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AROUND 1.5 billion people, or more than a fifth of the world's population, have no access to electricity, and a billion more have only an unreliable and intermittent supply. Of the people without electricity, 85% live in rural areas or on the fringes of cities. Extending energy grids into these areas is expensive: the United Nations estimates that an average of $35 billion-40 billion a year needs to be invested until 2030 so everyone on the planet can cook, heat and light their premises, and have energy for productive uses such as schooling. On current trends, however, the number of "energy poor" people will barely budge, and 16% of the world's population will still have no electricity by 2030, according to the International Energy Agency.

But why wait for top-down solutions? Providing energy in a bottom-up way instead has a lot to recommend it. There is no need to wait for politicians or utilities to act. The technology in question, from solar panels to low-energy light-emitting diodes (LEDs), is rapidly falling in price. Local, bottom-up systems may be more sustainable and produce fewer carbon emissions than centralised schemes. In the rich world, in fact, the trend is towards a more flexible system of distributed, sustainable power sources. The developing world has an opportunity to leapfrog the centralised model, just as it leapfrogged fixed-line telecoms and went straight to mobile phones.

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It was merely a coincidence that the year after C K Prahalad's bestseller, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits (2004), that Vikram Akula returned to SKS Microfinance, leaving a consultancy job at McKinsey & Company in Chicago that he took a year earlier.

Akula, a Fulbright Scholar researching poverty and a student of arts, had founded SKS Microfinance as a non-profit venture in late 1997 with funding close to $52,000 raised from 357 people. He converted it into a for-profit company in 2005 during his second stint. Success came rather swiftly. In 2006, Akula was named by Time magazine as one of the world's 100 most influential people.

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We are witnessing a sea change in the way society's problems are solved, work is performed, and businesses grow. Collaborations between corporations and social entrepreneurs can create and expand markets on a scale not seen since the Industrial Revolution. These markets will reach everyone, but especially the 4 billion people who are not yet part of the world's formal economy. They will offer new and remarkable products and services in sectors as diverse as education, transportation, and finance.

You may be skeptical of this claim, and with good reason. The citizen sector-the term we use to define the millions of groups established and run by mission-minded individuals across the globe who are attempting to address critical social needs-has long been regarded as understaffed and inefficient. But that has changed. We work with some 3,000 social entrepreneurs worldwide, and over the past 30 years we've seen the citizen sector catch up with business as it has increased its productivity, size, and reach. Its organizations are attracting talented and creative leaders, and their work is changing the game in critical industries and areas such as energy and health care.

For-profit organizations today have an opportunity to collaborate with citizen-sector organizations (CSOs) on large-scale problems that neither group has been able to solve on its own. The power of such partnerships lies in the complementary strengths of the participants: Businesses offer scale, expertise in manufacturing and operations, and financing. Social entrepreneurs and organizations contribute lower costs, strong social networks, and deep insights into customers and communities.

But to work together effectively, they must focus on creating real economic as well as social value. We believe they can do so by forming what we call hybrid value chains (HVCs), which capitalize on those complementary strengths to increase benefits and lower costs.

This trend has been developing for years, and we've participated in pilot projects that have delivered impressive results and promise extraordinary growth. HVCs can now be found in many industries all over the world. Collaboration between corporations and CSOs has reached a tipping point: It is becoming standard operating procedure. Indeed, we believe that if you're not thinking about such collaboration, you'll soon be guilty of strategy malpractice.

The Vibrancy of the Citizen Sector

Before we explore the inner workings of hybrid value chains, it may be helpful to look at how we got here. In the 1700s business became entrepreneurial. Upstarts devising faster and more-efficient ways to produce goods ushered in the Industrial Revolution. They introduced innovation after innovation, ultimately changing the world. After remaining flat for a millennium, per capita income in the West rose by an average of 20% in the 1700s, 200% in the 1800s, and 740% in the past century. But while the for-profit sector enjoyed sweeping progress, the citizen sector languished. It faced little outside market pressure and relied heavily on funding from governments that, as monopolies, feared competition. CSOs felt little push to innovate; as a result, they fell far behind in productivity, performance, pay rates, confidence, and reputation.

By 1980 the imbalance between the business and social sectors of society had become intolerable. (We had great TVs but lousy education.) New opportunities emerged across the world (except where governments got in the way), and the citizen sector restructured itself to become entrepreneurial and competitive. It rapidly increased productivity and scale, lowering the cost of goods and services it provided relative to business's offerings.

