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Last spring when my teammates and I were working on a renewable energy project in southern Africa, we thought carefully about how we could integrate a BoP perspective into our work.  Our client planned to situate its plant in a rural community, so we knew the impact would be dramatic.  We also knew that the company could influence the nature of its footprint, particularly if it treated the community as an active partner. 

Consequently, we engaged the company in a dialogue about how a 'community-inclusive' strategy could be mutually beneficial in terms of financial and social returns.  To our surprise, we found rich literature that informed our insights, including the International Council on Mining and Metals' Community Development Toolkit  and The Role of the Extractives Industry in Expanding Economic Opportunity by Holly Wise and Sokol Shtylla of the Kennedy School of Government.  In fact,  SEAT, Anglo American's community engagement and socioeconomic assessment toolbox has been hailed as an industry best practice.

Not surprisingly, we learned a lot about how extractive companies can incorporate communities into their supply chains, build infrastructure, invest in human capital, and support local suppliers and entrepreneurs.  Clearly, there are numerous ways to cultivate local economic development that complement, but also evolve independently of, an extractives company. 

However, we also recognized that an inherent contradiction existed in our work.  BoP business development by definition-if you accept co-creation as a key tenet-should engage the community in the process from the outset.  However, extractives projects can be scoped, planned, funded and largely executed before the community is involved in a meaningful way.  That begs the question of whether BoP business development and the extractives industry are compatible.

The answer is probably 'no' given the way that extractives projects (and most businesses generally) are structured.  Investors and the management team ultimately control how the business is built while co-creation assumes that all relevant stakeholders are involved from day one.  However, to the extent that companies prioritize entrepreneurship support and investment as key elements of their community engagement strategies, there's hope.

It's conceivable that a company could work with local entrepreneurs to co-create new businesses, or in the spirit of the BoP Protocol 2.0, engage in new market creation.  After all, most responsible companies endeavor to leave the communities they inhabit as thriving, self-sustaining entities.  For example, Anglo Zemele in South Africa actively supports local enterprise capacity-building and supply chain integration.  However, perhaps over time companies can develop a more explicit 'blank-slate' approach if and when it makes sense to do so.

It's also worthwhile to consider another, potentially more compatible business model-distributed renewable energy.  As you may recall, the extent to which clean technology, renewable energy, and the like should be produced at and for the BoP was explored at the Cornell Global Forum. Assuming that it should, then it's more likely that co-creation norms would be embedded from the beginning.  Okay, so maybe clean technology and renewable energy aren't necessarily extractive (or at least they shouldn't be).  

Nonetheless, it's important to explore the possibility of producing energy in a way that 'expands economic opportunity' while engaging the BoP 'before the fact.  Of course, one could argue that business development at the BoP need not involve co-creation from inception as long as lives improve at the conclusion.  Personally, I believe there's more than enough room for context-specific interpretation. What do you think?

News stories have been popping up lately about supermodels, actors, musicians and their pet causes. In graduate school I was focused sharply on the intersection of mainstream media and cause marketing, also known as "cause branding," and while I have a passion for these topics, I wanted to see how our NextBillion readers feel about celebrity spokespersons, big ad campaigns, and the like. Do you approve?

There's a recent piece in Vogue that profiles supermodel Christy Turlington and her passionate crusade for mothers in developing countries; she's doing a Master of Public Health at Columbia University. Then there's a recent piece I found on a stellar blog, Bella Naija, that poses the question, What do images of Naomi Campbell and wild animals do for the continent of Africa? Do they reinforce a message and image that is harming Africa and hindering its development?

Of course there is also Dambisa Moyo's persistent critique of aid, Bono, and the RED campaign, arguing that such efforts hurt Africa more than they help it.

Bill Easterly of Aid Watch at NYU recently wrote a blog post on why he thinks such campaigns are created in the first place; he argues they are created by and target middle-aged white men. I disagree and posted feedback there, but it's an interesting argument nonetheless.

So amidst the criticism, the well-done campaigns, and the not so well-done campaigns, what purpose do these campaigns serve?

This month, MTV's EXIT Campaign (End Exploitation and Trafficking) will launch here in Nepal with free concerts throughout the country to raise awareness about how to protect oneself from becoming a victim of human trafficking. Nepal, along with other MTV EXIT participating countries, the Philippines and Thailand, have long-standing human trafficking challenges.  Partnerships between models, actors, big brands, and more through "social marketing" raise awareness, raise funds, change behavior, and get healthy products such as bed nets and condoms into the hands of millions.

