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BUSINESS AND POVERTY

Opening markets to the poor

www.worldbank.org/wbiwww.worldbank.org/[email protected]

World Bank InstituteRakesh NangiaActing Vice PresidentThe World Bank1818 H Street NWWashington, DC 20433, USA

MARY MCNEILFOUNDING EDITOR

EDITORIAL BOARD

SWAMINATHAN S. AIYARECONOMIC TIMES OF INDIA, NEW DELHI, INDIA

MICHAEL COHENNEW SCHOOL UNIVERSITY, NEW YORK, USA

PAUL COLLIEROXFORD UNIVERSITY, OXFORD, UK

JOHN GAGESUN MICROSYSTEMS, PALO ALTO, CALIFORNIA, USA

JOSEPH K. INGRAMPERUGIA, ITALY

KWAME KARIKARISCHOOL OF JOURNALISM AND COMMUNICATIONS,THE UNIVERSITY OF GHANA, LEGON, GHANA

VIRA NANIVSKANATIONAL ACADEMY OF PUBLIC ADMINISTRATION,KIEV, UKRAINE

PEPI PATRONCATHOLIC UNIVERSITY, LIMA, PERU

J. ROBERT S. PRICHARDTORSTAR, TORONTO, CANADA

RAFAEL RANGEL SOSTMANNMONTERREY TECH UNIVERSITY SYSTEM, MONTERREY, MEXICO

VIVIENNE WEECENTRE FOR ENVIRONMENT, GENDER AND DEVELOPMENT, SINGAPORE

Development OUTREACH is published three times a year by the WorldBank Institute and reflects issues arising from the World Bank’s manylearning programs. Articles are solicited that offer a range ofviewpoints from a variety of authors worldwide and do not representofficial positions of the World Bank or the views of its management.

CHRISTOPHER NEALEXECUTIVE EDITOR

ANNA LAWTONMANAGING EDITOR

MOIRA RATCHFORDPUBLICATION DESIGN

PHOTO CREDITSCover: Naylor Design; : Sumitomo Group; Page 3: PatrimonioHoy; Page 7: Glow Images/Newscom; Page 10: Jean-PierreKepseu/PANAPRESS/MAXPPP; Page 12: Nestlé; Pages 13, 15, and16: Unilever. Bottom photo on page 16 by Frans Lemmens;Page 17: ALEXANDER JOE/AFP/Getty Images; Pages 21-23: TheWorld Bank International Finance Corporation and Lighting Africa;Page 24: ZUMA/Newscom; Page 26: BP; Page 27: ZUMA/Newscom;Pages 30, 32: Manan Vatsyayana/AFP/Getty Images; Page 34: AyanHumbert Droz; pages 36-37: GAIN; Page 48: AFP PHOTO/CRISBOURONCLE; Page 40: Pathfinder International; Pages 41-42:Abbott Fund; Page 44: AFP PHOTO/Indranil MUKHERJEE/FILES;Page 47: AFP PHOTO/Shafiq ALAM; Page 50: DEFTA Partners.

ISSN 1020-797X © 2008 The World Bank Institute

This magazine is printed on recycled paper, with soy-based inks.

W O R L D B A N K I N S T I T U T EPromoting knowledge and learning for a better world

ABOUT THIS ISSUE

Christopher NealE X E C U T I V E E D I T O R

he devastating impact of rising energy and foodprices on the world’s poor has sparked alarmabout this group’s vulnerability as global mar-

kets shift, often suddenly and deeply. The burdens ofpoverty, already heavy, become crushing as familyincomes fail to cover basic needs for food and shelter.For a growing number of development thinkers andinnovative entrepreneurs, ending this poverty—and thevulnerability that goes with it—is best approached byfocusing on the potential of the poor as theworld’s largestmarket of producers, workers and consumers.

This issue of Development Outreach focuses on thismarket, made up of those living at the “base of the eco-nomic pyramid” (BoP), that is, the four billion peoplewith incomes below $3,000 per year in local purchasingpower. Its contributors outline, in 13 articles that covera wide range of case studies, market-based approachesto reducing poverty.

While this BoP group lives in relative or absolutepoverty, it constitutes about two-thirds of the world’speople and a market of $5 trillion. Forward-lookingcompanies are reaching out to this group, providing bothproducts and opportunities that benefit the poor, as wellas their own bottom lines. By investing in sustainabledevelopment now, businesses are building markets thatwill grow from today’s promise to flourish in the future.

Companies that focus on the BoP market make aconcerted effort to include the poor in their businessstrategies. They go beyond philanthropy and traditionalconcepts of corporate social responsibility, to invest inthe poor as producers and consumers. The case studiesin these pages show how they operate profitably in whatis still the frontier of the mainstream market economy,while enhancing the well-being of the poor by nurturingthem as productive consumers.

Business and Poverty: OpeningMarkets to the Poor coin-cides with a new Executive Development Programoffered by the World Bank Institute, “Inclusive andSustainable Business: Creating Markets with the Poor.”Offered in Washington for the first time in June, thecourse provides guidance and tools to business execu-tives and public sector leaders seeking to enable busi-nesses to engage the BoP group.

T

SPECIAL REPORTBUSINESS AND POVERTY: OPENING MARKETSTO THE POOR

2 Business and Poverty: Opening marketsto the poorGuest EditorialDJORDJIJA B. PETKOSKI , V. KASTURI RANGAN,AND WILLIAM S. LAUFERHighlights features of the Special Report that discuss the rolebusinesses can play in addressing poverty, and offers case studiesas examples.

7 The Next 4 Billion: CharacterizingBoP marketsALLEN L. HAMMOND, WILLIAM J. KRAMER, ROBERT S. KATZ,JULIA T. TRAN, AND COURTLAND WALKERPoints out significant opportunities for market-based approaches tomeet the needs of the 4 billion people at the base of the economicpyramid.

10 Creating Shared Value through BasicBusiness StrategyNIELS CHRISTIANSENDemonstrates how Nestlé’s milk district model achieves a balancebetween meeting the needs of the poor and expanding Nestlé’s ownbusiness.

13 The Shakti RevolutionGAVIN NEATH AND VIJAY SHARMAShows what can be done by a multinational firm (Unilever) inmeeting both business and social objectives.

17 Social Issue-Oriented BoP Business andJapanese CompaniesMARI KOGISO, MIA MATSUO, AND TOKUTARO HIRAMOTOShows how by engaging local companies Sumitomo could capitalizeon a business opportunity while providing malaria prevention.

21 Lighting AfricaKATIA THERIAULT, LINDSAY MADEIRA, AND PATRICK AVATODescribes industry efforts to transform and accelerate the off-gridlighting market and extend benefits to the poor, with the support ofthe World Bank Group.

24 Developing the Local Supply Chain for theContract of the CenturyIBRAHIM ISMAYILOV, SAMIR TAGHIYEV, OLGA GODUNOVA,AND FARZIN MIRMOTAHARISummarizes how a BP/IFC partnership helped develop linkagesbetween Azerbaijani SMEs and the global oil and gas industry.

27 Patrimonio HoyISRAEL MORENO BARCELOShows how CEMEX’s progressive housing program took a proactiveapproach in Mexico with Patrimonio Hoy.

30 ZMQ Enabling Bottom-up DevelopmentSUBHI QURAISHITells the story of a small-sized company that helped socialdevelopment by combining philanthropic efforts with its ICTproducts.

34 Business and MalnutritionMARC VAN AMERINGEN, BERANGÈRE MAGARINOS,MICHAEL JARVISPresents new business models that help to make foods availableand affordable to the poor.

38 Bridging Gaps in Reproductive Health Carein Egypt through Private SectorInvolvementANDY COLE, MOHAMED AFIFI AND REEM SALAHIllustrates the reproductive health project Takamol which seeks toincrease the availability and quality of reproductive health services.

41 Improving Health Improves EconomicWell-beingCHRISTY L. WISTARExplores the positive impacts and unexpected challenges of Abbott’sinvestment in a public-private partnership to modernize Tanzania’shealth system.

44 Access to Finance and Markets as aStrategy to Address PovertyNACHIKET MOR AND BINDU ANANTHEmphasizes the value of access to financial services for the very poorthrough partnerships between banks and local financial institutions.

47 Bringing Bangladesh into the Digital AgeDEFTA PARTNERS GROUP, THE ALLIANCE FORUM FOUNDATION,AND GEORGE HARAShows how a multistakeholder partnership improved access to ICTto enhance health and education services in Bangladesh.

