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If I’m not scouring obscure newspapers for BOP related stories, staring aimlessly off into space, clipping my toe nails, or thinking about integrating a word like phallogocentrism into a blog about microfinance, then chances are I’m adding new activities to Nextbillion’s activity database.  If you have not checked it out already, I would suggest that you click here and learn about some off the most innovative enterprises tapping into BOP markets around the world.  But if you’re like me and find it difficult to click on a link, then you can just continue reading this post, which describes some of the latest BOP enterprises doing work in Africa.  

Solardome SA
Solardome SA is part of the solar revolution sweeping over Africa.  On its website, Solardome describes itself as an independent solar hot water system manufacturer that also specializes in solar energy systems. Its products include solar powered cookers, fridges, lights, water pumps, and batteries. Although the company is located in South Africa, many of its products are exported to surrounding countries, including Mozambique.

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The BOP Learning Lab, an on-the-ground research project run through Cornell’s Center for Sustainable Global Enterprise, will soon have an Indian arm. NextBillion ally Reuben Abraham (photo) reports on his Zoo Station weblog:

I have a joint appointment with the Cornell Center for Sustainable Global Enterprise and the Indian School of Business (ISB) in Hyderabad. I am heading up the process to set up the Center in India as a joint partnership between Cornell and the ISB. Under the umbrella of the center, we are also setting up a Base of the Pyramid Learning Lab and a Sustainable Innovations Lab. The entire project is headed up Stuart Hart at Cornell, who co-authored the famous "Fortune at the Base of the Pyramid" paper with C.K. Prahalad.

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How do you determine a country’s commitment to international development?  I wouldn’t know where to start, but thankfully, researchers at the Washington, DC-based Center for Global Development have published an index to help us sort it out.  The Commitment to Development Index, published since 2003, ranks 21 OECD countries’ commitment level based on seven metrics: aid, trade, investment, migration, environment, security, and technology.

When you aggregate these into an overall index, the results aren’t terribly surprising – the Netherlands, Denmark, Sweden, Norway, and New Zealand lead the way, while Spain, France, Italy, Greece, and Japan bring up the rear.  The United States sits thirteenth out of twenty-one countries – slightly below-average.

What’s most interesting about the CDI, however, are the disaggregated results.  First, I asked myself, "Which countries are most committed to private sector-led development?"  Using the trade and investment metrics seemed like the best way to arrive at an answer.  For trade, the CDI penalizes countries with high import tariffs and domestic subsidies – a methodology based on production-weighted estimates of aggregate protection in rich countries toward developing countries.  Commitment to investment measures both foreign direct investment and portfolio investment – basically, measuring how much rich countries’ policies encourage investment in developing countries based on a 22-question checklist.  (For more on each methodology, check out Inside the Index.)

It turns out that Canada, the Netherlands, and Australia, three nations whose overall rankings are tenth, first, and sixth, respectively, are the most committed to private sector-led development – each is in the top five of both categories.  Even lowly Italy, ranked in the bottom of the overall index, scores relatively well in terms of its commitment to trade and investment.  While New Zealand is tops in terms of its free-trade policies, it scores third to last from an investment point of view.  And the US?  Second-best in trade policy; seventh in investment. 

My brief look at the CDI leaves me with the following thought – you can’t judge a country’s development policy based on a single factor.  At the same time, I’m inclined to look at the specific policies of the trade and investment leaders for examples of what works from a private sector point of view.  Investors should also take note.  If you’re looking to invest in a company with designs on the BOP market, make sure they’re headquartered in a country with favorable CDI trade and investment rankings. 