But what do you think? Does having Angelina Jolie or Turlington's face plastered across a billboard or magazine cause people to perhaps disengage and not take the very stark reality of the lives of those at the BOP seriously? Should we take donor dollars and raise awareness at any cost? Will MTV campaigns have lasting value and impact for the BOP or are they merely corporate reputation boosts?

I like to imagine what the world would look like if mainstream media, celebrities, and cause campaigns didn't meet. No movies covering important issues like Jeff Skoll's Participant Productions does in movies like Syriana, The Soloist, Darfur Now, and An Inconvenient Truth. Teenage girls in the West not exposed to the threats of violence and HIV for their counterparts in developing countries. Future aid workers and Peace Corps Volunteers not given images to inspire them in their early college days. 

My assertion here builds on an earlier post about what inspires us to give. Exposing the masses to BOP issues through mainstream media is using one more channel and giving people one more chance to encounter a possible inspiration or spark of awakening that can lead to real change for the BOP, whether through an investment, microloans, donations, a career change, declaring a major, or other life-changing event. As I recently read in a favorite book of mine, Ladies Who Launch, "Accessing images and dreams has a strong impact on our lives and leads us toward that creative spark, inspiration, and vision where we begin to create." Change has to start somewhere, so why not through mass media?

In the final plenary session of SoCap's packed Day 2, I listened as the panel discussed "From IRIS to GIIRS to New Money". After a full day of hearing the topic of metrics raised in forum after forum, from break-outs to hallway conversations to tweets and blog reviews of earlier sessions, I was especially intrigued to hear this session. Antony Bugg-Levine, from The Rockefeller Foundation, moderated as B Lab's Andrew Kassoy, Acumen Fund's Brian Trelstad (full disclosure - Brian is my boss), and Deloitte's Chris Park discussed their thoughts on how infrastructure is evolving that will help drive impact investing to a true effective capital market.

Throughout the first two days of the conference, it seemed as though almost every conversation was either directly about metrics, or inevitably came back to metrics. This hot button topic seemed to elicit a range of reactions-from absolute conviction of the need for more rigorous impact measurement to absolute fear that this recent obsession with quantification will cause far more harm than good. The latter is rooted in the belief that forcing social enterprises and their investors to fit within a rigid framework will stifle the creativity that has historically allowed the sector to thrive. As a panelist on the earlier "Metastasizing Metrics" breakout session, I knew where I fell on this spectrum (and if you missed that panel, my title of "Metrics Manager" probably lets you know). But I was eager to see these four industry leaders discuss it; and even more eager to hear the audience's responses.

As Antony framed the session, one particular remark stuck out to me-his comment that our industry needs to go "from story to substance" really hit on the core question. How do we know that what we are doing is having the impact that we think it is? The infrastructure that exists in financial markets and which enables substantive, transparent results to be reported is simply lacking in our sector. And for investors to drive capital to impact investing, they need to see value, and until this gap in infrastructure is removed, our space will remain "naturally fragmented by people's passions," according to Andrew Kassoy.

Each of the three panelists discussed an initiative that their organizations are a part of that seek to start filling this infrastructure gap. Acumen Fund has build an online portfolio management system called Pulse (full disclosure-I am the Project Manager of Pulse), which is used to manage the chain of accountability and understand how we can do things better across our portfolio on investments. Simply put, it lets Acumen Fund write down what we care about, track it diligently, and discern meaning from our investors. Or as Brian put it, Pulse enables us to "eat our peas"-namely, the process of creating and tracking meaningful metrics is not difficult so long as you commit to buckling down and doing it.

Chris Park then discussed the IRIS initiative, a project led by the four organizations on this stage, to develop a taxonomy of social and environmental impact metrics. As Chris put it, IRIS will be for the social and environmental side of impact what U.S. GAAP and IFRS are to financial reporting-namely, the ability to create comparable standards that allow for transparent reporting in the same way that publicly traded companies report on financial returns. IRIS is the language that will allow for apples to apples comparison of social and environmental results.

Finally, Andrew Kassoy discussed GIIRS, which will be a ratings system for funds and enterprises that will allow investors to quickly ascertain the social value of their investments. So whereas Pulse is a platform that lets a fund manager easily track and report on performance, going deep into understanding impact using either the IRIS definitions or custom metrics, the GIIRS ratings system will use the IRIS standard definitions to quickly distill a meaningful rating for investors.

The sense that I had gotten coming into this plenary was that people were either really excited or really wary of these types of initiatives. The Q&A session didn't really clarify to me where the audience was falling on this question, either.