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Steve Daniels, the founder of A Better World By Design and co-creator of Maker Faire Rhode Island, just published a book, Making Do, based on his research on informal economies in Africa. The shocker? He just graduated from college this year and is 21 years old. Here's how one youngin' is making inroads in the humanitarian design field.

How did you become interested in innovation in Africa's informal sector?

Like many young designers, I've been passionate about technology to promote sustainable development. For a while I studied appropriate technology, a field that since the 1970s has sought to deliver life-saving and income-generating tools to communities throughout the developing world. However, countless accounts have shown that most projects don't sustain themselves and don't scale. That's partly because those who design the technologies are so far removed from those who make, own, and use them. I took a trip to Kenya and Ghana to investigate how we might bridge this gap and quickly realized that Africa has a huge pool of untapped talent--the technologists of the informal economy. The informal economy comprises unregulated and unprotected, but legitimate microenterprises--more than 90 percent of non-agricultural employment in Kenya. Informal craftsmen, known as jua kali in Kenya, make their livelihoods by manufacturing products in the resource-constrained environment Westerners struggle so hard to adapt to. Their businesses thrive due to the complex networks among traders and producers. The indigenous talent of the jua kali will be essential to developing truly appropriate technologies and their networks the key to sustaining and scaling them. Making Do breaks down the skills and networks of the jua kali in order to understand the role craftsmen and collaborators like us might play in a unique form of industrialization for Africa.

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Impact investing encapsulates a growing sector of private and public funds that finance for-profit companies focusing on services and products for the poor. It has attracted increasing investor and policymaker interest in recent years, but its development still faces hurdles.

Achievements such as those Muhammad Yunus, founder of the Grameen Bank in Bangladesh and Nobel Peace Prize winner in 2006, and Banco Compartamos, which attained an IPO in Mexico, creating attractive returns for investors, captured the attention of financial markets and policymakers in the last decade. Yet while microfinance institutions are a $25 billion market worldwide, according to Monitor Institute calculations, they represent only half of the dollars in impact investing worldwide:

--An important challenge for companies in this sector is to offer products and services that low-income populations require, which range from clean water to solar-powered lamps to mosquito nets, at prices they can afford.

--Although margins tend to be low, given clients' low purchasing power, private sector investors are often attracted by the scale of the potential market at the "base of the pyramid."

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If dodgy emails offering millions in return for your downpayment to repatriate a stranded Nigerian astronaut do not tempt you, then maybe this will appeal to your speculative side. A hectare of fertile African land, a 99-year lease, and all for $1 a year. Think about it: crop prices are soaring, land is appreciating and import-dependent rich nations virtually guarantee you a never-ending export market.

It's starting to sound like that Nigerian astronaut deal.

But this is not a scam. Sadly for anyone who happens to live on that farmland there are countless examples of governments handing it over at bargain prices to foreign investors, ranging from hedge funds to biofuel producers.

Critics call it "land grabbing". The trend of buying or taking out long-term leases on land first came to prominence during the 2008 world food crisis. As food riots raged from Mexico to Bangladesh, speculators and countries with their own food security fears quietly sealed deals with African nations. Others call it "neo-colonialism". Expanding, industrialising populations in need of plentiful food sources with cheap workforces take over vast swaths of Africa.

But proponents, including some at the World Bank, see overseas investment in foreign farmland, particularly in Africa, as a way to modernise agriculture there, bringing more food and profits to the local population.

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I disagree with Nobel laureate Muhammad Yunus.

This is no small matter. For good reason, Yunus is a living legend among social business types. He pioneered microcredit to the poor at a time when my professor C.K. Prahalad (alas, no longer alive) had not even coined the phrase “bottom of the pyramid”, let alone written the best-selling book about finding fortune there.

Yunus believes that markets have a role in social business, but that role is limited to one that makes the business “just sustainable”. In Yunus’ view, social businesses can be profit-making, but that profit has to be ploughed back into the company. Beyond that, markets should be kept at bay.

In an ideal world, social business shouldn’t exist. If all the organized actors in economic society—the government, businesses and philanthropies—did their job well, this hybrid animal called social business would not be necessary. The government would ensure fair play and a safety net, businesses would provide employment, make available goods and services as well as pay taxes, and private philanthropies would support causes beyond what the government can do. Then why all the fuss and buzz?

