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We blog frequently on this site about the importance of large multi-nationals finding ways to tap into BoP markets. This often comes in the form of discussions on reaching the BoP directly as consumers (ie projects like the OLPC or microcredit initiatives).

But what about small and medium enterprises as BoP intermediaries? Those of us who support these enterprises in our work are familiar with the list of benefits often attributed to SMEs - they raise employment, they are correlated with a reduction in income inequality, they reduce the size of the informal economy.... - but what about SMEs as middlemen for engagements between large corporations and the BoP?

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Location: Atlanta, Georgia

Organization: Gray Matters Capital Foundation is a charitable arm of Gray Ghost Ventures, a social investment company that seeks to invest in visionary people, with an emphasis on microfinance and education.  Since 1996, Gray Ghost Ventures has worked to foster strategic innovation by incubating and investing in enterprises and tools to provide market-based solutions to social issues. 

Through the initiatives of its charitable foundations, The Rockdale Foundation and Gray Matters Capital Foundation and through its investment activities Gray Ghost Ventures has improved capacity of the microfinance industry in the Arab world, supported successful reform efforts in the Atlanta Public Schools, created the first privately-held global microfinance investment portfolio and social venture capital fund, offering both financial and social returns. Gray Ghost Ventures seeks to expand the mission of its charitable foundations and its social investing in the area of expanding the access and quality of primary and secondary education to the poor in developing countries.

About the Education Initiative: While some countries have a credible public education sector, there are many in Asia, Africa and Latin America that are in desperate need of alternatives to failing public schools.  As a result, privately-owned affordable schools for low-income families have emerged, where families are considered clients with rights to demand quality.  These schools put an emphasis on quality, efficiency and performance, justifying the modest tuition charged that allow them to become sustainable enterprises. 

Affordable schools for the poor exist throughout the world and serve millions of children living in some of the most difficult conditions. Gray Matters Capital seeks to connect affordable schools with resources that will allow them to improve quality while remaining accessible and affordable for low-income families. 

Position:   The Gray Matters Capital Foundation is seeking a Program Officer to manage program activities that will build the ecosystem around the affordable school sector. This ecosystem will include educational resources, industry infrastructure and transparency as described above that will benefit students and their learning.  The Program Officer will be responsible for researching and designing programs, developing partnerships with other supporting organizations and donors, and monitoring results to ensure quality education is being offered.

Primary Duties for this position include:

• Sourcing and Due Diligence:  Identify, evaluate and make recommendations of promising partners; develop and maintain pipeline of grants & programs.
• Project Management:  Serve as the direct point of contact for partners, managing grants and programs from design through execution and evaluation.
• Monitoring and Analysis:  Conduct ongoing financial and social analysis of the grant and program portfolio. 
• Research: Conduct ongoing and project-specific research. Identify and implement appropriate measures of assessing quality and impact.
• Promotion: Represent the initiative in a variety of venues to diverse audiences from high level to the general public.
• Strategic Direction:  Contribute to the ongoing development of the strategy and planning around the initiative.  

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The Science and Technology Division of the Inter-American Development Bank is pleased to announce the launch of its grants program: Innovation for Inclusive Development. The objective of the program is to foster innovation in products, processes, and services and engender solutions that can improve the quality of life of the majority of people in Latin America and the Caribbean, those who are poor and/or excluded.

Up to six grants, ranging from USD 30,000 to 100,000, will be awarded to the selected proposals to develop, test, or pilot innovations in the region. Part of the initiative is funded by the Italian Trust Fund for Information and Communication Technologies for Development.

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India's growth depends on its ability to significantly revamp its dismal education sector, which suffers from problems of outreach and quality. A recent study shows that the public education sector may be beyond saving.

A possible solution comes in the form of sustainable investments in a vast network of private schools delivering standardized, high quality education at an affordable price to the low income mass market (base of the pyramid) customer.

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I recently spent three weeks in South Africa, primarily in the rural Limpopo Province bordering Mozambique, Botswana, and Zimbabwe. While the Republic of South Africa is the 25th richest country in the world, I was struck by the extent to which first-world lifestyles co-exist with endemic poverty. For instance, I stayed in Sewale with a former ANC councilor named Patricia who owned a pickup truck, two televisions and a surround sound system. Around the councilor's home, in all directions, were mud huts.