But one comment towards the end of the session did sum up my own feelings. In answering a question posed by Antony about the price of leadership and of driving for standards, Chris talked about the very real convergence of financial, social, and environmental impact. Today, we don't have a true market in impact investing. And we won't until we can bring process and rigor to the latter two dimensions in order to enable investor confidence. The financial infrastructure that exists today (all commentary about the efficacy of said market left for another day) took decades to build. We are just starting the process for building the same capacity for assessing social and environmental impact.

By driving transparency and predictability around all facets of investment performance, impact investing will evolve from a fragmented marketplace to a true capital market. Only when we have tools and systems that allow for tracking performance, talking about impact with a common language, and ratings systems that sit on top of those definitions will Impact Investing be a real, defined asset class. And rather than stifling the creativity and innovation that our sector thrives on, these efforts will create the clarity that enables it to thrive.

This panel (and this author) believes that it is not a question of IF but rather WHEN we will get there. And when we do get there, investors will then be able to make decisions based on personal values rooted in facts that balance the financial, social, and environmental impact because we will have the supporting ecosystem behind what is being measured and reported. Investors will then know that the results of their impact choices are substantive and not stories. Or as Antony eloquently concluded the session-"We want to soon be able to know it in addition to believing it in our heart."

A great opportunity for a sub-set of the "base of the pyramid" community - the inventors and innovators - just came across my desk, and I wanted to let folks know.

That's right, the annual Lemelson-MIT awards are taking nominations.  There are three awards - $500K, $100K and $30K.  More details:

The Lemelson-MIT Awards honor both established and rising inventors for their ingenuity, creativity and contribution to invention and innovation. The awards recognize the profound impact that inventors can have on economic and social well-being.

The awards include the following:

• The $500,000 Lemelson-MIT Prize honors outstanding mid-career inventors dedicated to improving our world through technological invention and innovation.
• The $100,000 Lemelson-MIT Award for Sustainability recognizes and supports inventors working to safeguard the well-being of our communities and planet.
• The $30,000 Lemelson-MIT Student Prize honors promising young inventors studying at MIT.

The Lemelson-MIT Program funds three additional student prizes to recognize students who demonstrate remarkable inventiveness: $30,000 Lemelson-Rensselaer Student Prize at the Rensselaer Polytechnic Institute, $30,000 Lemelson-Illinois Student Prize at the University of Illinois at Urbana-Champaign, and $30,000 Lemelson-Caltech Student Prize at the California Institute of Technology. Each student prize is administered by its respective school.

Bestowed annually, the Lemelson-MIT Awards were first presented in 1995. They are part of a comprehensive program administered by the Lemelson-MIT Program and established by the Lemelson Foundation to raise the stature of inventors and to inspire invention among young people. Find out about previous recipients at the Winners Circle.

It originally made sense to me when the NextBillion editors asked me to cover the panel titled "Sometimes it Doesn't Work: Lessons Learned" at SoCAP'09 this year as my last blog entry was titled "A Lesson Learned."  The one that learned the most lessons with me as it was clear that the financing mechanisms for social ventures is highly complex and I realized I knew very little about the business.

The panel featured Bart van der Vaart from Small Enterprise Assistance Funds (SEAF), Candace Smith from Microvest, Cliff Kellogg from Shorebank, and moderator Debra Schwartz from the MacArthur Foundation in a discussion on the various social ventures each of their respective firms have funded and the key learnings and challenges they found in the process. 

The firms finance a range of ventures, from small private-sector businesses in developing countries to microfinance institutions to solar/alternative energy companies with a social mission.  Each member of the panel has been in the business for years and had the following observations:

• Foundations tend to be slow and generally don't invest in enough.  You can almost burn as much money trying to get money FROM them.  
• "If you know ONE foundation, then you know ONE foundation." Foundations are all very different. You really need to understand the motivations of that particular foundation and what the decision makers care about. 
• Leveraging the individual personalities of foundation members that were involved in funding deals was important.  Some investors "were squeaky wheels, some were quiet."  For example, Shorebank would do weekly calls, using the more proactive personalities to get things moving. "The chemistry of the deal team can make a big difference."
• Non-foundation investors had never played on both levels of the risk ladder before.  They had a program need to implement something, say in Africa,
• The "chicken and egg" problem - sometimes in order to get the funds, the investment firms needed to develop a pipeline of companies to invest in.  Often many companies were not ready to take the two to three million dollars needed create a business. 
• In countries with strong government involvement in the economy (e.g. China, Vietnam), things could get set up very fast.  The government would say "though shalt lend" and the money flowed.  And then with a full pipeline of companies to invest in, the government would say "though shalt not lend." 
• "Super transparency is critical."  Every deal needs to have high levels of communication and reporting.  You need to retain your credibility, so communicating the good AND the bad is critical.
• All the investors were starting to see more for-profit/nonprofit interaction than before which they hadn't seen before.