52 KNOWLEDGE RESOURCES54 BOOKSHELF56 CALENDAR OF EVENTS

OutreachDE V E L O P M E N T

V O L U M E T E N , N U M B E R T W O � J U N E 2 0 0 8

P A G E 1 6 P A G E 2 7 P A G E 4 1

BUSINESS

Opening marketsto the poor

POVERTY&

SPECIAL REPORT

DJORDJIJA B. PETKOSKI, V. KASTURI RANGAN, AND WILLIAM S. LAUFERGuest Editorial

IN RECENT YEARS, business has played a signifi-cant role in alleviating poverty, especially in sectorssuch as telecommunications, information technolo-gy, and microfinance. Certain initiatives in thesesectors, such as microfinance in urban LatinAmerica and wireless telecommunication in Asia,have yielded impressive results, creating unrealisticbenchmarks against which other corporate pro-grams are being judged. Although businesses havemade significant contributions in some sectors, inmany others they have been unable to “move theneedle” on poverty.1

It can be argued that the private sector may havecontributed to broadening the gap between the richand the poor and to environmental degradation, butbusiness has also helped improve the quality of life inmany low-income areas.2 There have been quiet butstrong links among economic growth, innovation,and development. This article is not intended todefend once again the fundamental economic ration-ale for capitalism and its potential role in alleviatingpoverty. Rather it is meant to bolster that premisewith current examples and practices and to urgebusinesses to adopt a more proactive role in the

Opposite page:Tanzanian factoryworkers sewinganti-malarialOlyset Nets in ajoint venturebetween JapaneseMNC SumitomoChemical andlocal manufacturerA to Z Textile Mills.

Left:Owners of a homenewly completedthrough participationin the progressivehousing programfor low incomecommunities,Patrimonio Hoy.

4 Development Outreach WORLD BANK INST ITUTE

development of markets that benefit the poor. Our perspectiveis that a company’s responsibility is not only to increase itsinvestors’ wealth, but also to help create wealth for the 4 billionor so people at the Base-of-the-Pyramid (BoP) who make dowith incomes of less than $5 per day, as characterized in thearticle on the Next Four Billion.

Poverty is an economic, social, cultural, political, andmoral phenomenon and we believe it is necessary to addressthese dimensions in an integrated fashion—one that con-tributes to sustainable global development. Nestle’s MilkDistrict Model illustrates this approach. By providing oppor-tunities for training, education, and a steady income to poorrural farmers in exchange for a consistent milk supply, Nestleeffectively integrated poverty alleviation into a businessmodel that was mutually beneficial: the company has beenable to increase its supply of freshmilk and poor communitieshave benefited from job security, improved nutrition, and abetter standard of living.

There are many ways in which business can help in open-ing markets to the poor, ranging frommultinational corpora-tions (MNCs) and local small andmediumenterprises (SMEs)to corporate foundations, business alliances, and small entre-preneurs from both developed and emerging economies.

Business models that engage the poor

NEW BUSINESS MODELS have focused mainly on cost struc-ture, innovative distribution methods, and logistics, and haveignored the need to develop market institutions. Productivecorporate engagement at the BoP will require an in-depthunderstanding of the meaning of “market based solutions;”clarification of the types of markets (informal vs. organizedmarkets); and understanding how companies can connectfactor and product markets to help create job opportunities.

Companies, particularly large ones, can have amuch greaterimpact on the BoP by contributing to the creation ofmore effi-cient markets and by complementing market institutions,rather than just selling products to the poor. In less developedcountries, poverty alleviation should be approached primarilythrough wealth creation, including access to jobs, healthcare,education, and vocational training, even before providingaccess to consumable goods and services that improve thequality of life of the poor. Of course, wealth creation and con-sumption are complementary, but there is a hierarchy.

In building wealth, business models need to includemechanisms to deal with the following challenges:� Increasing the productivity and real income of the poor.� Enhancing job creation opportunities through direct

employment or self employment, supported by productsand services that boost productivity.

� Moving away from the “traditional consumers” concept tothe concept of “productive consumers.” (Developing self-esteem and dignity among consumers can be achieved bothby creating conditions for employment and by payingdecent salaries ).3

How businesses address these issues depends on manyfactors, such as industry structure, company vision, size, loca-

tion and ownership structure. The lessons learned from com-pany experiences can serve as building blocks in achievinginnovative, sustainable, and scalable solutions.

Companies such as Nestle, Unilever and CEMEX haveshown that through innovative business solutions they canboth operate profitably within a given (underdeveloped)institutional framework, and simultaneously directly facili-tate the development and strengthening of market institu-tions. Unilever’s experience with the “Shakti Revolution” inIndia illustrates that helping to empower underprivilegedrural women by fostering entrepreneurship and creatingincome opportunities can be more important than salesalone, since it encourages the growth of a sustainable con-sumer base.

Building a BoP business culture

TO BETTER ENGAGE THE POOR, business needs to under-stand their values, aspirations, and the contributions they canmake to value creation for themselves and others. Only limit-ed efforts have been made to change the sometimes deep-seated assumptions that business leaders make about thepoor, assumptions that are partly caused by a wide cultural andsocioeconomic divide and a lack of direct interaction.

Incorporating poverty alleviation into corporate strategyalways requires internal change in companies, and sometimeseven redefining organizational values and cultures. Thesechangesmay include developing an entrepreneurial spirit for,a clear vision of, and a readiness to support new and risky BoPventures. Not only it is necessary to capture the attention ofcorporate executives and senior managers, but an effort mustbe made to explicitly connect business growth and profitabil-ity with BOP markets. As the case of Sumimoto Chemicalillustrates, consistent corporate backing for BOP ventures canlead employees to identify innovative market based solutions.In Sumimoto Chemical’s case, that solution came in the formof an insecticide infused mosquito net to protect vulnerableAfrican populations against Malaria. The company’s manage-ment philosophy, known as the “Sumimoto Spirit,” aims to“generate profit not only for the company but also for society,”and has helped motivate their employees to reach the BoP.Similarly, the multinational cement producer CEMEX choseto put an interdisciplinary team of its own employees on theground in Mexico to better understand the social and home-building practices of low-income communities, and used thatknowledge to develop a successful product line of housing justfor the poor. Unilever’s commitment to improving the livesand livelihoods of the poor in India is driven by the recogni-tion that “the health of business is inextricably linked with thehealth of society.”

It is also important to understand the complementaritiesbetween philanthropy, corporate social responsibility (CSR),and service to the poor, as these approaches cannot be easilyseparated. Some CSR initiatives have recently been criticizedas mere token philanthropic attempts to address the needs ofthe poor. But if companies allowed themselves to engage onlyin activities where business goals and poverty alleviation were

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perfectly aligned, there would likely be fewer activities at theBoP. CSR activities have the advantage of providing a forumfor businesses to learn about the needs of the poor.

ZMQ, a small to medium sized Indian software company,has combined its philanthropic commitment (12 percent of itsprofits) with its core competencies in developing ICT learningtools for social development in order to sponsor and createproducts and tools to bridge the digital divide. In one suchventure, the company funded the development of a technolo-gy package to build the capacity of grass-roots women in usinglivelihood-generating technologies. The Global Alliance forImproved Nutrition (GAIN) has formed a Business Alliance toexplore the space between philanthropy and strategic privatesector interest by developing new business models to fortifyfood with necessary vitamins and minerals and making itavailable and affordable to the poor. Large companies, such asAbbott Laboratories, often utilize their corporate foundationsto explore the complementarities between philanthropy andCSR. Abbott Fund, in partnership with the Government ofTanzania, is engaged in a major project that is modernizingthe country’s health system. By improving hospitals’ physicalinfrastructure, training programs and working conditions,and utilizing the latest IT, the partners are expanding access toquality HIV/AIDS testing and health care for the poor.

Market capacity building

IN DEVELOPING COUNTRIES, companies often need to dealwith weak institutions or a lack of formal market mechanisms.In Unilever’s business expansion in India, the company had towork aroundmany infrastructure and institutional challenges,such as poor transport links and high rates of illiteracy.

In this context, it is crucial for business to address certainquestions:� To what extent do “organized or well-developed markets”

capture the costs and benefits of the poor?� What access do the poor have to these markets?� Why do the poor pay more for the same or similar goods

and services than the rich?� How can level playing fields that provide equal opportuni-

ties for the poor be created?These are important questions, because although informal

markets can facilitate commerce, they can also engenderabuse, create huge income inequality and exploitation, andbecome a barrier to entry and growth. Examples in this issueof Development Outreach illustrate how companies likeNestle, CEMEX, Unilever, and Sumimoto have overcome thebarriers of the informal economy and the lack of institutionaland physical infrastructure, and ultimately helped the poorintegrate into the official economy. Unilever developed a newbusinessmodel to engage local entrepreneurs to set up direct-to-consumer retail operations, with training from the compa-ny and support from self-help groups or microfinance banks.In 2007, Project Shakti estimated that 46,000 entrepreneurs(mainly female) had reached more than three million ruralIndian households.

