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Aavishkaar, the Indian micro venture capital fund that we’ve profiled on NextBillion and in GreenBiz, has been awarded the World Business Award as one of the top ten business models of the world contributing to the fulfillment of the Millennium Development Goals.

Other winners of the award include BOP stalwarts such as Cemex’s Patrimonio Hoy and TetraPak. I’m encouraged to see private sector-led solutions featured in an IBLF/UNDP awards program – maybe the multilaterals are finally getting the hint!

Thanks to David at the always-excellent MicroCapital blog for the heads up on Aavishkaar’s win. David also does a good job explaining the ins and outs of equity vs. loans for BOP start ups. Still curious? Browse our resources on mesofinance (the gap between micro and commercial finance) via the Search page.

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The World Bank’s Development Marketplace (DM) competition took place in Washington this week. Begun in 1998, and held in DC about once every 18 months, DM is “a competitive grant program that funds innovative, small-scale development projects that deliver results and show potential to be expanded or replicated.” This year’s competition, entitled, "Innovation in Water, Sanitation, and Energy Services for Poor People," awarded $5 million to the best ideas that provide clean water, sanitation, and energy to local communities in developing countries lacking these basic services.

For those keeping score, projects focused on providing clean water won just over half the grants. Alternative energy projects – including solar, biomass, and human-powered – accounted for most of the rest, with only a handful of sanitation projects receiving funding. Africa was strongly represented, with 14 of the 30 winning projects coming from the region. The largest number of winners from a single country was India with five projects receiving funding.

While walking through the project stalls located in the World Bank’s grand atrium, though, I couldn’t help thinking that the initiatives around me were not getting the support they deserved. The World Bank has an annual budget of US $20 billion and is the largest foreign aid organization with a mission to reduce poverty. $5 million is only .025% of total annual expenditures, and most of that money didn’t even come from the Bank. Donors to this year’s Marketplace included the Global Environment Facility (GEF), the International Finance Corporation (IFC), the Bill and Melinda Gates Foundation, and the Global Village Energy Project (GVEP).

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What if the ultimate Internet access device turned out to be a phone? Yes, its already happening for a few in the rich world, but I'm talking about access for a billion people or more in the developing world, for which the driver is cost, not convenience. Despite all the efforts to spread Internet access, it is the mobile phone that has so far gone farther and faster into developing countries.

Cell phone services are very profitable, but they are not cheap for users. Use of text messaging, a data service that costs less than voice, has exploded where it is available. Now three disruptive technologies working together may bridge the divide even more effectively: fixed wireless networks (WiFI and WiMax) that are optimizied for data and are cheaper than mobile wireless; Voice-Over Internet Protocol (VOIP), that uses bandwidth efficiently; and WiFi phones (or mobiles with WiFi chips added on) that can provide local "walk-around" service within a local WiFi network.

This combination, described in more detail in a work-in-progress paper called A New Model for Rural Connectivity, can make local-to-local calls almost free. And phones don't require tech support or pose literacy and language barriers--other aspects of the divide. Yet they can provide a growing list of phone and voice-based Internet services. Check out our thinking, give us the benefit of your comments and criticisms, help us update the list of devices and applications that support this model. And watch for updates.

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The BBC reported last week about a new device being marketed to purify water in developing countries. The LifeStraw looks like a large plastic flute, and contains internal filters that remove bacteria from the water as it is drunk. The device is priced at around $3.50, and is designed to purify 700 liters over the course of six months to a year.

In spite of its initial cost ($3.50 is still expensive to someone making $1 a day), the device is still a welcome addition to other water purifying devices now coming to market. Apparently, not everyone agrees. The BBC article included a critique of the device by Paul Hetherington, a spokesman for UK charity WaterAid.

“The problem is that many people live very far away from their water, often walking a total of 20km or more carrying a weight of 25 kilos. The LifeStraw isn't going to prevent that long journey, even if it does improve the water they drink. ” He continued, ”It only costs a charity like WaterAid £15 per person to provide them with water, sanitation and hygiene education, which, provided there is decent water resource management in the country, will last them a lifetime. At that rate, $3.50 is expensive.”