While the technicalities of investing went over my head (I never could figure out what a PRI is), the key learnings sounded very similar to any engagement I've had working with NGOs, international financing agencies (e.g., World Bank, USAID) and governments. 

• Things move very sloooowwwww. Patience is required.
• A ton of proactive engagement is required on the part of the firm trying to make things happen.
• "Understand than be understood" is important no matter what type of engagement you are in. 

I certainly learned a lesson.  Thanks to the panelists for an enlightening panel.

Last week, I attended a workshop on "Franchising in Frontier Markets" hosted by IFC and the John Templeton Foundation.  More than 50 investors, consultants, and practitioners using franchise-based methods to serve BoP markets participated in what turned out to be a very interactive day - very few presentations, and lots of talking around our packed round tables.

There was some debate as to whether we were discussing "social franchising" or "micro-franchising" or whether either of these terms is really necessary.  Maybe plain old "franchising" is enough.  Or maybe the point is to understand and apply relevant lessons, whether we're actually using franchising or not.

Participants seemed to focus on three such lessons:  standardization, replication, and what Sagittarius Brands Chairman and HealthStore Foundation Board Member Sid Feltenstein called "a passion for franchisee profitability." 

We've all heard of examples in which otherwise smart and well-meaning ventures lose focus on the unit economics of their franchisees, micro-distributors, or independent salespeople.  I can think of cases from Colombia to Bangladesh.  Even the celebrated Grameen-Danone joint venture failed to foresee that the Grameen Ladies it intended to sell its yogurt door-to-door weren't getting such a good deal.  They were asked to purchase a perishable product up front, and had to sell 70 cups a day to earn what was considered an acceptable minimum, $0.70.  The joint venture had to rethink its distribution plan.

As Jim Kramer, a more than 30 year veteran of McDonald's, pointed out, "For a franchise system to work, the pie has to be big enough to split between two parties."  This is serious food for thought for enterprises taking franchise or franchise-like approaches in BOP markets, where margins can be paper-thin - especially on "basic needs"-type products.  Will franchisees, micro-distributors, and independent salespeople spend their time marketing low margin, high social value products if higher margin, lower social value products are out there?  We're already seeing soft drinks distributors shifting toward beer, housing materials salespeople shifting toward cosmetics.  Will these trade-offs become even more common now that companies seeking to serve BOP markets are encouraged to leverage existing distribution platforms?

As Scott Lehr of the International Franchise Association pointed out, for franchisors to succeed, they need to be able to establish and enforce standards.  It may be that BOP businesses using largely informal, independent distribution networks will need to formalize in some respects if they want to continue to reach consumers with low margin, high social value products.  But we can't lose focus on the unit economics facing the people that make up those networks. 

We've been hearing the "low margin, high volume" refrain ever since the notion of "serving the world's poor, profitably" first hit the mainstream.  We know we have to get to scale, for economic as well as social reasons.  But as Dalberg's Wouter Deelder reminded participants at yesterday's event, franchising is a strategy for growth, not profitability.  You've got to have a profitable model first. 

Businesses at earlier stages of their journeys - and hybrids that don't intend to be profitable, instead using public or philanthropic funding to subsidize the poorest - can still learn a lot from franchising.  Dalberg, BYU's Jason Fairbourne, and UCSF's Dominic Montagu have spent a lot of time distilling relevant lessons.  Highly recommend their work.

Day 1 of SoCap09, and I was already conflicted.  Sonal Shah's keynote address had ended and there I stood as 800 folks milled about, trying to decide: which of these awesome panels should I choose - and, by association, which will I have to miss?  Fortunately for me, I knew Shital would attend the fantastic Ag Finance panel, while Jocelyn was headed over to learn about Disruptive Innovation.  So I took off for SME Finance in Developing Countries...and I'm glad I did.

The panel featured ANDE's Randall Kempner, Lemelson's Julia Novy-Hildesley, CGD's John Simon and IFC's Dan Runde as moderator.  Dan did a great job setting the stage, noting that 97% of all emerging markets jobs are created by small and medium enterprises (SMEs) - a staggering statistic.  With this in mind, the IFC has a SME Venture Fund (PDF) up and running for 8 key countries (Sierra Leone, Liberia, Democratic Republic of Congo, Central African Republic, Yemen, Bangladesh, Nepal and Bhutan).  They also support the Grassroots Business Fund (which spun out of the IFC) and publish the SME Toolkit, which has 4 million visitors every year.  It's good to see the big boys like IFC focusing on small and medium enterprises - a welcome change from the multilaterals' focus on big, often extractive, industries.

