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This is the conclusion of our interview with David Wheeler, author of Creating Sustainable Local Enterprise Networks. The entire interview is available here.

Describe the implications of your research for development strategies. How could development agencies use your findings to get the most impact for their grants and loans?

I approach this question with some trepidation and humility having spent most of the 1980s in the world of ‘development’. In my view, our friends and colleagues in the bilateral and NGO development agencies need a new song to sing. Most importantly they need to get over their fear of the private sector and go into a period of deep introspection about their potential future roles as enablers of human development through enterprise. Some of the most progressive ones are actually edging towards this.

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You may have noticed a recent upswing of news about small and medium sized enterprises, much of which has been picked up and discussed on NextBillion. Small local enterprise networks, mesofinance, small and large for-profit venture funds – and now an Alternative Exchange. (Via Timbuktu Chronicles)

AltX is a parallel market focused on good quality small and medium sized high growth companies...AltX plays a vital role within the JSE, by providing smaller companies not yet able to list on the JSE Main Board with a clear growth path and access to capital.

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Click to view Part 1, Part 2, and Part 3 of the interview.

What are the biggest challenges to creating Sustainable Local Enterprise Networks? How can these be overcome?

For all the great examples of SLENs that we described and that are featured on the NextBillion web site and elsewhere, there is no doubt that we are only scratching the surface of the true potential for what the UN has termed the ‘Unleashing Entrepreneurship’ agenda. The system conditions are simply not yet in place for this to take off yet. Trade rule disparities, political and institutional vested interests, the absence of property law and a whole range of cultural and economic disincentives to private enterprise get in the way.

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When our WRI team sat down to brainstorm a name for new web portal and community, it wasn’t evident at first that “NextBillion” made sense. One colleague pulled the Big Mac card: NextBillion was too close to McDonald’s signature “billions and billions served” tag line. Despite the absence of good french fries, we settled on our name thinking it conveys that the next billion customers will bring the next billion of profits – all while serving low-income communities.

Nokia may have been listening – or vice versa. According to a Wall Street Journal article, the cell phone giant has borrowed from our brainstorming session: “...Cellphone makers see great promise in the developing world, with Nokia Corp. dubbing the opportunity as the ‘next billion’ users.”

Nokia sees it in terms of users; others conceive “next billion” in terms of profit. It doesn’t stop there - what does it mean to you? Comments are open.

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Click to view Part 1 and Part 2 of the interview.

Doesn’t this model depart significantly from conventional wisdom in its hybrid character—with both for profit and non-profit components playing a significant role? What’s important about this model for larger companies, particularly multi-nationals interested in BOP markets? What’s important about it for traditional enterprise development efforts?

The model does depart from traditional strategy models predicated on ‘command and control’ thinking and economic rationalism from an individual firm perspective. So we would be hard pressed to conduct a Porter 5 Forces industry analysis on the networks we looked at, although I guess anything is possible. But we do like to think that the SLEN model is entirely consistent with the ‘resource based view’ of strategic management which is associated with Jay Barney, CK Prahalad and others. We just have to think about resources as being linked to relationships and novel partnerships as much as being controlled by the firm as an independent entity.

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This post is a continuation of an interview Nextbillion conducted with Prof. David Wheeler, who recently wrote an insightful piece on how sustainable local enterprise networks can enable bottom-up development at the base of the pyramid. The interview will conclude next week. To read the first post, click here.

What components of Sustainable Local Enterprise Networks are crucial for their success? How strong is the empirical support for this model?

We found four classes of asset growth to be common in virtually all examples of successful ‘sustainable local enterprise’ we studied: social capital (goodwill), human capital (skills and know how), ecological capital and financial capital. Where these asset classes received synergistic investment or re-investment the network grew in scope and resilience. From this perspective we can begin to understand why so much development assistance has failed in the past.

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The role of the private sector in improving the delivery of healthcare in developing countries is still being debated. Although private sector strategies may improve efficiencies and lower costs, some fear that turning healthcare entirely into a consumer service will marginalize the poor even further, or question whether or not providing healthcare to low income communities can be done profitably. The debate may finally be settled based on the success of several new business models that are blurring the line between NGOs and the private sector.

This report highlights a number of such enterprises organized into four broad categories: franchised networks that provide health services, ventures that produce health-related consumer products, enterprises that provide financial services and health insurance, and entities that are using the latest technologies to provide world class healthcare.

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WRI's latest What Works case study, HealthStore's Franchise Approach to Healthcare - Harnessing the profit motive to deliver public health in Kenya, is now available at the NextBillion.net Resources page. The 43-page case study, written by Columbia University MBA students, outlines how a hybrid public-private franchise model is serving over 400,000 patients per year for less than 1 dollar per treatment.

Public health achievements aside, HealthStore's for-profit franchises are turning a profit for their owners - enough to be called a living wage. To quote the case study, "The HealthStore model demonstrates that primary healthcare delivery is not the sole domain of the public sector. Its hybrid public-private micro-franchise model holds great potential for scaling up both within Kenya and throughout the developing world. The case shows that delivery systems are often the limiting factor in low-income and rural communities, and that the market for private healthcare services is both lucrative and socially transformative. By creating good jobs for trained healthcare personnel, HealthStore is doing its part to reverse the troubling "brain drain" affecting much of Africa. Fundamentally, HealthStore clinics are positioned at the forefront of the fight against childhood disease and death. The fact that HS clinics incorporate an innovative, for-profit franchise model speaks to the model’s potential to greatly reduce the number of children who die from preventable diseases each year."

Download the case study directly (PDF - Adobe Acrobat reader required)

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Today the South African Mail & Guardian featured an article on the launch of Soweto TV, a community television station that is designed to train and empower locals to produce news that reflects their reality. Much like, TV Rocinha that was featured at WRI's Base of the Economic Pyramid Conference in Brazil, Soweto TV reaches a largely low income market; while Soweto includes over 40% of the population in Greater Johannesburg, it accounts for only 4% of the city's GDP, source: Johannesburg's Official Website.

Driven by community derived content, special programming will focus on community health issues in the township, particularly HIV / AIDS, as a build up to World AIDS Day on December 1.

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There have been many criticisms of microfinance as an ineffective way of reaching out to the poorest of the poor. The problems cited:

-MFIs deliberately avoid the poorest whom they believe can never repay loans
-loans that would help the poorest would be too small to be profitable even for small MFIs
-loans are intimidating to the poorest poor who have no experience with credit
-MFIs often require collateral to ensure repayment--which the poorest people simply do not have.

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