Earlier this week the Los Angeles Times reported that over 100,000 cooperatives have been formed in Venezuela in the last year, forming “the centerpiece of President Hugo Chavez's new socialist model to create jobs and redistribute this oil-rich country's wealth.” By providing tax exemptions and interest free loans, as well as hundreds of millions of dollars in subsidies from oil and tax revenue, the Venezuelan government has given “groups and existing companies” all the reason in the world to form cooperatives. And while cooperatives have done much to alleviate poverty and redistribute wealth, a remarkable feet in this economically stratified petrocracy, I remain highly suspicious of the project. What it comes down to is that I don’t entirely trust Chavez. Olly Millan, Chavez’s minister of popular economy, has fought off allegations that the cooperative program is a top-down, soviet-style operation, explaining that, “The state is a non-invasive facilitator.” It provides money to the cooperatives, Millan says, but once the cooperatives are fully functional, private mangers, not government bureaucrats, make business decisions. While this is a relief, I am still a bit incredulous, especially because the movement is so heavily dependent on oil, a finite resource disappearing before our very eyes. So I am inclined to think that Venezuela is not the best place, after all, for examining successful cooperative models. Perhaps a better, or at least a less controversial, place is India, where cooperative success stories abound.

As in Venezuela, India’s cooperative movement took off thanks to a helpful nudge from the government. In1970 India introduced Operation Flood, a program to create a nation wide milk grid by tapping into the latent power of India’s dairy farmers. But because these farmers were scattered throughout the country, often in areas far from major cities, a serious logistical problem would need to be worked out. By establishing an extensive system of 70,000 cooperatives, 170 district dairy unions, and 25 state level federations, the government had found an answer. According to Monica Raina of the United Nations Development Program, “A milk producer becomes a member by buying a share of the co-operative after agreeing to sell milk only to it. Members elect a managing committee headed by a chairperson responsible for recruitment of staff in charge of day-to-day operations.” In this way, cooperatives function as democratic enterprises that represent the will of the producers.

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Dr. Aneel Karnani has posted a critique of Professor Prahalad’s book, The Fortune at the Bottom of the Pyramid and its thesis—as Karnani describes it—that multi-nationals will enrich themselves and the poor by participating in the base of the pyramid (BOP) market. Karnani describes this thesis as "at best a harmless illusion and potentially a dangerous delusion." He raises questions about the size of the BOP, its relationship to poverty, and calls for a focus on the BOP as producers.

While Karnani’s characterization of the Prahalad thesis is questionable, we can certainly agree with him that improving the productivity and welfare of BOP households is an important component of poverty alleviation. Our BOP work at Development through Enterprise has always been focused on improving both the productivity of the BOP as micro-producers and their welfare as micro-consumers-through access to information and connectivity, to financial services, to health care, to agricultural prices and inputs, and to more competitive and hence more equitable markets.

In response to Professor Karnani’s concerns about previous estimates of BOP size, we agree that a more sound empirical grounding is necessary to inform the debate. Our forthcoming publication, joint with the IFC, is based on a re-analysis of national household income and expenditure surveys—each with sample sizes in the tens of thousands and relevant to entire populations—from more than 110 developing countries.

Entitled "Tomorrow’s Markets", the publication will describe the BOP market based on purchasing power - by income level, by country and region. It will also analyze expenditure patterns by sector and by income level, focusing particularly on sectors that enhance productivity.

The point is that BOP households collectively spend money, lots of it, on a wide variety of goods and services, and are clearly willing to pay for services such as connectivity, clean water, financial services, energy, health care, and education for their children, as well as food, housing, and consumer goods. The BOP is already an economic actor, not just a passive, dependent group, and its collective actions define a market.

The pertinent development question is whether the BOP is well served by the present (often informal) markets, and whether there are unmet needs that could be better served by more competitive markets and broader participation by the legitimate private sector. Our analysis will attempt to answer such questions, with empirical data and well-documented examples. It will also clarify the difference between a poverty analysis (which seems to underlie Professor Karnani’s concerns) and a BOP market analysis.