If you think the IFC is doing a lot to support SMEs, you should check out ANDE - the Aspen Network for Development Entrepreneurs.  Long-time NextBillion readers have heard this before - ANDE supports the ecosystem around small and medium enterprise development, from funders to intermediaries to partners/experts and everyone in between.  Randall Kempner, ANDE's Executive Director, has had a busy year, during which he's distilled 3 common challenges faced by most SMEs serving the poor in emerging markets:

1. Human capital - having the right staff, with the best skills and the most up-to-date information, is make-or-break.  You can have a great business model, but if you can't execute on it, you're wasting your time.
2. Knowledge capital - specifically, being able to navigate the policy landscape and gain market access where subsidies, monopolists and corrupt local officials often stand in your way.
3. Money - of course! But SMEs in developing countries face special challenges, including artificially high interest rates (due to an overly cautious risk perception by most local banks) and the inability to access loans at all, most of the time (thanks to unrealistic collateral requirements.)

I'll be interested in see how Randall, through ANDE, helps his members tackle these problems as we transition into 2010.

Julia Novy-Hildesley, meanwhile, sits in a similar but different seat - she runs the Lemelson Foundation, which has committed more than $140M to education, innovation and invention.  Where does that intersect social enterprise and the base of the pyramid, you might ask?  Answer: at the start-up phase.  Lemelson sponsors the $500K Lemelson-MIT prize and also supports Ashoka and KickStart, both of whom are using innovation and invention to improve the lives of those living at the BoP.

During her remarks, Julia noted that joblessness leads to a lack of hope, and a lack of opportunity - so Lemelson funds startups, with the idea that innovation and invention beget jobs.  In addition to Ashoka and KickStart, they've funded SELCO, first with a grant, then a loan guarantee, and finally with an equity investment.  This flexibility and patient approach allows Lemelson to support an enterprise from its early stages (the grant to Selco was for R&D) to pre-profitability (loan guarantee) to growth (equity).  They've also taken 1st loss positions in Calvert Foundation and D.Light Design.  It's good to see a foundation use its philanthropic power to add flexibility and patience to a capital market that often lacks those two key characteristics.

The final speaker was John Simon, currently a Visiting Fellow at the Center for Global Development but formerly the Executive VP at the Overseas Private Investment Corporation.  While at OPIC, John worked to finance SMEs in conflict and post-conflict areas - Afghanistan, Sierra Leone, Pakistan, Liberia, etc.  Talk about a tough business environment - but he offered some important lessons that are applicable to conflict and non-conflict BoP markets.

First, business development services - technical assistance to the inside-the-beltway crowd - is paramount.  In Liberia, for example, OPIC facilitated funding for 8 promising enterprises.  7 of the 8 failed within a year.  A later round of investment, coupled with business mentoring and operational advice, saw 7 of 8 companies succeed.  In short: the money alone won't cut it.

Second, when investing in SMEs in developing countries, it's key to understand your exit options from the start.  Unlike in developed markets, there aren't as many oppotunities for public offerings - so you're looking at conversion options, promoter buy-back, or sale to a private holder.  Knowing the potential exit market when you first invest is key, according to Simon.

Overall, the panel was an important line in the sand, demonstrating that SME finance in developing countries IS possible, and that the sector is beginning to distill some how-to's (and how-not-to's) as it grows.  I'm glad I went - and I'm glad I managed to get there early - the room was packed.  Among the audience, I noticed ISFC's David Kyle, Microvest's Gil Crawford, UNDP's Sabha Sobhani, Ushahidi's Erik Hersman, Salesforce's Steve Wright and many, many more.

What is the future of the impact investing marketplace? Where will the social capital market be in 2010? Those with the unenviable task of taking on this questions in the Wednesday morning plenary at SOCAP09 where Charly Kleissner from the KL Felicitas Foundation, Dan Crisafulli from the Skoll Foundation, and Amit Bouri from the Global Impact Investing Network (GIIN). SoCap convener Kevin Jones moderated.

Matthew Bishop wrote in the Economist before the conference that SOCAP08, "proved long on optimism but rather short on coherence." Our 9am futurists were skeptically optimistic, but argued that growth and maturity for this field could only come through dedicated collaboration. This message reinforced what Willy Foote of Root Capital said the night before that we "need to be pathologically cooperative with would-be competitors." Thankfully each panelist has collaboration written in their job descriptions and are all in positions to help drive coherence and scale to the field.