In India, social businesses are required precisely because the organized actors do their jobs imperfectly. Government schemes are grand and usually start with good intentions, but the implementation is most often quite poor. Through improper design, shoddy workmanship, insufficient supervision and debilitating graft, many efforts come to naught. Businesses do play a constructive role in our economic society, but recent trends point to an alarming type of crony capitalism. Firms in industries that require government access—real estate, mining, oil and gas, infrastructure—appear to be hogging a disturbing piece of the economic action. This crowds out those businesses that seek to solve a social problem. The impact of philanthropies is quite limited. Indian philanthropy clings to its deep-seated cultural roots—bhiksha, zakat and the tithe play a role in enabling religious causes, but few large-scale social ones. And Western-style focused private philanthropies have only just arrived.

And so, social business.

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Omidyar Network, the philanthropic investing firm of eBay Inc. founder Pierre Omidyar, plans to plough as much as $200 million into India in the next five years. The organization's target: businesses and non-profits that can make a "social impact" and improve life for people on the lowest economic rungs.

The organization has had boots on the ground in India for about a year and is set to launch a formal office in Mumbai in September, said Jayant Sinha, managing director of Omidyar Network India, on Monday.

Even without a local arm, Omidyar Network has already invested $60 million of the firm's $350 million in total global commitments into Indian ventures, including D. light Design a firm that makes solar-powered lanterns, Quikr, India's version of the Craigslist online classified service, and various microfinance-related firms.

Among the key areas the group plans to target in the future, Mr. Sinha said, are businesses that aim to bring poor people into the banking system, social media enterprises and technologies aimed at making government more transparent. He said the amount Omidyar Network commits will be "driven by opportunities," but he expects deals worth $100 million to $200 million in five years.

"We're looking for organizations that are going to have breakthrough impact, and are going to scale and touch millions of lives," Mr. Sinha told India Real Time.

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Today, "social entrepreneurship" has become an important development to help some of the poorest groups in the world like the rickshaw pullers in India.

Colorfully adorned cycle rickshaws have long been a part of India's landscapes. These hardworking yet environmentally friendly rickshaw operators can navigate busy urban streets and rural country roads with the same ease. But they are all but invisible to their passengers as they barely subsist above the poverty level. And it has been this way for more than a century. Then arrived Irfan Alam, a young social entrepreneur who was struck by the poverty-ridden conditions in which they operate.

Alam thought rickshaw drivers were natural points of sale and therefore they could make extra money by selling drinks, newspapers, or even mobile-phone cards to their passengers on the spot. Also since the average rickshaw covers about 10 kilometers (six miles) a day around town, he envisioned each vehicle could be used as an advertising medium and courier service.

These ideas evolved into the non-profit organization Sammaan (which means "dignity"). Today these sleek refitted cycle rickshaws, driven by uniformed personnel, have changed the landscape of the roads in the state of Bihar in India.

The success of Sammaan has earned Alam many accolades from Business World's "Hottest Young Entrepreneur" to TED fellowship, BRLP World Bank Innovation Award, and a nomination as Asia's most inspiring young entrepreneur.

Following his participation at the Entrepreneurship Summit hosted by President Obama in Washington in April, Alam visited San Jose to deliver a lecture about "Bottom of the Pyramid Entrepreneurship" at TiE (The Indus Entrepreneurs) conference. India Currents had the opportunity to speak with him.

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Groupe Danone is the world's largest yogurtmaker and one of the biggest companies in France, with some $21 billion in sales annually. Yet a tiny factory in Bangladesh from which Danone never expects to earn any money is giving the company a profitable lesson in manufacturing for the developing world - and even some tips for business in the West.

The factory, which sits in the northern city of Bogra and makes a nutrient-rich kids' yogurt called Shakti Doi ("energy" in Bengali), got its start in 2005, when Danone CEO Franck Riboud met Muhammad Yunus, the Bangladeshi microfinance pioneer and founder of Grameen Bank. Yunus has a habit of finding ways to use corporate infrastructure to reach ultra-poor consumers, as his worldwide following can tell you.

The result is Grameen Danone and a factory that produces one-hundredth of what a typical Danone plant does, churning out a low-cost yogurt fortified with four vitamins and minerals generally lacking in the diets of the area's poorer children. Danone expects the enterprise - one of its "social businesses" - to eventually run at breakeven or better, but any profit will be reinvested in similar projects.

What Danone didn't expect is that selling yogurt to the bottom of the pyramid would teach so much, in realms from product development to factory design. "Two years ago, I was pushing to have people from the Western world interested in what we're doing," says Philippe Pages, Danone's director of nutrition for emerging markets. "Now I'm bombarded with requests."

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