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It has been a couple of weeks since Professor Aneel Karnani and Professor C.K. Prahalad debated the best (and worst) ways to serve bottom of the pyramid markets here at NextBillion.net. You may recall that it started when Karnani posted his criticism of Prahalad’s best-selling book; Prahalad responded in-kind. Now the Acumen Fund weighs in on the debate:

The paper argues that the only way to alleviate poverty is to focus on the poor as producers – not as consumers – to raise their income. We, like Prahalad, believe that these are not mutually exclusive. Given the right access to choices, the poor can make consumer decisions that increase their ability to generate income and improve their overall quality of life. The fact that there is ongoing debate around this idea reinforces the need for Acumen Fund, and others in this space, to continue to find and support examples of enterprises that are successfully serving the poor.

UPDATE: Michael Jarvis has posted notes from another meeting, this one called Business Reaching the Poor. Based on his post, it sounds like the second seminar was more focused and less rhetorical than the first (although that's not saying much.

Thanks to PSD Blogger Michael Jarvis, we have a short update from the World Bank – International Monetary Fund annual meeting, currently being held in Singapore. Jarvis attended a seminar entitled "Raising the Stakes: New Frontiers for the Private Sector in Development", and has this report:

Prahalad called for consumption-led, not investment-led, development, with business providing greater choices to the poor and helping reduce the poverty penalty where the poor pay more for the same goods than the wealthy. [He] argued that boardroom debate no longer focuses on the "why" of reaching out to 5 billion poor consumers - it just makes sense - but on the “how”. Innovation is required in marketing, pricing and across company operations.

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You may have read a blog I posted recently discussing some of the problems with the Fairtrade system; this drew directly on a Financial Times article detailing the ways coffee growers in Peru pass their products off as Fairtrade while circumventing the rules. Soon after, the Fairtrade Foundation wrote back with a defense of the system and principles by which farmers are certified and monitored.

The press release answers the FT reporter’s charges that these Peruvian farmers make below the legal minimum wage, arguing that they in fact earn more than what uncertified growers in the region pay their employees despite selling only a fraction of their full crop.

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An important event is coming up for investors interested in the booming, capital-hungry markets of India, China, South Africa and other emerging economies: The Emerging Markets Private Equity Association is hosting its annual forum in London November 30th through December 1st.

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In its excellent “Have Your Say” section of the site, BBC News recently wrapped up an open debate on the prospects of Africa’s enterprising youth and the obstacles that may prevent them from realizing their full creative and productive potential. The primarily African respondents had some fascinating insights, and aside from the few that criticized a lack of initiative on the part of young people in the region, most hammered at governmental issues including corruption, bureaucratic hassles and a lack of social programs.

One Zambian contributor had this to say: “Youths have the skills but there are no jobs and no money to start small business. Skill alone is meaning less. Let the Governments start providing loans/ grants and create jobs for youths otherwise the near future will be affected. On the other hand there are few insinuations which are offering skills to youths more especially orphans who have no one to pay for their fees. Hoping the international conference taking place in Nairobi will tackle the above issues and find lasting solutions. other it will just be another rhetoric which just befits participants with allowances and other stuff.”

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James Ferguson’s critique of the development paradigm in The Anti-politics Machine focuses on work international agencies were doing in LeSotho to increase family incomes and create a larger cattle market. If I remember the book correctly, the scheme fails due in part to the assumption that if cattle were given to families, they would be able to sell them on the open market and improve their livelihoods.

It turned out that this well-functioning market never materialized due in part to the fact that men were holding onto their livestock indefinitely…. The reason? In this community’s culture, cattle were considered to be the sole property of the husband- if they sold them and brought back cash, their wives would have greater power in the form of disposable income which they could spend without their husband’s oversight. So many of the men simply refused to relinquish control over their household’s wealth.

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A Special on small and medium sized enterprises (SMEs) by the South Asia based Financial Express explores various angles of the evolving SME development movement from the very heart of the original microfinance revolution: Bangladesh. Once you start really paying attention to development trends, it’s amazing to see how one new focus can receive little to no attention and then within a span of years, emerge out of the dust as the next ‘big thing’- all of a sudden 2005 is the year of microfinance. In researching an upcoming overview on SMEs and their role in sustainable development for the Earthtrends project, I have observed something similar happening with the small business sector (not to be confused with microenterprise).

If you begin to research reports and policy papers on these businesses, which are generally defined as having between 5 and 100 employees, you see a burst of new information from the very late 1990s onward. It appears from this Financial Express spread that the government of Bangladesh is moving from policy proposals to real action- just on the heels of the Grameen Bank and other initiatives in earlier years.

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Mr Vasquez has come with friends from his village in a remote part of Cajamarca, a department in Peru’s northern highlands, to pick coffee in the Moyobamba region on the edge of the jungle…He and his co-workers work from 6am to 4.30pm, for which they are paid 10 soles a day (about $3) – better than the eight soles a day some coffee farmers pay, he says. However, the amount is below the 11.20 soles a day that is the legal minimum he should receive.

This quote is from an article in Friday’s Financial Times, and it reminded me of why we at NextBillion.net have relentlessly promoted development driven by the underserved themselves. The article explains how oftentimes what gets certified as FairTrade coffee may not be very fair after all. These programs aim to improve the incomes of agricultural workers by only buying products made by producers that pay a “living wage” (typically defined as above the legal minimum and also above regional averages).

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