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Usually people at the BOP cannot afford to pay for insurance or health care. When they fall ill, they end up spending all their own money on surgery, doctors’ appointments, tests – they simply cannot afford health care. Micro-insurance offers an alternative approach to this problem. At affordable premiums, people at the BOP can have access to health care. However, few people in the BOP know how insurance in general even works.

The Micro-Insurance Academy (MIA) based in New Delhi trains and advises micro-insurance units serving the poor. This organization contacted the NextBillion team letting us know that they are launching an Innovation Contest in ideas of how to explain to the people in the BOP what health insurance is and how it works. MIA writes,

As (micro) health insurance is difficult to explain, the MIA invites proposals for innovative, intuitive and original ideas to explain the value proposition of health insurance for poor people and grassroots groups. Proposals could include good stories, anecdotes, games, simulations, picture-stories, scripts for video clips or short movies and the like, to explain insurance to persons with no prior insurance experience.

The prize of the competition is €1,000, and a jury of seven people will select the winning proposal among the submissions received by the deadline: August 31.

NextBillion encourages our readers to participate in this competition. Micro-insurance is a good way for people in the BOP to have access to health care. And if they do not understand in a clear way how micro-insurance – or insurance in general – works, then they will be missing out. This is the perfect opportunity to contribute in capacity-building strategies for the BOP, and at the same time compete for a financial prize – besides, who doesn’t need some extra money?

Editor's note: Tayo Akinyemi will be starting the MBA program at Cornell University's Johnson School of Management this fall.

I’m leaving for business school today, so this will be my last post on nextbillion.net for awhile. Although I didn’t answer all of my twenty questions (and attempted to answer questions that I hadn’t posed originally), I truly enjoyed blogging and expanding my knowledge about all things BoP. Needless to say, I will take the remaining questions with me to business school; I have no doubt that I’ll gain valuable insight there. In the meantime, I’ll apply a very quick and dirty analysis to what remains. Also, in keeping with the inquisitive nature of this blog, I’ll throw out a few more questions and food for thought.

Is "Base of the Pyramid" just MNC neocolonialism all over again? Will MNCs behave differently in this space than they have in the past? Can power be successfully decentralized and distributed?

Potentially yes, but the concept of BoP as nouveau neocolonialism runs contrary to what BoP business development is about. Frameworks like the BoP protocol have been designed to view MNCs and BoP communities as partners co-creating mutually beneficial business opportunities. Additionally, systems and institutions are created and implemented by people, so naiveté notwithstanding; we can influence how these entities perform. As long as the basic principles are respected, it is possible that the worst case scenario may be avoided.

Must there be a trade-off between doing well and “doing good”?

How close does BoP come to closing that gap? Where does BoP fit along the public/private sector continuum?

Does CSR, Public-Private Partnership, social enterprise, social entrepreneurship, venture philanthropy = BOP?

Is this really about devising a hybrid system that works better for everyone?

Certainly there are trade-offs, but it appears that the gap is closing. Pushing that boundary is the reason why I’ve chosen to focus on BoP and pursue a business degree. To me, BoP is the counterpoint in the balance between social and financial profit and promotes the notion that the pursuit of social good can be a core, not ancillary, function of business. Superficially speaking, social enterprise, social entrepreneurship, and venture philanthropy seem to focus on “entrepreneurializing” socially-focused organizations and pursuits; while corporate social responsibility (CSR), public private partnerships and BoP aim to leverage private enterprise for social good. Clearly, these are only the broad strokes, and don’t capture the complexity of the similarities and differences.

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Many immigrants come to work in the US, and when they do, they usually leave family behind. Often, their primary objective is to make money and provide for their families back home. Some companies - like the Mexico-based multinational cement giant CEMEX - are taking advantage of this situation and are starting to productize remittances. Instead of sending cash to their families back home, immigrants using a program called Construmex send aid in the form of housing materials.

Productizing remittances is a secure way for workers abroad to provide what they think its priority to their families. Some may recall a post by Thamel dot Com founder Bal Joshi about this very subject. We recently covered a news story on NextBillion talking about CEMEX’s Construmex program:

Money transfers can be expensive, and family members back home frequently spend the money on other things. And many immigrants don't know how much cement to buy or how to build a roof, so their hard-earned savings often are wasted. That's where Construmex comes in: Its architects help clients design home plans and calculate how much material to deliver and at what time intervals. The company also finances the purchase of the construction materials.