The role of Multinational Corporations(MNCs)

IT IS DIFFICULT TO GAUGE how many of the 63,000 MNCs4

are ready and willing to incorporate poverty alleviation issuesinto their business strategies. While the relatively small roleof MNC’s in creating local employment has been well docu-mented, their real contribution may be in setting perform-ance benchmarks in developing markets. These wouldbecome the benchmarks that most local businesses wouldhave to meet in order to gain legitimacy and trust in the com-munities in which they function.

MNCs need to recognize what they do well and what they dopoorly in BoP markets. Large companies are typically good atintegrating the poor into the global production system andfacilitating market transactions for increased productivity aspart of their supply chain ,5 but not necessarily at creating jobsthrough direct employment. But MNCs do have the power toshape institutional environments to bemore supportive of jobcreation, and build partnerships with government, NGOs,international financial institutions (IFIs), and donor agen-cies. For example, the International Finance Corporation(IFC), the private sector arm of the World Bank Group, hasbeen successfully working with the private sector to engagelocal businesses in the global supply chain, as illustrated inthe articles on its Lighting Africa project and partnership withBP in Azerbaijan.

The role of local companies

PRODUCTIVE ENGAGEMENT with the poor requires newbusiness models that take into consideration both access tolocal knowledge and issues of trust. Business objectivesshould go beyond lowering the cost of doing business at theBoP and improving access to customer groups. They shouldalso aim to build legitimacy and good will by tapping into localknowledge and leveraging social capital as a means of gainingaccess to market intelligence and building legitimacy in theeyes of the poor. Local companies can normally do this betterthan (and complement) MNCs. Of course, it is difficult togeneralize, as some MNCs, such as Nestle and Unilever, havebeen present in many emerging economies for decades.Similarly, CEMEX has been very successful in launching aninnovative housing program for low-income communities.Partnership initiatives, such as GAIN and UNICA, createspace for collaborative action. The GAIN Business Allianceallows both MNCs and local companies to learn from eachother, share results, and partner with development organiza-tions. The Brazilian Sugar and Ethanol Industry Association,UNICA, jointly with the World Bank Institute, launched acapacity development program for sugar producing compa-nies from Sao Paulo, which helps individual companies toincorporate social and environmental issues into their corpo-rate strategy and contribute to community development.6

Local companies are often best positioned to provide goodsand services to the poor while at the same time helping MNCsto expand their business at the BoP. For example, the key to


Sumimoto Chemical’s success has been its partnership with alocal Tanzanian company A to Z Textile Mills, which resultedin technology transfer, quality improvement, and creation oflocal employment for the poor who had no previous experi-ence in manufacturing and wage-based jobs. India’s ICICIBank initiative is based on the assumption that economicallyviable occupations already exist in most regions of India, andthat with proper support even the very poor can almost imme-diately engage in them without specialized skill building. Thekey, they have found, is providing access to finance, whichICICI created through creative partnerships between banksand a network of local financial institutions.

Measuring impact

TO FULLY ASSESS EFFECTIVENESS, it is important to captureeconomic, social, cultural, and environmental impacts.Measures of success should not be limited to output and prof-itability indicators but should also take into account issues ofequity and the balance between corporate, legal, and socialobligations. It is essential to measure social values from thepoor’s perspective, and to understand what is important forthem in terms of quality of life, empowerment, and security.Transparency and accountability must also be part of the ini-tiative since corruption hurts the poor the most.7 Companieslike Unilever, CEMEX and Nestle, through direct engagementwith the poor, reduce the risk of corruption that affects thepoor in their daily business transactions when operating ininformal markets.

We also need to capture positive and negative cross-sec-toral effects as well as improvements in market institutions.There is a growing need for companies, development organi-zations, and academia to create new models that capture thedevelopment multiplier effect. In Nestle’s engagement withpoor rural farmers in China, for example, the local bankingsystem benefited when the company provided its new suppli-ers with cash payments, leading to a new customer base forbanks in previously low-income areas.

Action agenda for the future

TO MEET THE NEEDS of 4 billion people is a daunting chal-lenge that can only bemet by taking successful models to scale.We need to look not only within existing markets, but alsoamong countries and continents, to find solutions that “travelwell”, particularly between developing countries. Companiescan play an important role in transporting best practices acrossborders, as the ZMQ and DEFTA Partners examples illustratefor countries in Asia and from Asia to Africa.

Effective poverty alleviation requires collective action byMNCs, local companies, governments, IFIs, and NGOs.Building successful partnerships is highly complex andrequires clarification of roles, responsibilities, and incentivestructures. Who is in a position to change the rules of engage-ment with the poor? How can corporate gaming be preventedto avoid increasing poverty and environmental degradation,particularly when institutions are weak? Where does the

value-creating potential lie within various stakeholdergroups? How do we best organize initiatives and provideincentives to collaborate in developing more comprehensiveand innovative models of engagement? And what are the mostinnovative ways of complementing the efforts of government,multilateral development banks, and development agencies?

To be sustainable, business initiatives need to be ownedand informed by the developing country stakeholders them-selves. The issues are global but most of the solutions arelocal. New mindsets and open dialogue with local entrepre-neurs are prerequisites for collective action. The DEFTAPartners example clearly illustrates that partnership betweenentrepreneurs from both developed and emerging economiescan play a critical role in creating innovative developmentsolutions. DEFTA Partners, in collaboration with BRAC, alocal development organization based in Bangladesh, areinvesting in improving the country’s communication infra-structure, thus providing access to millions of poor people.

We hope that the examples presented in this issue will beused to help local beneficiaries define the challenges, set theirown agendas, and successfully implement the best possiblesolutions.

Djordjija B. Petkoski is Head of the Business, Competitiveness and

Development Program at the World Bank Institute.

V. Kasturi Rangan is Malcolm P. McNair Professor of Marketing and

Co-chairman, Social Enterprise Initiative, Harvard Business School.

William S. Laufer is Professor of Legal Studies and Business Ethics,

Sociology, and Criminology, and Director of the Carol and Lawrence Zicklin

Center for Business Ethics Research at Wharton School of Business,

University of Pennsylvania.

The editing support provided by Alexis Sampson of The World Bank Institute

for this issue of Development Outreach is gratefully acknowledged.

Endnotes

1 V. Kasturi Rangan, John A. Quelch, Gustavo Herrero and Brooke Barton,Business Solutions for the Global Poor, John Wiley & Sons, 2007.

2 Ray Goldberg and Kerry Herman, Harvard Business School case: AlleviatingPoverty and Malnutrition, President and Fellows of Harvard College, 2007.

3 Maria Flores Letelier, Fernando Flores, and Charles Spinosa, Creatingand Developing Productive Customers in Emerging Markets, CaliforniaManagement Review, Fall 2003.

4 UNCTAD. (2000.) World Investment Report, 2000: Cross-Border Mergersand Acquisitions and Development. United Nations. Geneva.

5 Diana Farrell, Jaana K. Remes, and Heiner Schulz, The truth aboutforeign direct investment in emerging markets, McKinsey Quarterly,February 2004. WC: 1995.

6 Corporate Social Responsibility Program for the Sugar and Ethanol Industryin Sao Paulo, Brazil, Activity Report, The World Bank, World Bank Institute,UNICA, 2006.

7 The World Bank Group, The World Development Report, 2004: MakingServices Work for the Poor, World Bank Group, 2004.

BY ALLEN L. HAMMOND,WILLIAM J. KRAMER, ROBERT S. KATZ,JULIA T. TRAN, AND COURTLAND WALKER

THIS STUDY USES EMPIRICAL MEASURES to describe thebehavior of low-income populations as consumers and produc-ers. In aggregate, their purchasing power suggests significantmarket opportunities. By quantifying this market and describ-ing its characteristics, we hope to stimulate business develop-ment and investment that can better meet the needs of thesepopulations, as well as increase their productivity and incomesand empower their entry into the formal economy.

The 4 billion people at the base of the economic pyramid(BoP)—all those with incomes below $3,000 in local purchas-ing power—live in relative poverty. Their incomes in currentU.S. dollars are less than $3.35 a day in Brazil, $2.11 in China,$1.89 in Ghana, and $1.56 in India.1 Yet together they have

substantial purchasing power: the BoP constitutes a $5 trillionglobal consumer market.

The wealthier mid-market population segment, the 1.4billion people with per capita incomes between $3,000 and$20,000, represents a $12.5 trillion market globally. Thismarket is largely urban, already relatively well served, andextremely competitive.