In my opinion, the fundamental difference between the elite movers and shakers of this rural community and those who had resigned themselves to charity was empowerment. At first, I thought that this empowerment was derived from exposure to the wider world. But after having read Francisco's blog post this morning, I can see the conspicuous applicability of the Bee Sting Effect.

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In recent years, the capital markets have infused millions of dollars into the 'development sector.'  While we applaud the growing interest in development through enterprise, the question arises: are there enough quality investees?  Or, more simply, is too much money chasing too few investments?  Let's take a closer look:

Capital:
The novelty of the venture philanthropy model and the (debatable) success of microfinance in particular have helped attract large tracts of new capital to the development sector.

• In February 2007, Orient Global Foundation announced the creation of a USD 100 million Education Fund committed to supporting entrepreneurial solutions to improve the quality and availability of education in developing countries around the world.
• A new USD 17m Small to Medium Enterprise Investment Company for India has been announced by Google.org, the Soros Economic Development Fund (SEDF), and Omidyar Network, aimed at creating job opportunities and driving increased economic participation for a larger portion of the country's population.
• The Gray Ghost Microfinance Fund, Inc. is a $75-million, for-profit portfolio of investments aimed at connecting private social investors with microfinance opportunities worldwide.

Add players like Legatum, Minlam, MicroVest, and new entrants such as IGNIA, and one gets a sense of where we could be headed.

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So it seems KickStart has something else going for it, as if a viral video featuring Maasai rapper Mr. Ebbo weren't enough...

The CEO of the San Francisco-based social enterprise, Martin Fisher, won the Lemelson-MIT Award for Sustainability this week for his innovative and affordable including the MoneyMaker Pumps, portable and easy-to-use devices that allow farmers to draw water when they need it without having to travel long distances.

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"What poor countries need most is not more microbusinesses. They need more small-to-medium-sized enterprises, the kind that are bigger than a fruit stand but smaller than a Fortune 1000 corporation."

These were the words of James Surowiecki last month in his New Yorker piece What Microloans Miss. Now another mass media hit for the SME cause - the Miami Herald interviewed Root Capital founder Willy Foote this week about the basics of his enterprise development organization.

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Last night I read a good piece in the interesting Aguanomics blog. It comes from a recent article related to "The Persistence of Poverty: Why the Economics of the Well-Off Can't Help the Poor" a book by Charles H. Karelis.

I found it thought-provoking and worth sharing with the NextBillion community: 

"When we're poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems."

"Poverty and wealth, by this logic, don't just fall along a continuum the way hot and cold or short and tall do. They are instead fundamentally different experiences, each working on the human psyche in its own way. At some point between the two, people stop thinking in terms of goods and start thinking in terms of problems, and that shift has enormous consequences. Perhaps because economists, by and large, are well-off, he suggests, they've failed to see the shift at all."

On my way to work I was thinking about the market-based approach to poverty alleviation discussed here in NextBillion, and whether or not it aims in the right direction when confronted with Karelis' "bee stings" metaphor. I do believe that markets are effective mechanisms by which products and services can be made accessible to the poor, so they can make their choices and carve a way out of poverty.

However, market forces will only work properly if an effective state is in place and allows for a friendly and inclusive business environment. The lack thereof in most of the developing world is one of the issues keeping most of the BoP from escaping it, as argued in an excellent book I will be commenting here later this week.

Meanwhile, comments on Karelis' views are welcome.

Erik Simanis is not your average Ph.D. student.  For one thing, he's done work on his degree at two separate institutions (the University of North Carolina's Kenan-Flagler Business School and Cornell University's Johnson School of Business.)  Furthermore, he's spent more time in the field than in the library – not necessarily good for paper writing, but certainly a benefit as far as the paper's content is concerned.  Finally, Simanis probably knows as much about the Base of the Pyramid space – and how it relates to sustainability – as anyone, including BoP gurus like C.K. Prahalad, Stu Hart and Al Hammond.

Last week, I had the chance to sit down with Erik while I was in Ithaca for the Entrepreneurship@Cornell event.  Sitting in Monica Touesnard's office in the Center for Sustainable Global Enterprise, Erik and I polished off a couple cups of coffee over the course of two hours.  The outcome of that discussion – a long-form interview – follows.

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