In my opinion, this system is very intelligent, because, after all, it is the money of the person who is sending it and this system allows him to decide how it is spent. It ensures that the people back home get what he wants them to get - in the case of Construmex, a house.

According to Business Week, in two years, Monterrey-based Construmex has helped 4,500 migrants living in the U.S. build homes or small businesses in Mexico. This year it expects $3.8 million in revenue, a mere hint of the potential. "We're certain that there's a very large, unsatisfied demand out there," says Hector Ureta, CEMEX’s director for low-income programs. The company's studies show that 58% of Mexican migrants to the U.S. intend to build in their home towns.

Of course this is not CEMEX’s first foray into the BOP space; they already have a program in Mexico targeting the BOP called Patrimonio Hoy. Although both programs work with the BOP, the difference between Patrimionio Hoy and Construmex is that the first works domestically in Mexico, while the latter works with the immigrants in the US to provide housing materials. The interesting fact about CEMEX’s BOP programs is that they are neither operated nor subsidized by the Mexican government nor a by a NGO. CEMEX can be considered one of the leaders in the BOP space; they have experienced success and this is why they are looking to diversify their BOP holdings.

Critics of this system might have mixed-feelings about businesses catering to illegal immigrants, because of their illegal status. Editor's note - The previous sentence has been crossed out, since it reflects inaccurate information about the Construmex program.  NextBillion.net apologizes for the factual error - CEMEX adheres to all laws and regulations regarding immigration status.  I guess that if the workers have the option of starting to build assets back in their home countries, they have something to look forward to when they return. They are not just coming to work here, but they are building a future in their home towns for their return.

Note: We were notified that the version of the case study, What Works: Scojo India Foundation, released on 6/20/07 was found to have citation errors. The case study has since undergone revision and is now again available for downloading. The version available here is the authoritative final release of the case.

We're very excited to announce the release of a new, full-length case study, What Works: Scojo India Foundation.

We've often discussed on NextBillion the innovative work of Scojo Foundation, a non-profit operating networks of "Vision Entrepreneurs" who are selling reading glasses directly to rural, low-income communities worldwide.

The case study, authored by Sachin Kadakia ('07) and Nico Clemmink ('08) of Columbia Business School, provides in-depth analysis of Scojo India Foundation's business environment, operations, and best practices.

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The OTF group has launched a new initiative: The Pioneers of Prosperity Grant and Award Program. A partnership between the OTF Group and the John F. Templeton Foundation of the United States, the competition promotes companies in East Africa and identifies and cultivates local role models that act as examples of prosperous and sustainable businesses in their country/region. Businesses from East African countries including Kenya, Uganda, Tanzania, Burundi and Rwanda can participate.

This "Prosperity Award" will be granted to the five pioneers of the program. Each will receive a grant of $50,000 USD to re-invest; semi-finalists and finalists will receive media coverage by one of the competition sponsors: Pulse Experientia Ltd.

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This week the World Business Council for Sustainable Development (WBCSD) published a brief titled "Promoting Small and Medium Enterprises for Sustainable Development." I recommend reading it because it gives good ideas and advice to governments, large corporations, and the local community on how to support SMEs.

Because of the nature of NextBillion.net and our business-focused approach, it is important to mention the specific messages in the briefing, such as:

Building supply chain capacity
Rationalizing procurement procedures
Strengthening local distribution networks
Improving standards
Improving environmental performance
Providing access to financial services

Since SMEs are the backbone of most developing countries’ economies, governments and corporations need to find ways of synergizing with these SMEs and therefore create local sustainable growth. SMEs offer jobs to most of the population in these countries:

In OECD economies SMEs and mircroenterprises account for over 95% of firms, 60-70% of employment, 55% of GDP and generate the lion’s share of new jobs. In developing countries, more than 90% of all firms outside the agricultural sector are SMEs and microenterprises, generating a significant portion of the GDP.

SMEs create opportunities at a local level, as the WBCSD publication says, governments and large corporations should collaborate with SMEs building a bridge between the local community and the larger economy. An enhanced cooperation between the government, big corporations, the local community, and SMEs will be beneficial to local entrepreneurs in the BOP and will also create sustainable forms of development at a local level.

