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Multinational companies (MNCs) have a significant role to play in private sector strategies aimed at benefiting markets at the base of the pyramid (BOP). From a development perspective however, the role of local actors, especially indigenous small and medium-sized enterprises (SMEs), may be equally or perhaps even more important. There is now a growing body of research on the value of local enterprise networks or market-oriented ecosystems that - in addition to SMEs - include micro-entrepreneurs and NGOs; that often include local communities, cooperatives, and microfinance organizations; and that sometimes include donors, government actors, and large corporations. This local enterprise network approach holds the promise of delivering a broad range of sustainable outcomes that benefit the world’s poor.

Professor David Wheeler of York University analyzed this new approach in his piece Creating Sustainable Local Enterprise Networks, recently published by MIT’s Sloan Management Review. I spoke with Prof. Wheeler about the model, and will be posting his responses to my inquiries over the next two weeks.

A.H.: Much of the discussion about private sector approaches to development and to serving the BOP has focused on large multinational companies. Your work focuses on the role of smaller indigenous companies in developing countries, so-called small and medium enterprises, and suggests that they have an equal or even greater role to play. Could you describe the unique role of SMEs—and of local networks--in building economies and in poverty reduction?

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This is the final post in my series on financially sustainable models that provide high quality healthcare to the poor. A compilation of all posts will be available to download as a PDF next week.

Healthcare for the poor is typically regarded as substandard, and it sometimes is. But a number of new initiatives are turning this assumption on its head, proving that affordable world class healthcare can be affordable to markets at the base of the pyramid.

Hi-Tech Healthcare Delivery

Hardly a day has gone by recently without a flurry of news stories about the bird flu and the inevitability of a human flu pandemic. If the locations of recent outbreaks are any indication, this pandemic will likely start in a rural developing area where healthcare and infrastructure is limited, and then spread quickly throughout an increasingly connected world.

One company has pioneered an approach to stop such a pandemic before it starts. In Peru, the for-profit Voxiva has developed and implemented a technology platform that enables medical professionals to collect health data in real-time and communicate with one another in order to effectively monitor and respond to disease outbreaks. In such a situation, active surveillance is critical to early detection. The Voxiva platform utilizes phones and the Internet to ensure that appropriate action is taken, enabling local communities to use scarce resources effectively.

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WorldChanging's Nicole Anne Boyer was able to attend the 7th Triple Bottom Line Investment (TBLI) conference in Frankfurt a few weeks back. Her thorough reporting from the event is a must-read for folks interested in socially responsible investment and its associated spin-offs (including "meso-finance" for BOP firms).

Boyer reports that "Scale seems to be the word of the day. Most conventional bankers won't look at anything -- a product idea, an innovation, a service -- unless they can see how it can scale. No mass market, no mulla. This puts at a serious disadvantage innovations which may not have an obvious scaling potential, but still deliver much value at the local level. How do we unlock these industrial age production mindsets? How do we overcome this dilemma?"

That's a good question. We're often asked how to scale up a good BOP business model out of a region, or country, to make it work for underserved populations worldwide. There isn't a quick answer - and perhaps there's even more to the question, as Boyer notes. How important is scaleability when it comes to reducing poverty?

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This year’s Net Impact Conference, held at Stanford’s Graduate School of Business was by all accounts a huge success. Here are some quick stats:
• Over 1,400 participants from schools across the U.S. and internationally
• Over 200 speakers on approximately 75 panels
• 6 keynotes including: Al Gore, Generation Asset Management; Gary Hirshberg, Stonyfield Farm; VJ Joshi, HP; Judy Vredenburgh, Big Brothers Big Sisters; Greg Steltenpohl, Adina World Beat Beverages / Interra Project; and Kellie McElhaney, UC Berkeley – Haas.

Day One: The event kicked off with a strong keynote from Al Gore, who discussed the importance of integrating sustainability into business practice. Drawing from his experience with Generation Asset Management, he likened current risk management to the visible spectrum; noting that while we continue to assume that the narrow band of financial information used to value companies is sufficient, we can no longer afford to ignore the broader spectrum of global trends.

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This post is part of my continuing series about financially sustainable models that provide healthcare to the poor.

In developing countries, there is a strong correlation between access to finance and access to healthcare. Getting the poor to bank, and bank profitably, could push rural finance and healthcare past a tipping point: from philanthropy with a hint of business logic to real commerce with a hint of compassion. To test this assumption, a number of new initiatives are using private sector strategies to increase the availability of both.

One such model in Africa is piloting an approach to health insurance arising from principles of solidarity and mutual assistance. With support from USAID, groups called Mutual Health Organizations (MHOs) are being set up in 11 countries to provide affordable general and reproductive healthcare to women. Their structure is similar to microfinance self-help groups (SHGs), where women make monthly or semi-annual contributions that are pooled to cover future expenses of its members. The Organizations also leverage their combined bargaining power to negotiate better rates for a predetermined set of health services provided by affiliated clinics and hospitals.