Comments like this increasingly frustrate me, and I’ve seen them made repeatedly by sector-specific non-profits who believe that it’s pointless to try and solve one problem if efforts are not simultaneously made to solve another. It’s unfortunate that some organizations think that their solutions are the best and others should be disregarded, but that is precisely where development through enterprise adds value: it’s not an either/or proposition.

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Yaks for development? Withhold judgment and read on – this BOP project has legs (4, in fact). NextBillion ally Carol Chyau doesn’t think yak jokes are funny – with a partner, she’s behind the newly-formed Yashmere and Cheese for Change for-profit social enterprises. The Harvard Crimson reports:

...they want to use innovative business solutions to tackle development challenges. To improve living standards in rural communities in western China, they have launched a non-governmental organization, Ventures in Development, with two for-profit subsidiaries designed to leverage one of the region’s most abundant local resources—13 million Tibetan yaks.

Ventures in Development will work with 4,000 Chinese families implementing base of the pyramid strategies in rural China. One of the for-profit enterprises will market yak down fiber to the international knitter’s market – a BOP cashmere (yashmere) of sorts. The other, meanwhile, will turn yak milk into gourmet cheese. Chyau and her business partner, Marie So, have dubbed that enterprise “Cheese for Change.”

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Every year, smoke from traditional stoves fueled by wood is responsible for 1.5 million deaths. Sub-Saharan Africa and South East Asia are particularly affected. Now a new report from the World Health Organization makes the business case for investing in cleaner household fuels. The report claims that $13 billion dollars per year would halve the number of people worldwide cooking with solid fuels by 2015, resulting in a payback of $91 billion dollars per year. This seven-fold return on investment is a result of savings gained not only from less illness and death, but of less time spent ill, collecting fuel and cooking.

"Making cleaner fuels and improved stoves available to millions of poor people in developing countries will reduce child mortality and improve women's health," said Dr LEE Jong-wook, WHO Director-General. "In addition to the health gains, household energy programmes can help lift families out of poverty and accelerate development progress."

The report concludes, “With more time available, children would do better at school, while their mothers could engage in childcare, agriculture or other income-generating activities as a way to break the vicious cycle of poverty.”

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Efforts to preserve the Amazonian rainforest have always been rife with plenty of controversy.  This is either attributed to the fact that environmental protectionism is often seen as a blow to economic growth or because well-intentioned businesses end up exploiting local residents to green up their image.  It is this precarious tightrope that Rainforest Expeditions (RFE) walks between engagment and exploitation, between preservation and profit.  This week's featured New Ventures entrepreneur has rapidly grown its eco-tourism business by offering adventurous clients a quality experience of full-immersion in the Peruvian Amazon.  Its sustainable practices ensure that it is not only providing the vacation of a lifetime for its current customers, but for future generations as well.

 

While RFE is poised to expand its operations rapidly in the coming years, this will not come at the expense of the people living in the region or the natural habitat.  In fact, residents welcome the socially-minded company as it creates a truly mutual relationship between itself and the community.  In a recent interview, co-founder Kurt Holle explains that each eco-lodge is fully owned by locals, who provide labor and extensive knowledge of the Amazonian wildlife.  RFE provides the management expertise and financing necessary to make operations run efficiently, creating a truly equal partnership for both stakeholders.  As the company continues to attract investment and draw in travellers, it proves that saving the rainforest and growing profit margins can go hand in hand.

It’s easy to overlook food when thinking about BOP business and strategy. Food and agriculture often lack the “wow” factor that comes with microfinance, technology, or even innovative health models. We brush by it at our own peril, however – according to available data, food accounts for over 50 percent of a BOP household’s annual expenditure. By comparison, spending on information technology and communications might be 5 percent, at best.

