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There are skeptics in any field – base of the pyramid business is no different. Over the years, however, the nature of BOP skepticism has changed. At first, many questioned whether low-income, emerging markets really mattered to businesses' bottom lines and growth strategies. While there are those who still argue that BOP markets are best left to development agencies and charity, the general feeling is that business has a role to play in these markets. Instead, skeptics now ask: if business has a role to play, where are they? According to base of the pyramid champions, there are massive, untapped markets out there – so why haven't there been associated investments geared towards tapping the opportunity?

There's no simple answer. Business opportunities don’t materialize overnight; firms need time to establish relationships, map out strategy, and pilot new models – especially in the unfamiliar territory of developing economies. Still, many critics rightly point out that 4 years have passed since Prahalad and Hart introduced the bottom of the pyramid hypothesis. In a business world fixated on quarterly earnings reports, 4 years is a lifetime. Show me the money, they say.

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Three quarters of India's population lives in rural areas. Individual households in these communities tend to spend about $50 per year on primary healthcare. This is hardly enough to pay for private coverage, yet many of these underserved consumers are not reached by government programs. While the annual expenditures households in the countryside make toward health services may not amount to much individually, they collectively represent the kind of impressive purchasing power we often refer to in discussion of BOP-oriented business models.

Gram Mooligai, a recent addition to the New Ventures portfolio, recognized that the gap between poor, rural dwellers and basic healthcare could be profitably filled by a company willing to meet the specific needs of these consumers. Gram Mooligai's innovative solution is successful because it is tailored to this BOP market. The company relies on India's wealth of biological diversity to sustainably harvest traditional herbal remedies that it sells under the Village Herbs label. The herbs form part of the Ayurvedic system of healing, one with a strong heritage in India and that has a great deal of influence in many rural areas. These medicines have been provided to over 30,000 households by a network of 300 women health practitioners with prior experience in non-profit work.

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I've been busy lately, partly because I'm trying track a slew of recent BOP news stories appearing in the mainstream media.  (For readers who subscribe to the main NextBillion RSS feed, you may want to consider subscribing to the News Feed for daily updates).  Four stories set themselves apart from the group for the depth and breadth of coverage:

Acumen's New Model for Third-World Aid: BusinessWeek innovation editor Jessi Hempel profiles the New York-based investment fund and its founder, Jacqueline Novogratz.  There’s a special focus on Drishtee, an Acumen portfolio investment that's launching entrepreneur-owned and -run kiosks in rural India.  

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One World Projects was founded by Phil Smith, a pioneer in the Fair Trade world before it was hot. Originally conceived as a sustainable alternative for communities living in rainforest areas, Phil worked directly with communities to create crafts from renewable resources and then sold them to the US market.

The company has grown and changed over the years to become an established player in the Fair Trade crafts arena. Phil and his partner, Liz Wald, now work with more than 11,000 artisans in more 20 than developing countries. OWP has been working longer than most of its competitors, creating long-lasting relationships that truly transform communities.

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"It's a moment to balance the global with the local." - Dr. Abhay Bang, director of SEARCH

NextBillion’s news section contains 4 new items, all of which pertain to “risk” in relation to the BOP community. But this risk I am referring to is two-fold. These news items address the wrongly perceived notion by commercial banks and insurance companies that the poor are 'high risk.' But the flip side, the newsworthy aspect, is that now these companies are seeing opportunity instead of risk. In fact, they are making it their job to reduce the risk to the poor using multiple approaches.

Micro Health Insurance
For years, the poor were considered uninsurable, both for the barrage of risks they face and for being either unwilling or unable to pay for disasters in advance. Micro health insurance plans, such as the one provided by UpLift India Association, aim to provide quality healthcare at low premiums on a community-level scale. Undertaken with creative planning, this initiative can provide the same protection against risk for the poor that it does for the rich. In countries such as India (the world leader in this emerging field, with 5 to 10 million people enrolled in micro health insurance nationwide) where the poor usually work in informal jobs or are self-employed, they are highly unlikely to be included in employment-related plans. In addition, about one-fourth of hospitalized Indians fall below the poverty line as a direct result of their hospital expenses, according to a 2002 World Bank report. Many people take out steep loans or sell their homes in order to pay. And for the poor, losing even a day's wages while waiting in the hospital can be devastating. According to an article by The Christian Science Monitor...

Nandakumar Rajeshirke, a stone carver in India, bought coverage for his whole family at 50 rupees ($1.10) per person annually and renewed the plan for several years in a row. In 2005, his gamble paid off. Rajeshirke's wife needed a hysterectomy, a procedure that would normally cost 20,000 rupees ($446), one-third of his yearly salary. "Without insurance," he says, "I would have had to sell some things from my house or get a loan from someone at high rates." Instead of facing financial ruin, he paid 6,000 rupees ($134) total and had help navigating the long process through diagnosis, surgery, and medication.

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While it may seem cliché, I’ve always enjoyed the proverb advising that "when life deals you lemons, make lemonade." The phrase was my first thought when I saw a recent story out of Ethiopia about Azmarew Zeleke’s burgeoning coffee business; in this case, replace "lemons" with "spent mortar shells" and "lemonade" with "coffee machines". It may not have the same ring as lemons-lemonade, but you get the idea.

At a time when most of the coffee-related news out of Ethiopia has to do with a nasty trademark dispute between local farmers and Starbucks, Zeleke's story stands out for its inspirational tone. He and his six staff take spent shells left over from the 1998-2000 Eritrea/Ethiopia conflict, transforming the shells' aluminum cylinders to channel water, milk, and coffee instead of explosive powder.

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I've recently been reading through some past blogs, keeping a keen and curious eye out for activities to add to NextBillion's activity database...care to see what I found? Some very interesting, and of course worthwhile projects...

ZENUFA Laboratories - Tanzania

Zenufa, a pharmaceutical company, is settting up one of the first Tanzanian pharmaceutical plants complying with the WHO Current Good Manufacturing Standards. The project is being supported by BIO (Belgian Investment Company for Developing Countries)

Zenufa has a long-range plan to produce more innovative drugs, not yet manufactured in Tanzania, such as ARV drugs for aids patients. Zenufa will sell most of its products in Tanzania but will also target other neighbourhood countries. In addition, this plant will improve the access to essential drugs, will help reduce prices and will offer opportunities to launch more sophisticated drugs. Zenufa will create about 150 new jobs, most of them for women.

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Guest blogger Brian McBrearity will be reporting from time to time about his experiences working in Zambia on SME and financial services development. His Zambia Journal posts will appear about once a week here on NextBillion.net. This is the first in the series.

I am not a development expert, nor do I pretend to be one. I cannot say that I have spent years in the industry, or have vast amounts of knowledge. In fact, this is my first international development role, and it happens to be in the area of microfinance.

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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.

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