's own benefit, without regard for the environment or the interests of local populations; bringing in its own workforce so little money even reaches the citizens of the country where they are operating. China clearly needs some fast education on sustainability and corporate responsibility. Chinese leaders, we're an NGO....and we're here to help.

Let me share with you my state of mind after finishing a careful reading of the full World Bank report on Latin American remittances, Close to Home: The Development Impact of Remittances in Latin America. On the one hand, it is a closely reasoned, and (as far as this non-economist can determine) a fair-minded analysis of the data. I would expect no less from the Bank, and I applaud the authors.

On the other hand, it leaves me unsatisfied, hungry for more. Why? The conclusions and recommendations are appropriate to the evidence examined, but as the quite extensive and prominent news and analysis coverage of this issue suggests, there is an appetite for more, and one wishes that the authors had not felt so constrained, but rather, had taken a more expansive view of the potential for the study. But, for whatever reason, that was not to be, and one can't really criticize them for "staying within the lines."

That doesn't mean we have to. So, this post is a call to our readers to make the sort of suggestions that the authors of the Bank report did not. Let's design the "manna from heaven" which the Bank does not find today. I for one accept the essential Bank conclusions that countries should continue to encourage the deepening of financial services to recipients, to increase competition among remittance service providers in order to lower costs, and to improve the "doing business" environment. All these are good, but in your view, what are the additional big ideas that are appropriate to the need?

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Today's New York Times has an editorial "Wiring Development" that, to my mind, picks up on what is really important from the IADB remittance study, "Sending Money Home", namely the opportunity for Latin American banks to turn remittance recipients (and senders, too) into real, creditworthy customers, and to add a substantial part of the money stream into productive working capital, deepens the financial sectors of recipient countries, and begins to provide the financial literacy so critical to poverty alleviation. After a spate of mis-directed coverage, it's gratifying to see that the newspaper of record sees the positive big picture.

I came in today thinking, "wow, what a range of takes on the new World Bank study (pdf) on Latin American remittances released yesterday." We reported last week on the IADB remittance report and the reaction from CNN and Lou Dobbs, in which an immigration and values debate provided the frame for a fundamentally fact-based study of remittances volume. The same thing is happening with the World Bank study. Both FT and Wall Street Journal have published articles in the past 24 hours. The Financial Times emphasizes the negative parts of what is essentially a mildly positive study by the World Bank - namely that remittances aren't 'manna from heaven' nor a substitute for sound macro- and micro-economic policies in the recipient countries. The Wall Street Journal takes the negative impacts downstream, and with their usual good reporting, talk a lot about economic dependency and crime that, they suggest, are results of remittances.

In my view, these press reports are serving to cloud, not clarify the issues. Remittances are not the cause of economic migration, brain drain, economic dependency, or crime. All these predated remittances, and the press is setting up straw men to knock down. Nobody I know of is claiming that remittances are a panacea or cure-all, only that they exist, they are large, they are important both to the senders and recipients, and they have development potential that is under-explored.

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I attended the press conference Wednesday, at which the new findings on remittances. Interviews with 2500+ migrants in the US, the IADB (research by Bendixen & Associates) give us a statistically valid picture of the dimensions of US-LAC remittances, and the IADB concludes that the number is now around $45 billion dollars (up from the 2004 number, $30 billion), averaging $300 a month (up from the previously reported $200/month), and representing about 10% of the estimated $500 billion in income being earned by the 17.2 million adult LAC-region immigrants. That most of the senders and recipients are un-banked was described as an unrealized business opportunity, and as defining a policy agenda for the IADB.

What struck me in the IADB's press release was the emphasis on the economic benefits of the migrant workers to the US economy, the fact that 90% was staying in the US and being spent here, and the "values" in evidence by the migrants' "strong commitment to family and community," as IADB President Luis Alberto Moreno put it during the press conference. The reason for this interesting formulation was readily apparent when Don Terry, head of IADB's Multilateral Investment Fund (MIF), which has spearheaded the tracking of remittances since 2000, appeared later on the Lou Dobbs show on CNN. Here's the full transcript.

Their teaser framed the story:

It was reported last week that Nicolas Negoponte and Libya reached an agreement to supply 1.2 million of the $100 computers to Libyan schoolchildren for $250 million. I was intrigued by the agreement, the math for which points up one of the problems with the effort - the computer itself may ultimately cost $100, but the infrastructure necessary - pipe, training, deployment, content etc. - takes a lot more money to make the deployment useful in local conditions. Will the Libyan money actually materialize? Who knows?

Myself, I would tend to exercise some caution when dealing with Col. Qaddafi and his bureaucracy. And the extra $130 million is just the down payment. But that is no argument against. It takes money to build infrastructure, and there will be broad benefits when a more robust IT network covers Libya. Rob and I argue whether OLPC is a "real" business. I say that $250 million is money, and even if the government is the buyer, there are lots of companies making lots of money selling things - real and imagined - to governments. Selling to governments is a business model, and if you can jumpstart the production - get the costs down - by selling to them, go for it. As my last post on this topic pointed out, the real benefits of the OLPC may accrue to all of us and the industry in general. We'll see.