With that in mind, I recommend NextBillion friend and ally Emeka Okafor’s recent guest post at Worldchanging, Extending the Garden. He suggests small, profitable plots as a sustainable route to full stomachs and healthy ecosystems. If that doesn’t hook you, how about this: read Emeka’s post to learn about the Giant African Land Snail and the Nigerian Dwarf Goat.

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Optimists often cite microfinance as a "development success story," but realists know the truth - it suffers from high interest, misrepresentation of repayment rates, poor risk management, and insufficient scale. (More on the "dirty little secrets" of microfinance at the excellent MicroCapital blog.)

Similar unrequited optimism is often true for information technology - there's a lot of talk about the benefits of computers, PDAs, cell phones, the Internet, etc. when it comes to development. Take off the rose-colored glasses, however, and you'll notice a slew of defunct telecenters and failing IT-for-development projects, where the absence of business plans/models couldn't overcome the innovative application(s) of technology.

Don't get me wrong - there ARE a lot of legitimate success stories in both microfinance and IT for development. But I think each sector could learn a lot from the other in order to scale up successfully and attain the kind of development outcomes to which they are often attributed.

This intersection of microfinance and technology hasn't been explored enough, but it got a start last Tuesday when about 50 people attended a Microfinance Technology Fair organized by USAID, Chemonics, and QED here in Washington. Attendees saw first-hand how technology is being applied to microfinance. Demonstrations of a cell phone transfer system (G-Cash), hand-held POS device (RTS), PDA loan software (PortaCredit), and an open-source MIS (MIFOS) highlighted the afternoon. (Full disclosure: the organizers were kind enough to invite yours truly to help introduce these presenters.) While I loved seeing the technologies in action, I have some reservations about their ability to take microfinance to the next level without additional work:

• MFIs getting loan officers to use technology (like PDAs or POS devices) probably isn't worth it, especially when you have to re-train the loan officers and loan groups to use the technology. The cost of hardware, software, support, and training is probably greater than the savings gained from increased efficiency and transparency (this was a primary conclusion of our case study on the Remote Transaction System.)
  

• Cell phones are probably the best technology for MFIs and banks to use. Phones offer value as a communication device as well as a financial instrument. BOP communities increasingly have access to cell phones. They know how to use them, and trust the companies and agents who sell pre-paid minutes. Cell phones are easy for "agents" - shop clerks or gas station attendants - to use, expanding access without building freestanding networks of bank branches or loan officers. (SMART Communications does this well.) These are enormous advantages over POS devices, PDAs, and even computers.

• All technology platforms for microfinance, cell phones included, face major obstacles in terms of getting cash into the electronic system. Microfinance clients often make money in the informal economy, and cannot use payroll direct deposit to get their assets into the electronic banking system. MFIs looking to use technology must work on electronic deposits in addition to their ongoing success on the withdrawal and transfer side of things. (Gautam Ivatury of CGAP spoke eloquently about this problem).

I came away from last week's seminar very impressed with G-Cash, PortaCredit, the Remote Transaction System, and MIFOS. My comments here are not meant as a downer - rather, I hope that the microfinance and IT-for-development communities will put aside the cheery rhetoric and work together. There's potential for real outcomes - BOP communities with access to real financial services using next-generation technology - but only if the optimists want to roll up their sleeves and get down to work.

The Inter-American Development Bank's Multilateral Investment Fund (MIF) has just launched a web site dedicated to base of the pyramid strategies. Curious? Check out the site:

This is not about providing the same, existing products and services that have been developed for the top of the economic pyramid and simply marketed to the poor, but rather a new business approach that seeks to develop new products or services adapted to the needs of the BOP at an affordable price.

To undertake this initiative, MIF could partner with business associations, corporations, specialized NGOs, public sector agencies and universities that are involved in Base of the Pyramid and who have a proven track record of experience in this area.

(Disclaimer: WRI has partnered with the IADB and the MIF in the past to organize BOP conferences in Brazil and Mexico, and we are currently working with them to research the size and scope of the BOP in Latin America)

Thanks, Luiz!