Can remittances be more than simply cash-to-cash funds transfers? Indeed, the “productizing of remittances” is an approach that looks at the value chain of money flows to identify situations where the desired final output is not cash but the acquisition of tangible products or services. It is a product development and delivery process in which remittances are directly turned into the value for which the money is intended.

The benefit of this approach is its greater economic impact compared with traditional cash remittances. The cost of the money-transfer element of the transaction to the sender is virtually eliminated, thus increasing the buying power of the remittance. Furthermore, the sender maintains more control over the use of the remittance, thus lowering waste and misuse of the money. The productized remittance approach can also give senders more options for managing their money, including financial services such as bank-based savings accounts, loan-based purchases, and access to capital.

By Jeremy Khan

Bapi Das, seated next to an open sewer in a teeming slum on the outskirts of this Indian city, combs his hand through his hair, smooths his moustache, and prepares to enter the global financial system.

Das, a 42-year-old commercial painter, grins as a worker for a local micro-finance group frames his face with a digital camera and zooms in. It is an important moment. His photo will adorn a smart card that, with help from a mobile phone and a fingerprint reader, will allow Das to store money electronically, make small cash withdrawals, and send money to his family on the other side of the country. It is the first bank account he has ever had.

This might seem like a classic example of the Third World struggling to catch up with the First. After all, people in the United States and Europe have been using ATM cards and the Internet for years to perform the simple banking tasks Das is only now able to do. But look again: The technology used to bring slum-dwellers like Das their first bank accounts is so advanced that it isn't available to even the most tech-savvy Americans - at least not yet.

Soon, however, it may help you purchase groceries, withdraw cash from an ATM, or ride the T. Already in the past year, Citigroup has taken a mobile banking system it pioneered in India and brought it to the United States. And a host of other companies, from Ford to Microsoft, are following suit: piloting new technologies and ways of doing business in the developing world, and only then bringing these products and services to wealthier consumers in more mature markets.

This represents a stunning reversal of the traditional flow of innovation. Until recently, consumers in the Third World also had to tolerate third-rate technology. Africa, India, and Latin America were dumping grounds for antiquated products and services. In a market in which some people still rode camels, a 50-year-old car engine was good enough. Innovation remained the exclusive domain of the developed world. Everyone else got hand-me-downs.

But today, some emerging economies are starting to leapfrog ahead. Why build a network of telephone wires out to remote areas when you can go straight to a cutting-edge mobile network at a fraction of the cost? Why burn fossil fuels for electricity and cooking if cleaner - and in some cases cheaper - alternatives, like solar and biogas, are available? Why electrify rural villages with incandescent bulbs if longer-lasting, environmentally friendly options like LEDs or new fluorescent bulbs exist? In many cases, it is mature markets like the United States and Europe, tethered to older systems, that find themselves playing catch-up.

There are numerous industries in which the new new thing is being designed for the developing world, and only later reaching the United States or Europe. Motorola's Motofone, designed with emerging markets in mind, is thinner than its popular Razr, gets up to 400 hours of standby on a single battery charge, and has a screen specially designed for text messaging that works using reflected light, with no need for an internal lamp. Oh, and it will retail for just $30. Intel has begun field tests of a new wireless broadband standard that could connect billions in the developing world to the Internet cheaply - and, if it works, will probably become the standard for the rest of us. Cheap combination drug therapies that are easier for poorer, less educated patients to follow are pioneered in the developing world before arriving in our medicine cabinets. Improvements in water treatment and clean energy - for instance, producing biogas from household waste - are also emanating from the developing world.

To achieve the growth rates and returns their shareholders demand, companies have increasingly begun chasing what C.K. Prahalad, a business professor at the University of Michigan, has called "the fortune at the bottom of the pyramid" - the vast aggregate purchasing power locked away in the 4 billion people who make up the world's poor. And as they do, companies are confronting the unique challenge of making high-tech products cheaply enough to make a profit. In some cases, this means shifting jobs for talented designers and engineers to the developing world - not just to save labor costs, but in order to better understand the markets they are now trying to reach.

"Developing markets offer the best opportunity for global firms to discover what is likely to be 'next practice,' as contrasted with today's best practice," Prahalad has written. "The low end is a new source of innovation."

Kanta, a stooped, middle-aged woman in the Delhi slum of Harsh Vihar, works part-time helping her children in their shop. What little she earns is mostly spent on food. Any money she manages to save, she hides in her apartment or on her person, where it could easily be lost or stolen. She earns no interest, of course. There are no commercial bank branches or ATMs in Kanta's neighborhood. (Like many Indian women in this area, she uses only one name.) Most banks wouldn't want her business anyway: it would cost them more to service her account than they could make off her small transactions.

Indian officials have made it plain that they’ve given up using the annual diaspora conclave as a platform to woo investments of overseas Indians.

"The investment or money has not been forthcoming. Therefore, we decided that we will not ask for any investment this year (at Pravasi Bharatiya Divas 2008) but seek partnership from NRIs for philanthropic projects," Overseas Indian Affairs Minister Vayalar Ravi told the media recently.