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Following earlier discussions on Biofuels and the BOP, Rajya profiles a company that has found a way to establish itself in this sector while offering benefits to local communities. Download the PDF version of this feature here.

by Rajya Karipineni - New Ventures India

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Every time I would go to the zoo as a kid, my Mom used to buy peanuts to feed the elephants; I would feed them some and eat the rest. I remember it took me a long time to shell the peanuts that I was going to eat, and sometimes I just got frustrated and quit. Many hands are getting a rest from shelling peanuts this summer in Uganda, which is the main income-generating activity for many women there. Thanks to a partnership between Nourish International/Full Belly Project, students are working on setting up a production facility that shells peanuts 50 times more efficiently than by hand.

According to Nourish International, "Peanuts serve as the primary source of protein for over half a billion people world wide, and currently women and children spend up to 8 hours a day painfully shelling peanuts by hand."

The peanut sheller machine was invented by Jock Brandis after he saw the burden that shelling peanuts had on women in Mali. Afterwards, he created the Full Belly Project, a non-profit that focuses on development and delivers simple agricultural technology machines to people in developing countries. Their main objective is to create inexpensive technology that is readily available, cheap and with a long service life. The nut sheller machine is capable of shelling not only peanuts, but also shea nuts, pine nuts, neem nuts and pecans.

Nourish International is an organization that works with college students to increase awareness of world poverty and help them develop entrepreneurial, management and leadership skills while collaborating with other organizations to alleviate poverty. This summer, nine students from NI committed 5 weeks of their summer vacation to turning their business plans into reality in Iganga, Uganda. Chaz Littlejohn has been working on this project and sent an e-mail to the NextBillion team to let us know about his summer project. He was working to measure the economic impact that the peanut sheller has in the communities that purchase the sheller by taking a randomly controlled sample of 450 households and measuring changes in their income, expenses, crop production, time use and health. Chaz summarizes his experience:

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Growing up in Mexico, I’ve seen first-hand the difficulties that low-income earners have in purchasing goods or getting financial services. These goods and services many times are even more expensive than in a developed country, and are therefore inaccessible to low-income earners. I’ve been thinking a lot on what I should write as my first essay on this blog, so finally I decided that I should write about the first Mexican business that comes to my mind that focuses on the BOP market: Banco Azteca and its retail unit Elektra.

Banco Azteca was launched in Mexico in 2002, and is the banking unit of Mexican specialty retailer Grupo Elektra; both companies are part of the larger Grupo Salinas. The entire Grupo Salinas targets low-income earners, and its success has shaped business practices in Mexico toward the BOP, and its model has been imitated by other retailers in Mexico such as Wal-Mart.

Banco Azteca has expanded since 2002 and apart from Mexico it is also operating in Panamá, Guatemala and Honduras; in 2008, it is expected to launch operations in El Salvador.

Grupo Elektra sells electronics at almost double the price that you would find in a retail store. The "advantage" of Elektra is that it offers its customers the opportunity to buy goods and pay for them over a period of 12 to 24 months in very small weekly payments, sometimes even as low as 50 Mexican pesos per week. On the one hand, it’s great because the people can have access to buying TVs and stereos, even iPods. The problem comes when the obligation of making monthly payments over 2 years becomes too burdensome for the consumer, especially when his/her income does not leave much room for contingency spending. When consumers are unable to make their monthly payments, the item under contract can be confiscated and the consumer loses the amounts already paid. Are BOP consumers being taken advantage of? In a way, yes. These practices could be considered predatory, especially since consumer protection laws are less stringent in Mexico than in the U.S. or Europe.

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The Flor de Cana flowed and there was a palpable air of creativity and connectedness last week at the Business in Development happy hour. It must have been the crowd. There are many bright passionate minds working in the field of private-sector development, and the event, hosted by Agora Partnerships, brought together a variety of these folks out from World Bank junior professionals to Technoserve CEO Bruce McNamara. Great discussions abound in the dimly lit ambience of Play Lounge, engaging enough to make you forget that the floor developed a faint but discernable stickyness as the evening progressed. Of course, the generous drink specials undoubtedly helped.

A personal highlight for me was an insightful talk with Root Capital's Phil Covell (correction - previously listed as "Howell") on scaling strategies for small green businesses in developing countries. The emerging market SME sector is characterized by plenty of ambiguity and it's always helpful to trade ideas with a knowledgeable person on how to connect entrepreneurs that do good work to larger markets. We agreed that successful SME investment requires a strong presence of in-country representatives who know the lay of the land. Also, you often have to work with actors beyond the entrepreneur herself, such as potential buyers to help the company achieve scale. 

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