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By Sarah Murray

In her book Dead Aid,* Dambisa Moyo calls for the end of aid to Africa within five years. Paul Kagame, president of Rwanda - which has halved aid as a percentage of its gross domestic product in the past decade - recently argued in the Financial Times that aid creates instability and dependency while failing to reduce poverty or disease.

Ms Moyo and Mr Kagame are among those questioning traditional models of development. While not all favour the pure for-profit approach, many argue that there is a greater role for market-based approaches to global problems. If such models prevail, the question for big non-governmental organisations (NGOs) and international public sector institutions is how to fit into the new development landscape.

The prospect of long-established institutions such as the World Bank, the United Nations and the International Monetary Fund (IMF) simply disappearing seems remote. And certainly, the idea of ending aid to Africa in five years is an ambitious one.

The global downturn has shown that multilateral institutions remain critical, particularly in a crisis, when they have the ability to direct massive funding flows to not only the developing world but also to mature countries. Iceland, for example, has recently been forced to accept a $10bn bail-out led by the IMF.

Nevertheless, moving rapidly into the donor agencies' sphere is a group with very different modes of operation. They include social entrepreneurs, NGOs using market-based models and large non-profits such as the Gates Foundation. Multinationals are also recognising that they can help foster economic development while turning a profit.

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By Sarah Murray

In water-scarce India, access to modern irrigation technology has long eluded the country's 260m smallholder farmers. Now, small-scale manufacturing and a distribution system is bringing irrigation products to growing numbers of these farmers, generating water savings of 30-50 per cent, energy savings of 50 per cent and increased crop yields of up to 70 per cent.

The new system is not, however, funded by a multilateral development agency - it is being delivered by Global Easy Water Products, a for-profit company.

Like Hinduism's many gods, India's social entrepreneurs have a multitude of incarnations. But whether enterprises are businesses, non-profit organisations, local governments or hybrid organisations, their goal is the same - to apply market-driven approaches to the social and economic problems facing their country's poorest people.

Entrepreneurs - such as Harish Hande, whose company Selco is taking solar-powered lighting into rural Indian homes, and Thulasiraj Ravilla, whose hybrid non-profit Aravind Eye Hospital treats patients for preventable blindness - have achieved international acclaim. Some are taking their ideas overseas.

Monitor Group, a US consultancy, recently studied more than 300 market-based initiatives involving companies, non-profits and state authorities.* It found India to be "a pacesetter among emerging markets" in social entrepreneurship.

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It is hard to argue with the lofty ambition to end once and for all the scourge that is global poverty. How the world should go about this, however, is much more vexed. If poor countries do not have sufficient capital, aid advocates argue that there is a moral imperative for rich ones to help. Since 1970 hundreds of billions of dollars in bilateral and multilateral aid has been sent to Africa from the developed world. G20 leaders agreed at last month’s summit London that an extra $50bn would be needed to see the poorest continent through the global economic crisis.

The problem, argues Dambisa Moyo, a Zambian economist who has stolen the global limelight with her recently published book, Dead Aid, is that all this “money for nothing” is having the opposite of the desired effect. Not only has aid failed to lift Africans out of poverty - average incomes across much of the continent have stagnated or fallen in the past forty years. It has also become the main obstacle to development. Aid fosters dependency, stifles enterprise and encourages corruption. It is time to turn off the taps.

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Report finds that the company's Manual Distribution Centers have led to the creation of 12,000 jobs while contributing to the Millennium Development Goals.

SocialFunds.com -- As part of its commitment to the Business Call to Action, Coca-Cola has developed a Manual Distribution Center (MDC) model in Ethiopia and Tanzania that has the potential to contribute to some of the Millennium Development Goals (MDGs).

Coca-Cola's efforts in Africa are described in a report entitled Developing Inclusive Business Models, issued by the Harvard Kennedy School and the International Finance Corporation (IFC).

The eight Millennium Development Goals provide a framework for the development activities in more than 190 countries, and aim to successfully address the world's main development challenges by 2015. These challenges include the eradication of extreme poverty and hunger, the promotion of gender equality, improvements in health, and environmental sustainability.

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Over the last five years, Mumbai has been blessed with two significant depictions. In 2004, Suketu Mehta wrote “Maximum City,” which was a finalist for the Pulitzer Prize and is one of the best books about a great city in recent years. In 2008, “Slumdog Millionaire,” a romantic tale of urban poverty and quiz show success, sold millions of tickets and won a bucketful of Oscars. Both capture the energy and diversity of Mumbai, but neither adequately captures the economic energy that makes the city so exciting.