In India, the contributions made by migrants are not readily apparent in economic terms. Overseas Chinese, for example, accounted for 80 per cent or more of the inward foreign direct investment into China in the 1980s and early 1990s, when that country opened up. By contrast, Non-resident Indians (NRIs) accounted for 10 per cent or less of inward FDI after India opened up. Most of the capital sent to India by NRIs has been personal transfers to family and friends, not FDI.

In the past, NRIs have been critical of the ‘hard sell’ on investment as they do not come to the Pravasi Bharatiya Divas as investors with millions of dollars but mostly as professionals to share their expertise and experience in India's forward march.

"We have found that there has been too much noise about investment and very little actual investment," says Ravi. According to him, only around five per cent of FDI in India is from NRIs. "Yet I have met many people, salaried people, not millionaires, who want to contribute to improving conditions in their home state," Ravi has been quoted as saying.

It was apparently with this thought that the government proposes to announce the setting up of an India Development Fund (IDF) at the NRI conclave to be held in New Delhi on January 8 and 9. January 9 marks the day the father of the nation Mohandas Karamchand Gandhi returned to India from South Africa.

The India Development Fund will reportedly be a not-for-profit trust, which will provide a single window to direct philanthropy funds to the social sector. The sectors have been identified keeping in mind the objectives of the 11th Plan, and these are mostly in micro finance, women’s empowerment, health and education. According to the ministry, reputed NGOs will be engaged and international accounting standards applied to the funds to demonstrate proper utilisation to contributors.

The Credit Suisse Thought Leadership Conference 2007, organized by ISP for key clients, took place on November 20 in Zurich under the slogan "Entering the Next Level." One of the speakers was Professor C. K. Prahalad from the University of Michigan, USA. In an interview he talked about microfinance and market potential at the bottom of the income pyramid.

Cornelia Stauffer: Why are you campaigning for the market at the bottom of the income pyramid?

Professor C. K. Prahalad: Until a few years ago, multinational companies primarily focused their efforts on the one billion people who live at the top of the global economic pyramid. The other 80 percent of the world’s population that formed the base of this pyramid were ignored. With my work I want to draw attention to these 4-5 billion people, the majority of whom survive on less than two dollars a day. They have purchasing power and offer large companies the opportunity to engage actively and profitably in the latent market at the bottom of the pyramid.

Credit Suisse has been engaged in microfinance since 2003. What do you think about microloans aimed at low-income customers?

Poverty has three causes: First, poor people do not have the same access to information on markets and prices as rich people. Second, there is a lack of access to products of world-class quality. And third, they do not have access to credit on reasonable terms. So microfinance plays a key role in combating one and may be two of these three problems. Microloans can enable families to improve their livelihoods.

What is your opinion about microcredit for small and medium-sized companies (SMEs) in emerging markets and at the bottom of the pyramid?

By Robert S. Katz & Ana P. Escalante

For Babu Rajan, a fisherman in Pallipuram, India, a new mobile phone brings substantial improvements to his daily existence. Rajan used to arrive at port with his daily catch and take whatever price the fish dealers were offering, according to Washington Post reporter Kevin Sullivan. If he tried to find another buyer with a better price it would take too long, and his fish would spoil. Local buyers knew these fishermen had no choice, and they colluded to keep prices artificially low.

Now, thanks to ever-cheaper mobile phones, fishermen like Rajan call several ports and dealers while still at sea and find the best prices before deciding on a market. Armed with information, Rajan reaches port with the best offer, maximizing his profits and contributing to a more efficient marketplace overall. A study of market performance of South Indian fishermen by Robert Jensen and recently published in the Quarterly Journal of Economics showed that once mobile phones became available to Rajan and his compatriots, fishermen’s profits rose by eight percent on average and consumer prices fell by four percent on average.

The many in-store Mexican banks have only begun to scratch the surface of the unfulfilled demand for financial services among low-income Mexicans. Or so hope Banamex, Soriana, and Wal-Mart Mexico, the latest entrants into the consumer credit bonanza in Mexico. The success of Banco Azteca, Coppel and other retailers who opened financial services outlets in their branches has attracted a wave of new competitors.

Migrants around the world sent $301 billion to family members back home last year, with India edging out Mexico as the world's top recipient, a U.N. agency said Wednesday.

This verdant swath of southern Indian coastline is a famously good place to be poor. People in the state of Kerala live nearly as long as Americans do, on a sliver of the income. They read at nearly the same rates.

At least three or four times a year, Saher sends a portion of her salary home. The money helps her parents buy necessities, and even creates a bit of savings in a place where the few jobs that still exist often don't pay for months, if at all.

Once a month 28-year-old Ignacio Moreno (not his real surname) walks to a small storefront on Chicago's West 26th Street and plunks down $380. It's not the rent for his two-bedroom apartment, where he lives with his wife and two kids, but an installment payment on his dream home back in Mexico. A bakery employee who works the night shift since the family came to the U.S. illegally in late 2003, Moreno is paying for $10,000 worth of cement, gravel, and bricks for the four-bedroom house he's building on the outskirts of the Mexican capital.