Kleissner started with a sobering note about the strained carrying capacity of our planet. With our population growing, the reality of scarce resources opens up opportunity for actors to maximize return at the expense of sustainability - a tough trend to counter. He followed with the acknowledgement that impact investing is still a rounding error in the current capital market and "CSR in the U.S. is merely a marketing band-aid." Further, the fiscal crisis has wounded all portfolios and as Kleissner noted, "the people are on the sidelines last year are still on the sidelines - and they are more scared."

At the same time leaders in the space are "stepping on the gas" and increasing involvement. KL Felicitas' portfolio as one example has 45% of investments in impact investments today and is targeting 100%. By making their portfolio strategy and results open to all, Kleissner is both inspiring and enabling others to develop or increase their mission and program related investments. Kleissner predicted a tipping point for impact investing in 2015 reaching a 5-15% of the total capital markets (a bold claim seemingly out of line with his other predictions, but I'd love if he proves correct).

Amit Bouri built on these comments while being clear that "while he was not trying not to paint too rosy a picture, there was clear momentum we can build on as a field" There was evidence the impact investing field was going in both depth and breadth. Players like responsAbility and Gray Ghost Fund continued to raise capital and post returns even in the depth of the downturn. Mainstream players like TIAA-Cref, Prudential, JPMorgan Chase and others are increasing their impact investment activity. There has been a greater level of public-private partnerships and many more deals referred to in the Monitor Institute report of 2008 as "Yin-Yang deals."

One great example of such a deal is how AGRA and other partners made a $10 million loan guarantee fund, allowing Standard Bank to make $100 million available for lending over three years to African small-hold farmers. While impact investing is still an underleveraged niche, coordination and sophistication is growing.There's a long way to go.

With proliferation of funds, Bouri warned "we'll see increased scrutiny and demand for data on impact investments." As Brian Trelstad of Acumen Fund noted that day, "Right now our investors care that we care about metrics, they don't care as much about the metrics themselves. And that will change." To solve this problem and ultimately drive more capital to impact investments, the GIIN (of which I am an employee as a disclaimer) and its partners including B Lab, Acumen Fund, PricewatershouseCoopers, Deloitte, The Rockefeller Foundation and others have been developing standards for measuring and communicating the social impact of investment known as The Impact Reporting and Investment Standards (IRIS).

These standards will be key to improving the effectiveness of impact investments through performance measurement, while allowing for benchmarking on social metrics in addition to financial returns. Bouri added that field-building projects such as IRIS will only succeed with the support and adoption from leaders of the field. Just as the growth of the venture capital industry took committed investment from leaders and academics to grow and scale, the impact investing community will need similar commitments.

Dan Crisafulli, perhaps the least rosy of all, reminded us to "keep in mind the tough realities." Our current problems are getting worse (e.g., climate change, global conflict) and we won't return to the wealth generation of the past. Crisafulli preached that the promise of social impact is not to make us feel better or give us a fuzzy feeling from doing good, it is to scale social impact with major amounts of capital to reverse trends on major global problems. While he was preaching to the choir on this day, Crisafulli's articulation was a reminder of the messages we need to bring outside of the confines of an insider conference.

So how can we get to a brighter future Crisafulli asked? "Social capital" will not be sufficient  - we'll need to mobilize dramatically more support from the government and private sector. On the private side, we need more highly scalable business models beyond microfinance drive investment capital at the scale that is needed. As far as business models and transparency, Cristafulli stated "businesses either need to be paid for their social impact or someone else needs to be paying for it." If the latter, the social subsidy needs to be made clear and not hidden. Further transparency and lower transaction costs can also create a more efficient "conveyer model" from seed to growth capital to later stages of investment capital that doesn't exist today. On the government side, the bigger value will be from policy rather than funding (the size of the Social Innovation Fund on Day 1 was a stark reminder of this fact).

All panelists agreed that growth of this industry is not in any way inevitable - it instead will depend on the willing commitment from leading actors to build industry infrastructure and build a unified voice to lobby for specific policy/regulatory change. Just as important, we'll need to share best practices, business models, deal, and metrics.

Greater transparency will not only drive search and transaction costs down for the current players, but also help attract new players. Kleissner stated how it "amazed him that his rich friends didn't fire their advisors and seek out new models" when they lost 40% of their money with current advisors. Unfortunately, the endowment effect and status-quo bias and other realities of human nature are hard to shake - they give out Nobel Prizes for studying how people make decisions that appear inconsistent with standard economic rationality. (Note: See behavioral economist Dan Ariely's TED Talk for an entertaining explaination).

