Blog

I just ran across one great idea (and a great video that explains it), via NextBillion ally Emeka Okafor and his great blog Timbuktu Chronicles.

Market for Change was founded in 2007 "to catalyze sustainable economic development and poverty alleviation by creating a thriving, active market for small and medium-sized business process outsourcing vendors in Africa and other developing regions."

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It is impossible to argue against the need for reliable energy at the BoP. Energy drives every facet of society, from nourishment to communication. According to the UNDP, at least 1.2 billion people suffer from energy poverty, which has profound impact on health, education, and livelihoods.

Increasingly, people are calling for the new energy models in developing nations to be "sustainable" and drawn from "clean" and renewable sources. The accepted belief is that if we can get developing nations on a path of adopting clean technologies, they can completely leapfrog the dirty, self-perpetuating system we have created in the west. However, there are barriers to establishing renewable energy projects at the BoP, on both the supply and demand side. One recently-launched for-profit social enterprise that hopes to revolutionize financing in this field is MicroEnergy Credits Corporation (MEC), and I had the wonderful pleasure of conversing with its founders, April Allderdice and James Dailey, last week.

Allderdice and Dailey both have impressive resumes, from Peace Corps to Columbia Business School to McKinsey and Grameen; they have the research and the on-the-ground experience to move this field forward.

MEC realizes that even though clean technology pays off in the long-run compared to conventional sources, very few BoP consumers can afford to pay high up-front costs when they are concerned with day-to-day survival. According to Allderdice and Dailey, BoP consumers "cannot afford to pay extra for environmental or even social benefits, and therefore adopt traditional energy." And let’s be honest, who are we to tell others that they should sacrifice their meager income to save a planet which we are primarily responsible for destroying? In addition to the high up-front cost, there has not traditionally been a local broker to provide financing to the poorest and the most remote clients who do want to adopt clean energy projects. That is where MEC hopes to create change.

MEC’s solution is to use existing Microfinance Institutions (MFIs) and the recent developments in the carbon credit markets on the supply side to facilitate the adoption of clean energy at the BoP. According to Allderdice and Dailey, "Putting a significant portion of the world’s population on a clean energy path could have a huge impact in the long term, and is an opportunity that should not be wasted." Their idea has been well-received, by both the Tomberg Family Philanthropies and the judges at the Global Social Venture Competition.

To provide financing on the ground, MEC will go through the MFI network, since MFIs are embedded in the community, especially rural off-the-grid communities that need decentralized solutions. This is a very timely post, as Derek’s post last week highlighted in CGAP Senior Advisor Katharine McKee’s article on microfinance and climate change, which said that "A number of respected MFIs and networks – including ACCION, BASIX in India and Equity Bank in Kenya – are exploring products to respond to climate change."

MFIs have expertise in structuring deals, establishing appropriate loan repayment schedules and interest rates. According to Dailey, "MFI field officers meet with millions of households every week; they are a channel to market for financial services, and financed energy services are a natural outgrowth."

MFIs such as ACCION and Grameen have also proven to be incredibly scalable, and they can spin off renewable-energy focused businesses; the most notable example of this has been Grameen Shakti, a member of the Grameen family that provides renewable energy technologies for rural households. Allderdice recently worked for Grameen Shakti, and says that it is "currently scaling faster than Grameen Bank was at year eight."

The other piece of the puzzle on the supply side is to provide incentives to the MFIs through the evolving world of credits for renewable energy projects. Carbon finance is a valuable source of capital, yet it is a complex and evolving field that is difficult for the traditional on-the-ground MFI to tap into. In order to reduce the transaction costs of carbon financing,

"MEC provides MFIs carbon revenues on a per unit basis for each system they finance. This gives them near term access to finance for the seed costs of starting an energy program. As their program scales up, they can pass on the subsidy to end users which enable them to achieve greater volume by reaching poorer clients."

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Today's New York Times front page features, once again, the pressing crisis that has risen from soaring food prices around the world. The debate has found its way to institutions like the UN and the World Bank, who have called for urgent measures to keep the world's poorest from suffering the hardest consequences.

Meanwhile, another issue is slowly gaining momentum and I'm sure we'll begin to hear more and more about it in the coming months: water scarcity. The past two weeks have seen extensive coverage, discussing everything from proper pricing and innovative technologies, to business models and new concepts like that of "virtual water." This is an issue I will explore in depth in the coming months as I will be joining Al Hammond in the Global Social Benefit Incubator project, studying and mentoring innovative business models that tackle the issue of clean water supply for the poor.

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Today in New York, I had the pleasure of attending a round table organized by the Council on Foreign Relations entitled The Commercialization of Microfinance: The Good, The Bad and The Ugly. Moderated by CFR Senior Fellow Isobel Coleman, the discussion featured comments from Mary Ellen Iskenderian (of Women's World Banking) and Roshaneh Zafar (of the Kashf Foundation.)

I arrived early, set up my laptop and grabbed a bite to eat (if you're curious, the CFR building is beautiful and they do a good lunch spread). Before I was through my sandwich, the room had filled to capacity and CFR staffers were scrambling to set up overflow seating – there’s clearly a lot of interest in the recent controversy surrounding microfinance. It was quickly apparent that women outnumbered men in the audience by a ratio of about 2:1 – interesting, though not completely unexpected given the importance of women in microfinance and the fact that the speakers and moderator are all women.