In contrast, BoP markets are often rural—especially inrapidly growing Asia—very poorly served, dominated by theinformal economy, and, as a result, relatively inefficient anduncompetitive. Yet these markets represent a substantialshare of the world’s population. Data from national householdsurveys in 110 countries show that the BoP makes up 72 per-cent of the 5,575 million people recorded by the surveys andan overwhelming majority of the population in Africa, Asia,Eastern Europe, and Latin America and the Caribbean—hometo nearly all the BoP.

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SPECIAL REPORT

TheNext 4 BillionCharacterizing BoPMarkets


Analysis of the survey data—thelatest available on incomes, expendi-tures, and access to services—showsmarked differences across countriesin the composition of these BoPmar-kets. Some, like Nigeria’s, are con-centrated in the lowest income seg-ments of the BoP; others, like thosein Ukraine, are concentrated in theupper income segments. Regionaldifferences are also apparent. Ruralareas dominate most BoP markets inAfrica and Asia; urban areas domi-nate most in Eastern Europe andLatin America. Striking patterns alsoemerge in spending. Not surprising-ly, food dominates BoP householdbudgets. As incomes rise, however,the share spent on food declines,while the share for housing remainsrelatively constant—and the sharesfor transportation and telecommu-nications grow rapidly. In all regionshalf of BoP household spending onhealth goes to pharmaceuticals. Andin all except Eastern Europe thelower income segments of the BoPdepend mainly on firewood as acooking fuel, the higher segments onpropane or other modern fuels.

A BoP portrait

THE DEVELOPMENT COMMUNITY

has tended to focus on meeting theneeds of the poorest of the poor—the1 billion people with incomes below$1 a day in local purchasing power.But a much larger segment of the lowincome population—the 4 billionpeople of the BoP, all with incomeswell below any Western povertyline—both deserves attention and isthe appropriate focus of a market-oriented approach.

The starting point for this argu-ment is not the BoP’s poverty.Instead, it is the fact that BoP popula-tion segments for the most part arenot integrated into the global marketeconomy and do not benefit from it.They also share other characteristics:

Addressing the unmet needs of theBoP is essential to raising welfare,productivity, and income—to enablingBoP households to find their ownroute out of poverty. Engaging the

The BOP is characterized not only bylow income—below $3,000 per capitaper year—but also by several othershared characteristics:

SIGNIFICANT UNMET NEEDSMost of those in the BOP have nobank account or access to modernfinancial services—if they borrow,it is typically from the localmoneylenders at very high interestrates. Most do not own a phone.Many live in informal settlementsand have no formal title to theirdwelling. And many lack access towater and sanitation services.

DEPENDENCE ON INFORMALOR SUBSISTENCE LIVELIHOODSMost of those in the BOP are poorlyintegrated into the formal economy,which limits their economicopportunities. As producers, theyoften lack good access to markets tosell their labor, handicrafts, or surpluscrops and have no choice but to selllocal employers or to middlemen whoexploit them. As subsistence andsmall-scale farmers and fishermen,they are uniquely vulnerable todestruction of the natural resourcesthey depend on but are powerless toprotect.2 In effect, informality andsubsistence are poverty traps.

IMPACTED BY A BOP PENALTYMany of those in the BOP, andperhaps most, pay higher prices forbasic goods and services than dowealthier consumers—either in cashor in the effort they must expend toobtain them—and they often receivelower quality as well. For someservices BOP consumers lack accessaltogether. The high cost of beingpoor is widely shared: it is not justthe very poor who must walk longdistances for water or firewood,or who often pay more for thetransportation to reach a distanthospital or clinic than for thetreatment, or who face exorbitantfees for loans or for transfers fromrelatives abroad.

Asia (including the Middle East) has by farthe largest BoP market: 2.86 billion peoplewith income of $3.47 trillion. This BoPmarket represents 83% of the region’spopulation and 42% of the purchasingpower—a significant share of Asia’s rapidlygrowing consumer market.

Eastern Europe’s $458 billion BoP marketincludes 254 million people, 64% of theregion’s population, with 36% of the income.

In Latin America the BoP market of$509 billion includes 360 million people,representing 70% of the region’s populationbut only 28% of total household income,a smaller share than in other developingregions.

Africa has a slightly smaller BoP market,at $429 billion. But the BoP is by far theregion’s dominant consumer market, with71% of purchasing power. It includes 486million people—95% of the surveyedpopulation.

REGIONAL PROFILESA BoP PORTRAITliving at the BoP

BOP3000

BOP2500

BOP2000

BOP1500

BOP1000

BOP500

BOP MARKETBY INCOME SEGMENT ASIA

$3,470 billion

BOP3000

BOP2500

BOP2000

BOP1500

BOP1000

BOP500

AFRICA$429 billion

BOP3000

BOP2500

BOP2000

BOP1500

BOP1000

BOP500

EASTERN EUROPE$458 billion

BOP3000

BOP2500

BOP2000

BOP1500

BOP1000

BOP500

LATIN AMERICA & THE CARIBBEAN$509 billion

J U N E 2 0 0 8 9

BoP in the formal economy must be a critical part of anywealth-generating and inclusive growth strategy. And elimi-nating BoP penalties will increase effective income for theBoP. Moreover, to the extent that unmet needs, informalitytraps, and BoP penalties arise from inefficient or monopolis-tic markets or lack of attention and investment, addressingthese barriers may also create significant market opportuni-ties for businesses.

Perhaps most important, it is the entire BoP and not justthe very poor who constitute the low-incomemarket—and it isthe entire market that must be analyzed and addressed forprivate sector strategies to be effective, even if there are seg-ments of that market for which market-based solutions arenot available or not sufficient.

Characterizing BoP markets

TOTAL ANNUAL household income of $5 trillion a year estab-lishes the BoP as a potentially important global market.Within that market are significant regional and national vari-ations in size, population structure income distribution, andother characteristics.

Spending patterns

POPULATION structure by itself is not a reliable guide to mar-ket composition. Accordingly, this analysis also examines BoP

spending patterns by country, sector, and income level. Thisanalysis is based on a World Bank initiative—the InternationalComparison Program—to standardize the expenditures reportedby national household surveys into defined categories.

BoP characterized by sector markets

SECTOR MARKETS for the 4 billion BoP consumers rangewidely in size. Some are relatively small, such as water ($20billion) and information and communication technology(ICT) ($51 billion as measured, but probably twice that now asa result of rapid growth). Some are medium scale, such ashealth ($158 billion), transportation ($179 billion), housing($332 billion), and energy ($433 billion). And some are trulylarge, such as food ($2,895 billion).3

Evidence of BoP penalties emerges in several sectors.Wealthier mid-market households are seven times as likely asBoP households to have access to piped water. Some 24 per-cent of BoP households lack access to electricity, while only 1percent of mid-market households do. Rural BoP householdshave significantly lower ICT spending and are significantlyless likely to own a phone than rural mid-market householdsor even urban BoP households—consistent with the broad lackof access to ICT services in rural areas.

BoP market analysis

A KEY ISSUE IN UNDERSTANDING BoP marketsis informality. The International LabourOrganization estimates thatmore than 70percentof theworkforce in developing countries operatesin the informal or underground economy, sug-gesting that most BoP livelihoods come fromself-employment or from work in enterprisesthat are not legally organized businesses. Thisinformal economy is a significant fraction of thesize of the formal economy. According to adetailed study by economist FriedrichSchneider,4 the informal economy averages 30percent of official GDP in Asia, 40 percent inEastern Europe, and 43 percent in both Africaand Latin America and the Caribbean.Informality is a trap for the assets and the growthpotential of micro and small businesses andthose who work in them.

These results together suggest that a signifi-cant part of BoP income comes from activitiesand sources that are only indirectly reflected innational economic statistics. Household surveys,in contrast, usually seek to capture all sources ofincome or total expenditures. Reporting ofincomemay not be precise, but in this report the

T h e N e x t 4 B i l l i o nc o n t i n u e d o n p a g e 2 6

ESTIMATED BoP MARKET BY SECTOR$5 trillion

Source: World Resources Institute


SPECIAL REPORT

BY NIELS CHRISTIANSEN

FOUNDED IN 1866, and the world’s largest milk companysince the early 1900s, Nestlé has improved the quality of lifefor local partners and constituents in developing countries,decreased malnutrition within emerging markets, and con-tributed to economic development in these countries aroundthe world. Through its 650 agronomists and 3,000 direct buy-ers, it provides free technical advice and 25 million dollars ofmicro credit to over 600,000 farmers. Nestlé built its long-term strategy around its commitment to “health and wellness”whereby it supplied milk products in developing countries

while providing training in improved milk production, cropand feed management, hygienic practices, and free breedingassistance. As evidenced in Latin America as early as the1920s, local farmers embraced the education, training, andcommitment from a well-established company who, inreturn, provided steady income, resulting in an extremelystrong brand name. Outside research has shown that no glob-al companymatches Nestlé in terms of the public rating of thecompany in social responsibility, in the developing world aswell as globally.