While we can't change human nature, we can work together to achieve and then showcase the promise of impact investing to those still on the sidelines. While the crisis has shaken the confidence in established investment approaches, we need a louder and more unified voice to change the minds that matter.

We all use cell phones, and the majority of us acknowledge the immense potential for the mobile platform as a tool for development and empowerment.  But do we really understand all of the complex infrastructure and mechanisms for getting that call or SMS to and from the palm of our hands?

The "Making Money on Mobile in the Developing World" panel at SoCap 09 made it clear that in order to build a sustainable and scalable mobile phone solution for development, there needs to first be in place a thorough understanding of mobile ecosystem, including the industry value chain, the characteristics of the major players, government regulation, and the potential future of the industry.

Esteemed panelists ranged from long-time mobile industry insider and venture capitalist Arun Gore of Gray Ghost Ventures, to entrepreneurs Gavin White of Resdida and Ashifi Gogo of Sproxil.  The panel was also expertly moderated by Alison Bloch, an mHealth strategist for the GSM Association's Development Fund.

The panel was both high-level and technical, and yielded some key insights for social entrepreneurs interested in using the mobile phone as a tool in their ventures.  The first was that mobile ventures must not be seen specifically as "social" ventures.  Often times large industry players, like telecom carriers and partners like pharmaceutical companies, won't take a non-profit seriously, and rarely begin to pay attention unless they see a profitable value proposition embedded in the solution for them.  The lines between financial and social impact need to be purposefully blurred in the mobile industry.

The reason for this is that there are many levels of bureaucracy and complex infrastructure to traverse in order to make changes to enable certain solutions.  Many large mobile corporations are inherently bound by inertia and status quo, and in the end, despite social impact and potential lives saved, they are the controllers of the network and any scalable solution will have to go through them.

For this reason, Ashifi urged solution developers to engage their target mobile carriers very early on the process, and to try to demonstrate their value to the carriers well before they are ready to roll out their solution.  If not done well in advance, this could lead to frustrating lags and roadblocks when launching the venture.

But who are the decision-makers to whom you must demonstrate value? Most people typically target the CTO or CMO of a carrier, who may agree to a concept in theory, but Arun asserted that in order to get things done you need to sell your concept to the individuals who manage the carrier's data center and get their buy in, since these are the folks that will be most impacted by the connectivity and churn issues that result from changes to the system.

Another insight was to be explicitly aware of the environment you are working in, particularly the habits and patterns of your end user, and the mistakes made in the past in the ICT industry. Indeed, a common thread throughout the entire SoCap 09 conference was that innovative solutions can often be sourced directly from those who are struggling with the problem, and this is no different in the mobile space.  According to Ashifi, the best way to help commercialize a solution is to speak to and observe the mobile phone utilization patterns of the communities you are looking to impact as much as possible.  Don't disregard the farmer with the battered old Nokia phone from 1998 - this farmer uses that phone for everything; it is his social network, news source, business tool, and information engine.  

Gavin echoed the sentiment that solutions need to be personalized and empathetic to the end user.  He brought up an example of the time e-mail was first introduced, and how companies were interested in a mass-blast approach that didn't take into account specific group's needs and interests.  He warned that solution developers must avoid this mass, impersonal approach that is starting to rear its head again as mobile becomes more ubiquitous.  Solutions will only stick if there is value being provided to the end user where and when they want it.
 
The panel concluded with a discussion of where this industry is moving in the future, and what are the changes and innovations that will arise that will impact the sustainability of ICTD ventures.  These are some of the trends that will influence the industry:

• Cost of SMS will continue to decrease:  In the Philippines, innovative carriers have gotten the price of an SMS down to approx 1 cent, and are still making a profit due to increased volumes as a result of reduced cost.  This trend will likely be followed in other countries, and this will make ICTD solutions more cost effective.  (Conversely in the U.S., SMS costs 4-5x more than most developing countries, not to mention the double fee incurred by both sender and receiver.)

• Maturation of the industry will lead to more diverse and specific core competencies:  Like other industries, as the mobile industry continues to mature and carriers grow larger, more businesses will emerge with niche roles and specific core competencies, such as tower operators, spectrum owners, application aggregators, etc. This will create many more opportunities for social ventures to integrate at various levels of the value chain.

• More durable hardware:  As phone manufacturers and carriers continue to compete on market share, particularly on the "last-mile" customers in more rural and inaccessible areas, they will focus on developing more durable, appropriate and affordable hardware solutions (see: solar powered mobile phone) for these customers.