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Has microfinance finally gone mainstream? The fact that the Economist devoted 10-pages to a survey of the industry this month convinces me that maybe it has. Through seven different pieces, the magazine provides both a good history of efforts made over the past three decades to bank the poor, as well as interesting prediction on where the industry is headed. In a word: commercialized.

According to the article, “Local banking giants that used to ignore the poor… are now entering the market. Even more strikingly, some of the world’s biggest and wealthiest banks, including Citigroup, Deutche Bank, Commerzbank, HSBC, ING and ABN AMRO, are dipping their toes in the water.” Fantastic!

But why the sea change? Why now? Above all, it seems to be an industry shift in mindset – from seeing the poor as charity to seeing them as customers.

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As I discussed in Tuesday’s post, there are an increasing number of businesses producing health-improving consumer products that are affordable to customers at the base of the pyramid. Today, I will highlight a few more examples, including specialized food items meant to improve nutrition, and inexpensive filters that reduce water-borne illnesses.

Nutrition

More than 350 million children and adults worldwide are suffering from malnutrition, a problem which accounts for more than half of child mortality in low-income countries. In addition to making a person more susceptible to illness in general, a diet bereft of proper nutrients can result in otherwise easily preventable diseases. For example, a lack of iodine and iron - normally found in foods like meat that are often too expensive for the poor to buy - severely impacts child growth and intellectual development. Vitamin A deficiency is also the main cause of preventable blindness.

Seeing a market opportunity, two of the world’s largest consumer goods companies have developed products aimed at combating poor nutrition. Proctor & Gamble (P&G) has created NutriStar, a powdered health drink designed to help kids grow better while also boosting their mental alertness and performance, while Hindustan Lever Limited (HLL) has developed a more stable iodine for salt that is effective in preventing iodine deficiency disorder.

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In conjunction with NextBillion.net’s series on Healthcare Delivery at the BOP, Rob Katz recently spoke to Michelle Fertig and Herc Tzaras, authors of the forthcoming What Works case study: “Franchising Healthcare for Kenya: The HealthStore Model.”

Michelle Fertig and Herc Tzaras will receive their Masters in Business Administration from Columbia Business School in 2006. Earlier this year, Michelle and Herc traveled to Kenya to conduct field research on a company doing innovative public-private healthcare delivery work at the BOP. HealthStore’s mission is “to improve access to basic health services and essential drugs for children and their families in the developing world.” Recognizing that ineffective distribution systems often prevent essential medicines from reaching BOP communities, HealthStore has established a network of pharmacy franchises reaching all the way down to the base of the pyramid while simultaneously providing living incomes for their nurse-owners.

1. What is the most innovative element of HealthStore’s model, in your opinion?

The combination of a for-profit franchise network with a non-profit central franchisor is the key innovation. The HealthStore Foundation (HSF) is non-profit and so there is no incentive to "cheat" the franchisees. Its job is to set the franchisees up for success, and it does this through relationships with the government, a non-profit drug distributor, regional support offices, and on-going training programs. Entrepreneurs are not only given the necessary support to earn a sustainable income, but they also gain the satisfaction of managing their own business without handouts. These local entrepreneurs are empowered to succeed in an environment where they are surrounded by poverty and despair. The communities in which they operate benefit because they are given access to essential, affordable medicine and because can be inspired by the success of the franchisee.

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The International Finance Corporation and the Financial Times are sponsoring a research paper competition for 2005-2006. Top prize is US $30,000; all told, $90,000 will be awarded. Your 4,000 word (max) research paper should "add to the global discussion on private sector development and economic growth by providing new and innovative analyses, perspectives, or ideas."

Those thinking of submitting old undergraduate or graduate work, beware: the judging committee won't go for that. Trust me - I know one of them.

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An ounce of prevention is worth a pound of cure. The old adage is particularly applicable to healthcare in developing countries, where millions of people die or get sick each year from illnesses that are easily preventable. The financial costs of these illnesses far outweigh the minimal costs of prevention, yet even these expenses are currently out of reach for the poorest. Today however, a number of new initiatives are seeking to address this injustice by producing consumer products that prevent diseases and are affordable to the masses.

This post is a continuation in my series about Healthcare Delivery at the BOP. In my previous post, I highlighted examples of enterprises that make use of the franchising business model to provide healthcare to the poor. In this post, I will look at consumer products that help prevent respiratory diseases and malaria. As always, I encourage you to post your comments and questions.

Indoor Air Pollution

More than half of the world’s population relies on biomass (dung, wood, or crop waste) for their cooking needs. Although they are inexpensive, burning such solid fuels indoors without chimneys or proper ventilation produces a range of harmful indoor air pollutants, including small particles that are up to 100 times acceptable levels. This pollution currently results in 1.6 million deaths annually due to pneumonia, chronic respiratory disease and lung cancer. With populations growing and alternatives such as kerosene or liquid petroleum gas becoming more expensive, the numbers of people relying on such fuels – as well as the negative health effects - are set to grow.

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