By launching initiatives to ameliorate poverty and nutri-tion concerns in emerging markets at an early point in the

Creating Shared Value throughBasic Business Strategy

Street stallholder sells Nestlé dairy products in Cameroon.

J U N E 2 0 0 8 11

company’s history, Nestlé spearheaded a global campaign thatmost major corporations have only recently started thinkingabout. Nestlé refers to this as its “Creating Shared ValueStrategy”—creating value for society as a means to creatingvalue for shareholders. This has been a key element in build-ing brand strength and customer loyalty.

Nestlé is today the world’s largest food and beverage com-pany, building rapid growth on a nutrition, health and well-ness strategy. It is larger than its next two competitors com-bined andmore recently, it reported sales of over $100 billionin 2007.

Milk district model: Implementationstrategy

HAVING EMERGED in the late 1800s, Nestlé’s original milkdistrict model, developed in Switzerland, initially involveddelivering the raw materials needed for an infant food made ofgrain and milk, and for condensed milk.1 In order to operateefficiently, Nestlé established contracts with several farmers toensure a constant supply of materials. As the demand for milkproducts increased, Nestlé began opening more factories andworking with more farmers. As Nestlé began exploring oppor-tunities in emerging markets, the company faced new chal-lenges and was forced to develop a milk production processfrom scratch. Nestlé utilized its previous work in Australia todevelop an efficient process in Latin America which involvedsecuring amilk-producing area, building new factories with lit-tle resources, importing appropriate equipment, and traininglocal workers. As the process developed, Nestlé replicated it inother regions including Asia, Africa and theMiddle East.

In setting up a milk district, Nestlé focused on negotiatingcontracts with farmers for twice-daily collection of milk,installing or adapting milk collection and chilling infrastruc-ture, coordinating appropriate transportation from collectioncenters to the district’s factory, and developing a program tocontinuously improve the overall quality of milk.Contemplating the location of themilk district, Nestlé consid-ered production quantity, production costs, potential incomeearned from milk production by local farmers versus earningfrom other alternatives, and competition within the area.

Impact on poverty reduction

NESTLÉ’S SUCCESS in developing milk districts was largely aresult of its continuous presence in the various communitieswhere opportunity was scarce. More specifically, Nestléentered areas prepared to train the locals, provide long-termjobs, guarantee wages, and develop a quality end-product.According to Nestlé’s technical director of global dairy opera-tions, “It is always the most remote area that is the poorest andless developed. So bringing a milk collection center to an arealike that is a blessing for the village, and starts the whole eco-nomic development of the place.” By identifying the regionswith the greatest need for assistance, Nestlé fostered a mutu-ally symbiotic relationship with partner countries. Farmersvalued the steady income provided by the company which was

used to increase their standard of living while Nestlé valuedthe long-term commitment and steady supply of milk provid-ed by local farmers.

As a result, Nestlé’s initiatives in developing milk districtswere a first step towards social responsibility and povertyreduction. Nestlé has since been distinguished for its ability tocapitalize on its socially conscious behavior. As Michael Porterand Mark Kramer recognize, “If…corporations were to analyzetheir prospects for social responsibility using the same frame-works that guide their core business choices, theywoulddiscov-er that CSR can be much more than a cost, a constraint, or acharitable deed—it can be a source of opportunity, innovation,and competitive advantage.”2 Nestlé integrated its corporateobjectives into onemodel that was responsive to poverty allevi-ation and malnutrition while simultaneously attaining its cor-porate strategic long-term revenue and profit goals.

Improved standard of living

Job CreationA VITAL ASPECT of Nestlé’s long-term strategy involved eco-nomic development and job security. By the end of 2004,Nestlé assisted nearly 500,000 dairy farmers supplying Nestléfactories directly. Of the 500K, 130K farmers were in Pakistan,70K in India, 30K in China, 12K inMorocco, 2K in Uzbekistan,9K in Sri Lanka, 3.5K in Peru, and 3.5K in Panama. Mostly allthe dairy farmers were small-scale producers of milk. Morespecifically, small-scale producers (producing less than 50liters/day) contributed to 33 percent of Nestlé’s fresh milksupply in a given year, while large-scale producers (producingmore than 4,000 liters/day) supplied less than 15 percent ofthe yearly milk supply.

As consumption of dairy products increased annually,opportunity for farmers expanded and job security becameless of a concern.

Higher disposable incomeNestlé’s milk districts generated higher incomes for farm-

ers and the community at large. On average, these milk dis-tricts were growing by 2-5 percent annually with some of thedistricts growing asmuch as 10 percent. Inmost regions, over90 percent of the total cost of milk delivered at the factory waspaid to farmers. As consumption of milk products and salesincreased dramatically in most emerging markets, farmerswere doubling their output and increasing their disposableincome. For example, in China, milk sales per farmer hadincreased by 30 percent from 2002—2005; as a result, farmersearned on average $300/month; 12x the national average farmincome in that country.

Nestlé’s business model demonstrated that providingongoing cash flow to rural areas through private funding andsponsorship improved family living conditions, provided con-sistent education to children, and cultivated stronger liveli-hoods. Hans Joehr, Nestlé’s corporate head of Agriculture,confirmed that “normally one dollar flowing back to a ruralarea gives another three or four dollars to the local economy.”


Health and wellness

THE MILK DISTRICT MODEL did not only result in higherincome for farmers, but, the district’s rigid criteria played animportant role in consumer health and nutrition by providingenergy, protein, calcium, and other essential vitamins. Animproved state of health among local residents also had a pos-itive impact on poverty reduction.

Milk product consumption increased dramatically in mostemerging markets, averaging a 2 percent increase per year.The increased consumption of healthier dairy productsresulted in lower death rates and an overall improved state ofhealth.

Prospective growth and sustainability

NESTLÉ’S EARLY PRESENCE in emerging markets gave it afirst-mover advantage against its competition. Nestlé createdpartnerships with local dairy producers as well as farmers,which prevented competition from successfully producingmilk products in the same regions. By 2005, Nestlé had salesof $68 billion, with 500 factories in 83 countries and 247,000employees around the world.

Nestlé’s extensive global network provided the assuranceof product development. Additionally, Nestlé’s commitmentto education, training, and regulation guaranteed the ongoingquality assurance of its milk products.

Ultimately, prospective growth and sustainability will bedetermined by the company’s ability to produce milk productsat the same pace as products are consumed. A potential bottle-neck that many districts face is the continuous availability ofcows and freshmilk. As a result, the price of cows has started toincrease significantly. The availability of herds in the futurewill be a direct determinant of the company’s ongoing success.

Scalability and global application

NESTLÉ’S MANAGEMENT TEAM contemplates whether itssuccess within the dairy industry can be adapted to other foodsystems. In the late 1900s, Nestlé diversified its business intoother ventures such as cosmetics, pharmaceuticals, bottledwater, pet food, and ice cream. Diversification in product typehas helped balance Nestlé’s current activities and helped

counter rising oil prices as well as unstable political and eco-nomic conditions.

Long-term challenge: Water scarcity and limitations onfood production

A contemporary hurdle that has the potential to impedeNestlé’s success in curtailing poverty and advancing nutri-tional concerns is the growing crisis in water availability inmany parts of the world, and the growing gap between supplyand demand for basic commodities, including milk.

This can be attributed to over extraction of water in agri-culture (though aggressive pumping) which is not beingreplaced, water pollution, wastage of water at many levels, andglobal warming.

For this reason, Nestlé has become a strong advocate forwater preservation and propermanagement. It was a foundingmember of the United Nations Global Compact Water man-date, and has taken significant actions to reduce its own con-sumption of water. While increasing its food and beverageproduction in the last 9 years by 76 percent and at the sametime reduced its water consumption by 28 percent.

To guard against the negative impact of green gas emis-sions on global warming, Nestlé ahs reduced its greenhousegas emissions by 17 percent in the last 4 years.

While these environmental constraints can have a limitingimpact of food companies, Nestlé has a very long termapproach to planning and is better able thanmost to take pre-cautionary measures which cushion the impact of environ-mental factors.

Nestlé is also protected by negative occurrences in individ-ual countries due to its superior global presence. It has beenrated number one by Barron’s magazine for global strength,and is present in virtually every country around the world,with about 500 factories in over 100 countries. With about 1billion customers daily choosing Nestlé products, it is at thesame time operating in a very competitive environment,where consumers can readily choose alternatives.

