NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

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.”And a big reason why BoP ventures, like my friend’s company, are not funded by large government agencies or private foundations is because the BoP approach has not yet fully become a mainstream poverty alleviation approach. If the BoP perspective is going to stick and grow, it will need more than just a few success stories. To see a shift in the allocation of resources towards pro-poor enterprises, current BoP ventures must move from its fledgling state and into maturity. And by this I mean towards the generation of millions of the right transactions.

But can we start scaling if we are not sure what are the right transactions? Shouldn’t we first figure out what should be scaled before actually scaling? There is no doubt that we as a field need to figure out our real impacts on poverty alleviation. But movements generally don’t happen in staggered ways. Impact evaluation and scaling happen contemporaneously. I think the key is to ensure that we have feedback loops and accountability baked into the system as we grow enterprises.

I recently had lunch with Marcos Neto, the Central America Program Director for CARE USA. As we were discussing CARE’s activities in Central America, we ended up talking about the steps needed to make a real dent in poverty. Though many BoP ventures may be able to address one facet of poverty (e.g. access to clean water, affordable credit), none can be expected to be the poverty panacea. This proved to be a helpful reminder to me. I’m sure it is really easy for all of us reading this blog to be BoP cheerleaders. “BoP all the way!” Unfortunately, this can easily turn into, “BoP is the only way!” Which would be exactly that trap that so many other poverty alleviation movements have fallen into – and have thus failed.