Mumbai is not ancient; it is roughly as old as New York. It was a Portuguese port given as a Queen’s Dowry to the King of England and then rented to the British East India Company.

Like New York, Mumbai grew great by shipping the products of a rural hinterland, like cotton, to the markets of Europe. The connection between the two cities became particularly obvious during the American Civil War, when the decline in exports of Southern cotton provided a great boost to the commerce of what was then Bombay. Industry grew up around commerce in both cities, and poor people flocked to the opportunities that come from urban innovation.

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CHAMPIONS of market forces are a glum lot these days, for the most part. But not Jacqueline Novogratz, a market-minded development expert. The current crisis in capitalism, she believes, strengthens her call for a sweeping change in how the world tackles poverty. “The financial system is broken, yes, but so too is the aid system,” she observes. In her view, “a moment of great innovation” could be at hand.

In “The Blue Sweater”, her recently published autobiography, she describes her past frustrations working in such pillars of finance and development as Chase Manhattan bank, the African Development Bank and the Rockefeller Foundation. She found them bureaucratic, distant and condescending to those they sought to help. So in 2001 she set up Acumen Fund, a “social venture capital” outfit, to promote what she calls “patient capitalism”. Acumen is an odd mix of charity and traditional investment fund. It takes donations from philanthropists in the usual fashion, but then invests them in a businesslike way, by lending to or taking stakes in firms. The recipients—private ventures aiming for profits—must serve the poor in a way that brings broader social benefits. Acumen goes to great lengths to measure those benefits, and thus the efficiency of its work.

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Human excrement is serious business. Three African social entrepreneurs, David Kuria, Joseph Adelegan and Trevor Mulaudzi, spoke at the National Press Club in Washington, D.C., in February to share this revolutionary approach to solving the global sanitation crisis. The entrepreneurs speak from experience; each has established lucrative and groundbreaking businesses related to people “doing their business” — and providing the proper sanitation facilities for it often in crowded urban centers of Africa and their periurban suburbs. Their business models, once considered distractions in the traditional policy or charity realm, are proving to be successful ventures. Their innovations are successfully shifting social behavior and improving public health, the environment and the economy. Trevor Mulaudzi, a South African entrepreneur, stressed that “no one wants to use a dirty toilet no matter how poor they are.”

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ANN ARBOR, Mich. — For years, groups working on poverty-fighting ventures have used stories, anecdotes, and milestone markers to highlight their work and secure funding.

Unfortunately, these things don't actually measure the effectiveness of an organization's effort. Nor do they showcase any unintended consequences, long-term changes, or missed opportunities. But Ross professor Ted London, after several years of field research, has developed a tool that organizations can use to better assess the true impact of their work.

London's framework appears in the May 2009 edition of the Harvard Business Review and is in use by nonprofit and corporate partners in Asia, Latin America, and Africa.

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What makes businesses succeed in emerging markets, where the customer profile and demands are quite different from more affluent western markets? Monitor Inclusive Markets, part of the consulting company Monitor Group firms, has released “Emerging Markets, Emerging Models,” a report analyzing the actual behaviors, economics, and business models of successful “market-based solutions”—financially-sustainable enterprises that address challenges of global poverty.

“Emerging Markets, Emerging Models” is addressed to those organizations and individuals most concerned with making a real and enduring improvement to the lives of the poor. Monitor’s findings highlight data from global working models, including more than 270 organizations based in India.

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Over the last few years the traditional thinking about innovation has been turned on its head. We used to assume that innovation was driven by access to the most advanced tools and resources. But the emphasis has shifted more recently to the role that scarcity plays in driving innovation. This change has inspired a newfound belief that innovation will emerge from the bottom up, out of developing markets, as opposed to being exported by rich nations like the U.S. and Japan.

BusinessWeek recently published an article profiling a number of major corporations that are increasingly looking to developing markets for innovation. The article profiled both cutting-edge consumer technology companies like Nokia, as well as industrial stalwarts like GE. These companies realize that we have a huge amount to learn from solutions that are emerging on the periphery. I recently attended a talk, titled Street Hacks, by Jan Chipchasewith Eric Von Hippel's group at MIT Sloan, in which he showcased a number of interesting innovations that his team has uncovered in urban slums throughout the developing world. He included one particularly fascinating example of markets where you can buy a dual sim card in which someone has removed the chips from two existing carrier sims and soldered them onto a single sim. This allows mobile phone users to switch back and forth between carriers on the fly, depending on rates and how much they have in each account. We are years away from enjoying an innovation like that in the U.S.

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