The Nestlé strategy of Creating Shared Value is one of thefactors that have led to its brand strength globally, as well aphilosophy of long term development which raises people outof poverty while creating a cadre of loyal supplies and con-sumers.

Niels Christiansen is Director of Public Affairs, Nestlé S.A.

Endnotes

1 Goldberg, Ray A. & Herman, Kerry. “Nestlé’s Milk District Model:Economic Development for a Value-Added Food Chain and ImprovedNutrition” ed. Havard Business School.

2 Porter, Michael E. & Kramer, Mark R. “Stategy & Society: The LinkBetween Competitive Advantage and Corporate Social Responsibility” Ed.HBR Spotlight Making a Real Difference, 80.

J U N E 2 0 0 8 13

BY GAVIN NEATH AND VIJAY SHARMA

ROJAMMA IS A SINGLE MOTHER with two daughtersliving in Kurumurthy, a small rural village 150 kilo-metres south west of Hyderabad in Andhra Pradesh.Until five years ago she scraped an existence by work-ing in her mother’s field, earning barely enough tolive on herself, let alone bring up two children. Thenher life changed beyond recognition. Today she earnsaround 650 rupees (US$16) a month, is widely recog-nized and respected in her community, and hasbecome a role model for other women wanting toraise themselves out of poverty. What changed was avisit to her village by a representative fromHindustanUnilever and her decision to become a Project Shaktientrepreneur.

Hindustan Unilever, the Indian arm of global con-sumer goods company Unilever, is one of India’s lead-ing businesses, with an annual turnover of US$2.3 bil-lion and a history in India stretching back a hundredyears. Itmarkets suchwell-known international brandsas Lipton, Lifebuoy, Surf, Vim and Pond’s, as well as localbrands, such as Kissan, Annapurna, Lakme andWheel.

Unilever has always held the firm belief that theprivate sector can contribute to social developmentby creating win-win solutions to social challengesthrough innovative strategies that meet both businessand social objectives. It was this philosophy thatprompted Hindustan Unilever to create ProjectShakti, a unique micro-enterprise initiative that isboth a catalyst for rural wealth creation and a success-ful business operation.

Meeting the challenge

ROJAMMA’S PLIGHT before she became a Shaktientrepreneur is no different from that of hundreds ofmillions of others trapped in the vicious cycle ofpoverty. (See Figure 1) The micro-finance revolutionhas resulted in eight million Indians receivingmicro-credit, 95 percent of whom are women, andthree in four recipients crossing the poverty line.

SPECIAL REPORT

The Shakti RevolutionHow the world’s largest home-to-home operation is changing

lives and stimulating economic activity in rural India

i-Shakti provides villagers with access to computers that are housed in the homes of Shaktientrepreneurs.

While there is only enough micro-finance available to meetone tenth of the demand, micro-credit will only work over thelonger term if there are scaleable and sustainable opportuni-ties for micro-enterprise.

For decades Hindustan Unilever has held a leading posi-tion in most of the product categories in which it operates,with half its sales in India’s 5,000 towns and the other half invillages with populations of 2,000 or more. As the Indianeconomy opened up in the 1990s and competition increased,the company realized that to grow its business, it had to seeksales from the 550,000 villages with under 2,000 inhabitants,which account for 87 percent of the population. This was eas-ier said than done.

The challenge of reaching these villages was immense.Poor or non-existent transport linksmade it impractical to setup a conventional retail distribution network and, althoughtheir collective purchasing power is considerable, most vil-lagers are unable to afford to spendmore than a few rupees onproducts. If that wasn’t challenge enough, most rural villagesin India are inaccessible through conventional broadcastmedia and widespread illiteracy renders press advertisingineffective as a communications medium.

The Shakti solution

WHAT WAS NEEDED was a totally new type of business model.Hindustan Unilever’s solution, called Project Shakti(“strength” in Sanskrit), was as innovative as it was ambitious.The company decided to set up a direct-to-consumer retailoperation by creating a network of entrepreneurs to sell itsproducts door-to-door, and to produce a range of affordableproducts in small sizes to meet the needs and pockets of low-income consumers. These are mostly single-use sachets sell-ing for as little as 50 paise (half a rupee) each.

The company decided to tap into the growing number ofwomen’s self-help groups in India bymaking presentations atrural group gatherings, initially in Andhra Pradesh. At thesemeetings, disadvantaged women, including Rojamma, areidentified and invited to become Shakti entrepreneurs.Considerable investment is then made in training and coach-ing these women from extremely poor backgrounds to becomehighly competent and confident business operators.

Each Shakti entrepreneur invests US$220 in stock at theoutset—usually borrowing from self-help groups or micro-finance banks—and aims to have around 500 customers,mainly drawn fromher village and from smaller villages near-by. Most generate monthly sales of around US$225, netting amonthly average income of US$16. After paying a few dollars amonth for the loan, she is left with about $150 annually. Withan average rural household income of $250, this represents asubstantial increase formost families. For singlemothers likeRojamma, it is a far cry from the handful of rupees she used toearn working in her mother’s field.

Shakti Vani (“Voice”) takes Project Shakti a stage further.Hindustan Unilever trains local women to give talks to vil-lagers about basic health practices, such as good hygiene, dis-ease prevention and pre- and post-natal care, using visual

aids to overcome widespread literacy. Over the last two yearsShakti Vani has raised health and hygiene awareness in over50,000 villages.

The third Shakti component, being piloted in AndhraPradesh, is an IT initiative called i-Shakti that is designed tomeet villagers’ information needs and provide both privateand public sector organizations with communications accessto “media dark” areas. Village “kiosks” containing internet-linked computers, mostly housed in the homes of Shaktientrepreneurs, provide free and interactive information on awide range of topics, including health, agriculture, education,finance, employment, and entertainment. All content isvoice-enabled so that illiterate people can use it.

The economic and social impact

PROJECT SHAKTI has proved to be a great success for womenin India and forHindustanUnilever. Launched in 2000, by late2007 some 46,000 Shakti entrepreneurs had been appointedand trained, covering 100,000 villages in 15 states and reach-ing over three million households in rural India. This makes itthe world’s largest sustained home-to-home retail operation.

Already a multi-million dollar business, by 2010 it willrepresent a significant share of Hindustan Unilever’s overall


Source: Unilever

Source: Unilever

POPULATION

Less than 200

200-499

500-999

1,000-1,999

2,000-4,999

5,000-9,999

10,000 and above

TOTAL

NUMBER OF VILLAGES % OF TOTAL

114,267 17.9%

155,123 24.3%

159,400 25.0%

125,758 19.7%

69,135 10.8%

11,618 1.8%

3,064 0.5%

638,365 100%

INDIA’S POPULATION DISTRIBUTION

FIGURE 1: BREAKING THE POVERTY CYCLE

Micro-credit

Micro-enterpriseopportunity+

X

X X

LOWINCOME

LOWINVESTMENTS

LOWSAVINGS

J U N E 2 0 0 8 15

business and generate an annual combined income for Shaktientrepreneurs of over $25 million a year.

While the financial benefits are easy to measure, Shakti’ssocial impacts are harder to quantify. For the thousands ofwomen like Rojammawho have become Shakti entrepreneurs,this initiative has changed their lives in ways that are muchmore profound than the income they earn selling soaps andshampoos. It has brought them self-esteem, a sense ofempowerment and a place in society.

A recent independent study showed that Shakti women aremore confident about socializing, more likely to take leadroles in public activities, and enjoy higher recognition andsocial status among local people. As Rojamma herself says:“Today everyone knows me. I am someone now.”

Lessons learned

SO WHAT LESSONS CAN BE LEARNED? Firstly, that for a proj-ect like Shakti to be scalable and sustainable it has to be com-mercial and profitable. This is not a corporate social responsi-bility program. It is a business initiative with social benefits.

Secondly, developing a business model like Shakti is notfor the faint-hearted or short-sighted. It took us a long timeand considerable refinement to get it right. This requiredunswerving senior-level commitment and considerablepatience and persistence, not traits quoted companies are

always noted for. Hindustan Unilever was willing to acceptlower rates of return in the short-term because it was pre-pared to take a long view.

Thirdly, selecting the right person to become a Shaktientrepreneur was key. We learned from experience that it hadto be someone for whom earning $16 a month fundamentallychanged her life, rather than made life a little easier. Thismeans that themajority of our entrepreneurs are women fromfamilies living below the poverty line. This brings its own setof challenges. It is difficult for women on low-incomes to visitthe homes of those who are better off, while the caste systemadds an extra layer of complexity. This meant teaching a lot of“soft” skills, such as confidence-building, as well as “hard”skills, such as selling and book-keeping.