Continuing discussions of "eco-chic," I'm turning this week to another Brazilian company, Linax, that works with perfume and oil ingredients. Of course the concept of sustainable cosmetics is hardly original, but the sector deserves a little good news after having been ravaged by scandal and disillusionment- particularly following high profile exposés of the Body Shop in the late '90s. BSI was accused of using largely synthetic ingredients in supposedly "natural" products as well as essentially exploiting Kayapo indians in the Amazons for good PR. If only the Body Shop had had Linax to consult.

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Is it my imagination or are targeted remittances the next leap in private sector-led development? Enterprises large and small like SMART Communications and FirstMile Solutions have considered implementing programs to tap into this over $170 billion a year industry. But one local NGO, PEOPLink, has already launched a preliminary version of this service- Paramipueblo.com - that takes advantage of this growing field of possibilities. I had a chance to interview the organization's founder, Daniel Salcedo, earlier this summer for a great discussion on his remittance site, the philosophy behind the innovative CatGen software and where the worlds of the ICT sector and the BOP collide.

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Next year microfinance celebrates its 30th birthday (Of course, that depends on who you ask). Beginning when Dr. Muhammad Yunus, an American trained economist from Bangladesh, experimented by lending money to 42 women so that they could buy bamboo for making and selling stools, microfinance has transformed throughout the decades, becoming a global industry and a pillar of international development. According to the Microcredit Summit Campaign, a whopping 92 million people have received microloans, a number that has attracted significant attention from more than just the do-gooders involved in international development. So it should have come as no surprise when The Wall Street Journal reported earlier this year that a new player has entered the arena of microfinance: the microfinance fund. Funding for microfinance has traditionally come from charities and government-aid organizations, the Journal notes. “Now, an increasing number of private funds are steering capital to microfinance -- and demanding a return, albeit a modest one in single digits, on their investments. By doing so, the funds hope to boost microfinance's reach and efficiency, while also drawing more capital from investors.”

One of these funds is Bethesda, Maryland-based MicroVest, which provides capital to microfinance institutions that operate in the field. MicroVest invests in both debt and equity. According to the Journal, “Debt funds expect annual returns to investors of anywhere from 1 percent to 5 percent, while equity funds, which usually have more risk and longer investment terms, expect annualized net returns of about 5 percent to 10 percent.” Other funds that have sprung up include the Dignity Fund in Oakland, Global Partnerships' Microfinance Fund in Seattle, and Accion International's Accion Investments in Microfinance.

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Many of you have noticed that Professor Aneel Karnani's post, Mirage at the Bottom of the Pyramid, has remained at the top of NextBillion.net's home page for the last 48 hours or so. This is no technical glitch - the moderators made an editorial decision to let it stick there for a day or two, since it was one of the first times a serious BOP critic has made his or her case on NextBillion.

I first caught wind of Professor Karnani's paper a few weeks ago, when it was in draft (read: not bloggable) form. I read it with great interest, and found myself agreeing with him on many points but disagreeing on many others. My boss and known BOP expert Al Hammond will post to this space later this week with an "official" response.

In the meantime, you can still read and comment on Karnani's paper - and I would highly encourage anyone truly interested in the BOP hypothesis to do so. As an idea becomes a movement, disagreement grows over the movement's direction and purpose. Perhaps that's where the BOP hypothesis is trending. For those of us interested in the BOP - from an academic, professional, or casual point of view - Karnani's paper is required reading. Not only that, it's only available via NextBillion. So get in on the ground floor now, and decide where you stand on Karnani's points. Comments remain open - tell us what you think.

Over a month ago, we covered a New York Times article on Billiton and its six year effort fighting malaria in Mozambique.  Now it has come to my attention that The World Economic Forum, in collaboration with Harvard’s School of Public Health, has released a paper, Business and Malaria: A Neglected Threat? which documents the danger that malaria poses to business.  The paper reaffirms the urgency of the situation and suggests that businesses need to step up where inept and corrupt governments have failed and help support the fight against malaria.  Check out the World Bank’s PSD Blog for more information.