Things that the panel hoped to see in the industry as it evolves that would create a better environment for mobile solutions for development include:

• Governments easing fees and regulations that place a heavy financial burden on the mobile industry, such as landing rights.  These fees prevent more affordable pricing due to needing to recoup these initial investments.

• The rise of consumer advocacy groups to protect consumer rights and give them a voice in how the industry evolves to suit their needs.  Currently, despite the volumes of end users, there is not enough cohesion among them.

• Heightened compatibility between hardware, software and carriers in the mobile industry to allow interoperability and potential to scale for mobile solutions.  For example, the cloud-computing concept could transfer to cloud-telephony.

In the end, Alison brought the discussion back to what mobile ventures are all about: information.  How do we identify, pool and disseminate the information that is most valuable to all the distinct stakeholders?  And who will own the information that is generated from the huge volumes of mobile transactions as new applications emerge? To make money from mobile solutions for development, value will be inevitably be derived from creative ways to address these questions.

For the SoCap community, the success of microfinance is a well known story: over the course of nearly 40 years, what started as a bright idea by a Bangladeshi economist has become a global industry that improves millions of lives per year and provides a range of profitable investment opportunities for socially minded investors.

The question on the collective SoCap mind is "What's next?" Might there be other opportunities at the Base of the Pyramid for providing non-financial goods and services that could also offer returns for investors? Can the vast platform built by microfinance be leveraged to provide these services to marginalized communities? If so, which services should be prioritized, and how long will it take for them to reach scale?

With the afternoon sun brightening the room and a light ocean breeze passing through the open windows, the participants in last Wednesday afternoon's "Beyond MFI" panel turned their attention to these burning questions. April Rinne of Water.org moderated the lively discussion between Steve Hardgrave of Gray Matters Capital, Gil Crawford of Microvest, Gary White of Water.org, and Patricia Safo of JCS.

Steve kicked off the panel by explaining how Gray Ghost began to invest in independent private schools scattered throughout the slums of Mexico. Many poor families already pay fees to send their children to these schools, which they consider better than government-run schools. With additional investment, school proprietors can invest in improving classrooms, supplies, and teaching staff, thus attracting more students and improving the quality of education for the poor.

Patricia advocated for MFIs themselves to play an increased role in development; in Ghana, she believes that MFIs can identify promising sectors of the economy, pressure the government to regulate those sectors, provide loans for SMEs to operate within them, and target companies that can produce goods locally to create vertical supply chains within the country.

Water is another area in which the microfinance model can be leveraged; by providing loans to build toilets and connect to water utilities, MFIs can improve the health and productivity of communities while making a healthy return. Despite this compelling opportunity, Gary said that most MFIs have been slow to embrace this new line of business for fear that it might fail. However, with $1M in grant capital as the catalyst, Water.org was able to raise an additional $4M from the capital markets for MFI partners to make loans for access to water.

Rather than focus on one issue, Microvest has bifurcated their portfolio, continuing with classic MFI investing on one side and investing in other new BoP initiatives on the other. Along with Stu Hart, Gil conducted research on potential investments, but found that many promising BoP initiatives were still 7-15 years behind microfinance in terms of scale and returns.

In my opinion, new BoP initiatives will require significant investment if they are ever to catch up to microfinance. We cannot forget that the microfinance sector was built on the back of millions of dollars in donated capital.

I agree with Gary that philanthropic capital is necessary to allow for the incubation of new initiatives beyond microfinance, and that this capital must have the flexibility to allow for the trial and error that is inherent in launching new businesses in difficult markets (which Gary argues that much donated capital still does not allow for). These donations can catalyze what may later become investment opportunities at the Base of the Pyramid, but will donors be willing to invest philanthropic dollars that will provide impact investors a return later down the line? With all the rush towards impact investing, are there still donors out there willing to provide seed capital that expects no return?

If the social capital markets are serious about "social" returns, the market will need to provide significant philanthropic capital to provide new ventures the runway capital (hence the takeoff photo at the head of this post) they need to get to scale. While there may be certain sectors and projects that can be funded through investment capital from the start, and the lessons learned from microfinance may indeed speed up the trajectory to scale for BoP ventures, there are many ventures with potential for major social impact and profit, such as VisionSpring, that will never get off the ground without significant donated capital to play the critical R&D role.

The Base of the Pyramid has been largely ignored by the private sector because it not conducive to large scale and profitability within a reasonable time frame for most investors. If, as a sector, we can view nonprofit BoP ventures as seeding markets for the private sector - and provide sufficient donated capital to allow them to grow to scale - the social capital markets have the potential to revolutionize the quality of life for billions of people.