Finally, we could not have achieved what we have withoutstrong support from over 300 partners, including NGOs,banks and both state and local government. While many rec-ognize the potential for economic growth through encourag-ing women to become entrepreneurs and are keen to partner,not all government departments and NGOs are yet comfort-able about working with the private sector, and convincingthem sometimes proved a challenge.

Future plans

HINDUSTAN UNILEVER intends to keep developing ProjectShakti until it achieves its target of reaching 500,000 vil-lages through 100,000 entrepreneurs and 600 million con-sumers by 2010.

Project Shakti has the potential to make an even morefundamental contribution to improving the wealth and qual-ity of life of India’s rural poor. Shakti entrepreneurs, ShaktiVanis and i-Shakti together represent a huge inter-connect-ed network and a major communications channel, openingup a huge flow of information and education to vast tracts ofrural India. We are continually exploring ways in whichShakti can create an even bigger impact on health andhygiene and take both business and social development to thenext level. We are currently talking to several potential part-ners, including our Lifebuoy soap brand, about creating acomprehensive health program to reduce the huge numbersof children who die every year in India from diarrheal dis-ease, many of whose lives could be saved through hand wash-ing with soap and water.

Shakti Vani already runs an extensive hygiene educationprogram with Lifebuoy to create awareness about the impor-tance of hand washing with soap. We are now looking at howProject Shakti could link together the many developmentagencies, health ministries, pharmaceutical companies andtechnical experts that deliver curative as well as preventativeprograms to tackle this dreadful disease. With the ambitiousgoal of “no child dying from diarrhea in a Shakti village,” wehope to co-create a partnership model that demonstrateswhat can be achieved if all actors in society apply their skillsand capabilities to a task that is clearly defined and poten-tially achievable.

Unilever distributor Aruna Roshanagari doing her accounts in her shopin Pepalpahad, a village in Andhra Pradesh.


Future challenges

NOW THAT THE SHAKTI NETWORK is well-established, it canbe opened up to other stakeholders, including governmentagencies and other private sector firms. The partnerships wehave developed so far to build the network have worked on thebasis ofmutual trust andmutual benefit. The real test will comewhen the network is used by many more organizations and wehave no illusions about how challenging this will prove.

It will mean public sector partners having to recognize thatcompanies involved in social development work also need tomeet business objectives and make profits if their participa-tion is to be sustainable and scalable. Similarly, private sectorpartners will have to appreciate that government bodies havestrong political constituencies to answer to, as well as socialdevelopment objectives.

Whatever the primary purpose and objectives of each part-ner, whether developmental or commercial, creating conver-gence between different activities is the key to progress. A bigpart of the solution to development lies in working togetherand using infrastructure, whether developed by the public orprivate sector, for the benefit of all.

Conclusion

WHILE UNILEVER IS INTENT on building its sales and mar-ket share in rural India, it is equally committed to improvingthe lives and livelihoods of people in India. What this projecthas shown is that so much more can be achieved by looking atsocial and commercial challenges through the same lens,rather than seeing them as distinct and and separate activities.

Project Shakti’s role in creating incomes for rural womenand helping to empower them is more important than salesalone. The health of our business is inextricably linked with thehealth of society. In the end it is in all our interests, whateverour motives, for people to have access to a better quality of lifeand more opportunities for personal development. ForRojamma it has not only transformed her standard of living andsense of self-worth, it has also allowed her to educate herdaughters, giving them the chance in life she didn’t have.

Gavin Neath is Senior Vice-President, Corporate Responsibility,

Unilever.

Vijay Sharma is the former head of Shakti, Hindustan Unilever.

For more details about Project Shakti please contact Manu Soodat Hindustan Unilever in India on 00 91 9999 021777 or at:[email protected]

Shakti entrepreneur Rojamma (right) has used her income to educateher daughters, giving them the chance in life she didn't have.

An open-air lesson in personal hygiene by a Shakti Vani communicator.

J U N E 2 0 0 8 17

BY MARI KOGISO, MIA MATSUOAND TOKUTARO HIRAMOTO

THE SUMITOMO GROUP requires all of its member compa-nies and business operations to work under a business man-agement philosophy called the “Sumitomo Spirit,” which aimsto generate profits not only for the company, but also for soci-ety. One of Sumitomo Chemical Co., Ltd.’s businessesinvolves the production of insecticide-treated mosquito nets.

All employees—from the management and technical staff tothose at Group companies—have lobbied international aidorganizations in promotion of the Olyset Nets project, con-vinced that the mosquito net could become an indispensabletool in the prevention of malaria outbreaks.

From 1993 to 2001, the staff of Sumitomo and its Groupcompanies worked tirelessly through trial and error to devel-op the modern Olyset Nets, which are certified by the WorldHealthOrganization (WHO) as Long-Lasting Insecticidal Nets

SPECIAL REPORT

Social Issue-Oriented BoPBusiness and Japanese Companies

Case Study: Sumitomo Chemical’s Olyset NetsInstilling the “Sumitomo Spirit”

A child studies under a mosquito net in his home.

(LLIN). The prototype insect-resistant net was originallydeveloped to prevent insects from penetrating the manufac-turing processes at factories. Since the nets needed to bedurable for use in factory environments, polyethylene wasused instead of polyester, making the original nets high qual-ity but very costly to produce. Initially, demand for the prod-uct was not strong, so Sumitomo developed a technology totreat the polyethylene resins used on the nettingmaterial withan insect-expelling agent, eventually leading to the develop-ment of the current Olyset Nets.

Despite this, the Olyset Net business did not generate theintended results in terms of profitability, and efforts made bythe marketing staff at Group companies in Africa gave disap-pointing results, as only small numbers of the product weresold. Despite this initial setback, Sumitomo continued to pro-mote the business, convinced that it would become successfulat some point in the future. This situation continued until theproduct was officially certified in 2001 by the WHO as having

long-lasting insecticidal effects, which contributed to thepresent success of the product.

The development of Olyset Nets—designing the optimal approach forusers with critical needs

THE SUCCESS OF THE OLYSET NET business is due mostly tothe nets’ high quality and easy-to-handle form, especiallyamong households with small children in developing coun-tries. The creation of the product would not have been possi-ble without the long term support from the company’s corpo-rate philosophy, which enables it to allocate a fixed ratio of itssales profits on investments in research and development.

Sumitomo’s Olyset Net turned out to be a product capable ofsolving the problems associated with conventional mosquitonets since the insecticidal efficacy of the chemical agents


TABLE 1: OVERVIEW OF OLYSET NET BUSINESS

TABLE 3: OLYSET NET MANUFACTURING SCALE IN AFRICA

YEAR TECHNOLOGY PRODUCTION SALES OTHERS

1993

2001

2002

2003

2004

2005

2006

2007

Launched into insect-resistantnet development project

Approval by WHO as “Long-LastingInsecticidal Nets (LLN)”

Olyset Net wins Time’s “MostAmazing Invention”

Olyset Net wins “USA Tech MuseumAwards”

Established 1st Project teamwith Acumen Fund

Production start in Changzhou, China

Licensing to A to Z Textile Mills Ltd.and production start in Tanzania

Production start in Dalian, China

Production start in Vietnam

Established Vector HealthInternational Ltd. And production start

Sales start in Africa

Provided 30 million OlysetNets from 2003 to 2006

Build elementary school facilitiesand start education support programs

Olyset Net wins “Asahi CorporateCitizenship Award”

Source: Sumitomo Group

WORLDWIDE 2004 2005 2006 2007 (F)500

1300

260

1250

3400

272

1800

4300

239

3100

6800

219

2004 2005 2006 2007 (F)100

350

350

400

1200

300

400

1200

300

800

2400

300

Capacity of production (million nets/year)

Employees in Olyset production

Employment creation (per million nets)

Capacity of production (million nets/year)

Employees in Olyset production

Employment creation (per million nets)


TABLE 2: OLYSET NET MANUFACTURING SCALE

AFRICA

3500

1000

3000

2500

2000

1500

500

0

AFRICA OTHER COUNTRIES

Millionnets/year

2004 2005 2006 2007 (F)


400 850 1400 2300

100

400

400

800

J U N E 2 0 0 8 19

applied to polyethylene resins in the net was guaranteed to lastfive years, and the insecticidal properties were also unaffectedby washing. Furthermore, the use of polyethylene makes themesh of the net resistant to stretching and tearing.With a large-sized mesh, the net breathes well, a characteristic suitable forhouses built in tropical areas prone tomalarial outbreaks.