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Guest blogger Lauren Withey is a research assistant for the World Resources Report at the World Resources Institute, in Washington D.C.

By Lauren Withey

It used to be that most U.S. college graduates, perhaps after spending a few years testing their penchants for various occupations or getting a second degree, would expect to settle into a consistent office job for the rest of their working lives. Attending a Microfinance Research Symposium at Georgetown University last week reminded me why such a smooth career path has become increasingly the exception rather than the rule among young job seekers today.

The Symposium was organized by FINCA International, a non-profit microfinance institution founded in 1984. Its first project was to create a group lending system - a "Village Bank" - in Bolivia. The success of this enterprise led to the growth of an extensive franchise network of these village banks, which now spans 21 countries, and serves over 700,000 clients.

The NGO's annual Research Symposium consists of presentations by the winners of a call for papers. The papers use FINCA's extensive client data, which is collected around the world each summer by Fellows, to advance the microfinance research agenda.

The presentations were well constructed and each addressed an important question within the growing body of microfinance literature: Can microfinance spur job growth? Are women more likely than men to spend their loans productively? Does microfinance really raise incomes of its clients over time?

But the most fascinating part of the afternoon was the overwhelming sense one developed from listening and looking around the room that microfinance is infinitely hip among do-gooder, high-achieving, globally-conscious youth today. Two of the winning presenters had been interns for FINCA. These interns, all accomplished, multi-lingual graduate students, work 40 hours a week, unpaid during while attending school.

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What's big, red and innovative all over?  No, it's not Clifford's supremely creative cousin – it's Entrepreneurship@Cornell.  A university-wide initiative, Entrepreneurship@Cornell is unique in bringing together students, faculty, alumni and outside experts across a range of sectors (hospitality, biotech, real estate, venture capital, law and more were all represented at the event I attended last week).  Other universities could learn from Cornell's approach – a truly multidisciplinary program is hard to find in academia, so kudos to the Big Red for getting this one right.

I went to Ithaca last Thursday and Friday to participate in Entrepreneurship@Cornell’s annual celebration.  The 2 day event featured a gala dinner, entrepreneur expo and – of course – panel sessions.  Thankfully, the panel session in which I participated was well organized and expertly moderated.  (No coincidence here: the organizers – Steve Wang and Sara Standish – are Johnson School students and the moderator was Mark Milstein, a heavy hitter in the BoP space.)

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In my last post, I put forth a definition on scaling a BoP venture: increasing business transactions that positively affect the lives of the poor. In this post I'd like to address the importance of scaling a BoP venture.

Apoovra Shah recently brought up the issue of BoP ventures partnering with governments as a means of scaling. I'd like to take a different spin on this. I'd like to suggest that scaling BoP ventures is critical in order to influence the way governments spend their money on aid. Why is this important? Because according to William Easterly's book, The White Man's Burden, governments have spent $2.3 trillion over the past five decades on foreign aid -- and with little to show for it.

Last month, I was able to spend a week in Indonesia working with a local business owner on a BoP scale-up strategy. Over dinner one night, our conversation drifted to the subject of government aid money. My friend said to me, "Do you think we'd ever get funding from a government agency? No. We don't fit the profile."

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All of us at NextBillion.net were both humbled and thrilled to see the New York Times Sunday Magazine draw on our work - and the work of many colleagues - to write an extended piece on the impact of cell phone usage in emerging economies.

Sara Corbett's article follows Nokia researcher Jan Chipchase as he navigates the human terrain of countries like Ghana, Brazil and Uzbekistan, trying to figure out why a farmer in Kenya or a prostitute in Brazil is finding unique value in their cell phone. The article uses Jan's experience as a device for sparking a broader discussion on the potential for the booming cell phone market to increase incomes and quality of life among the BoP.

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Now in its fourth year, World Challenge 08 is a global competition aimed at finding projects or small businesses from around the world that have shown enterprise and innovation at a grass roots level. The competition seeks social entrepreneurs who are making a difference without costing the earth. It could be you or someone you know.

World Challenge 08 is organized by BBC World and Newsweek, in association with Shell, and is about championing and rewarding projects and business which really make a difference. The winner will receive a grant of USD $20,000 to put back into their project/business, and two runners up will each receive USD $10 000.

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BiD Network is announcing a "one time only" Photo Contest. The contest will gather photos from around the world on the theme of "Entrepreneurship for Development".

The Competition: In this Photo Contest, BiD is focusing on entrepreneurs around the world who are working for innovative changes towards sustainable economic growth in developing countries. You can submit your photos to the competition by simply uploading your image on www.bidnetwork.org. To do so, you must be registered as a member of bidnetwork.org first.

Awards: The winning photos will be announced in mid-May and receive prize money. Prize money will be divided into 3 categories: 1st prize (€200), 2nd prize (€100) and 3rd prize (€50). Winning photos will be featured in several productions (like flyers, folders and posters) that will be released and distributed in 2008.

Deadline: April 30th 2008

More details can be found here.