Establishing joint ventures withlocal companies with support fromgovernmental organizations:Quality control and the introductionof technology

SUMITOMO’S OLYSET NET venture has been supported by abusiness environment where a private-sector company canreceive financial support from government organizationswhen launching new business in developing countries. TheOlyset Net business represents a successful case of collabora-tion between the public sector—the party in charge of sup-porting fund-raising, and the private sector—the party incharge of the project’s actual business operations. Such col-laborations have allowed Sumitomo to succeed in fosteringlocal companies which can potentially take charge of theman-ufacturing process within the BoP market.

Sumitomo licensed its own manufacturing expertise forOlyset Nets to a local company, A to Z TextileMills Ltd. (A to Z)in Tanzania at no charge, which led to the start of local produc-tion. According to the WHO, annual demand for LLINamounts to 60 million to 80 million nets. To meet thisdemand, Sumitomo arranged loans for US$5.8 million fromthe Japan Bank for International Cooperation (JBIC) tofinance the initial for a joint venture, Vector HealthInternational Ltd. (VHI), with A to Z. VHI initiated productionin January 2007 with an annual output capacity of 4 millionnets, and the company plans to double annual production to 8million nets in the future. Sumitomo has emphasized its com-mitment to completely infusing its technology into VHI.

This manufacturing process is labor-intensive, contribut-ing to local employment with a total of 1,200 workers.Sumitomo does not intend to secure profits by collectinglicensing fees for this technology, but gives priority toexpanding local production by providing education and train-ing to local production staff. In order to help local staffacquire know-how about Olyset Nets, Sumitomo has sent itsown engineers to Tanzania. At the factory, the Japanese engi-neers are educating local employees in production manage-ment, quality control, and worker safety. This investment inemployee education is a huge effort, particularly becauseSumitomo had to begin the business from scratch, a situationradically different from cases where factories are built inareas where companies can take charge of the manufacturingprocesses which already exist.

Sumitomo decided that it was important to dispatch itsengineers to the Tanzanian company and to train local work-ers in production technology, control of the manufacturingprocess, and quality control. Technological transfer usually

involves less transfer costs on the side of the party that isdoing the transfer, but it is quite difficult to fully transfer itsquality control know-how in themanufacturing process to therecipient company. For example, at Olyset Nets, if a hole is leftin a mosquito net due to an error in the sewing, mosquitoescan penetrate the net. In view of these kinds of potential risks,educating and training local workers sufficiently in order tofully introduce the relevant technology into the manufactur-ing company is vital, even if it entails additional costs. In theBase of the Pyramid (BoP) market, a business is required todevelop not only potential consumers but also potential pro-ducers when undertaking this kind of BoP business.

The Olyset Net business andsocially-oriented BoP business

OLYSET NETS TECHNOLOGY has directly contributed to theprevention of malaria in developing countries, and profitsearned through the business have been re-invested into a planto expand local production bases, while technological intro-duction has been instrumental in boosting local productioncapacity. This has all led to increased employment. In addi-tion, Sumitomo Chemical and the Sumitomo Group have useda part of the profits from the Olyset Nets business to financethe establishment of elementary schools in local areas. Theseactivities are capable of nurturing potential producers andconsumers on a long-term basis.

Social BoP and Japanese businesscustoms are compatible

AS THE SUMITOMO EXPERIENCE demonstrates, Japanesecompanies are in a good position to engage in “social issue-oriented BoP business” (social BoP), which is the ability ofbusiness to contribute to solving poverty and other socialissues in a gradual manner by offering products and servicesto BoP households, whilemaintaining respect for their values.

Japanese companies possess three major characteristicsinherently suited to this type of social BoP business:� the ability to conduct long-term corporate management,� the ability to make continuing and long-term investments

in research and development, and� the ability to receive support from governmental organiza-

tions and agencies.Long-term corporatemanagement is closely associated with

Japanese business culture and the nature of Japanese stock andfinancialmarkets, which still allow Japanese companies to con-duct business with a long-term view. Although the number ofshareholders who are vocal about their opinions has increasedin Japan and shareholder demands have become more trans-parent, the relative number of shareholders focused primarilyon pursuing short-term profit is still lower than in the UnitedStates and Europe, making it easier for corporate managers toconduct businesswith a long-termvision.Under the leadershipof managers with long-term views and prospects, Japanesecompanies are able to engage in social BoP business, working to


resolve immediate social issueswhile time seeking to reapprof-its from their efforts in the future.

The ability tomake continuing investments in research anddevelopment reflects the inclination of Japanese companies tomaintain funding for technological investments, even in diffi-cult business climates. The ratio of research-related spendingin Japan in terms of its gross domestic product (GDP) has beenthe highest among major industrial countries since the late1980s. (White Paper on Science and Technology, 2007). Research-related spending by the private sector accounts for about 80percent of all such spending in Japan, which is higher than theratio of this area of private-sector spending in other developedcountries, suggesting that Japanese businesses are inclined tocontinue to invest in research and development activities evenunder difficult business conditions.

Japanese companies can receive financial support fromgovernmental organizations when launching new businessesin developing countries—making it possible for companies touse funds in a manner that suits the business terms of eachproject. Such financial support is often through overseasinvestment loans by the Japan Bank for InternationalCooperation, whose lending scheme enables Japanese compa-nies with an eye on investing in new businesses overseas toutilize low-interest loans on a long-term basis. It also allowsthem to utilize funds for investment in social BoP businessprojects that are expected to take a significant period of timeto bear profit, since it is relatively easy for them to overcomethe initial difficulty of raising funds for such businesses.

Challenges to companies engaged inBoP business

IN ORDER TO REALIZE continued success in social BoP busi-ness, Japanese companies need to address two major issues.The first challenge is the need to strengthen their networkswith international organizations, nonprofit organizations(NPOs), and nongovernmental organizations (NGOs). As arule, Japanese companies’ networks with international organ-izations, NPOs, and NGOs are not strong. Companies need toreinforce their networks with these organizations in order topromote social BoP. In the case of Sumitomo, its Olyset Netsbusiness in Tanzania is being efficiently implemented as aresult of the company’s deepening networks with an interna-tional organization. Sumitomo has also recognized that animportant challenge for the company in further expanding itsbusiness is to increase its contact with customers, and natu-rally it is considering how to best reinforce networks withinternational organizations, NPOs, and NGOs.

Japanese companies also need middle managers to widentheir management perspective through better in-house coop-eration and avoiding organizational sectionalism. Managersshould deepen their understanding about relations betweenrelevant divisions from the viewpoint of corporate manage-ment. For example, when a company tries to form a partner-ship with anNGO, its department in charge of corporate socialresponsibility (CSR) becomes the party most likely to negoti-

ate, but when the company tries to resolve social issues orproblems related to its business, it generally turns to employ-ees working at an in-house research division who are believedto be knowledgeable about the issue. In Sumitomo’s case, astrong commitment to inter-divisional cooperation withinthe company helped to make CSR activities more palatable,and other activities such as the establishment of a local schoolwent forward as part of its BoP business.

By addressing these types of challenges, Japanese business-es will be able to engage in social BoP business smoothly andeffectively, making it possible for them to resolve importantsocial issues and also to reap themany rewards in the BoPmar-ket in the future. Now, some other Japanese companies, likeYakult Honsha and Yamaha Motor, are also expanding theirbusinesses into the BoP markets, and it is expected that stillothers in the various industries will follow these trends.

Mari Kogiso is Tokyo Representative of MIGA, World Bank Group.

Mia Matsuo and Tokutaro Hiramoto are with the Social Innovation

Foresight Team, Nomura Research Institute, Ltd. Tokyo.

References

Ministry of Education, Culture, Sports, Science and Technology, White Paperon Science and Technology 2007, 2007.

Organization for Economic Co-operation and Development, Main Science andTechnology Indicators, 2006.

Statistics Bureau, Ministry of Internal Affairs and Communications, Survey ofResearch and Development, 2006.

Sumitomo Chemical Co., Ltd., Sumitomo Chemical CSR Report 2006, 2007,accessible at:http://www.sumitomo-chem.co.jp/english/responsible/pdf/2006csr/2006csre_02.pdf.

Sumitomo Chemical Co., Ltd., SUMITOMOKAGAKU, vol. 58, 2007.

Sumitomo Chemical Co., Ltd., SUMITOMOKAGAKU, vol. 61, 2007.

World Resources Institute, The Next 4 Billion: Market Size and BusinessStrategy at the Base of the Pyramid, p.1-3, 2007.

Endnotes1 White Paper on Science and Technology 2007, published by the JapaneseMinistry of Education, Culture, Sports, Science and Technology.

Sumitomo Chemical Olyset Net

J U N E 2 0 0 8 21

BY KATIA THERIAULT, LINDSAY MADEIRAAND PATRICK AVATO

The problem

VIEWED FROM SPACE, Africa emerges as looming in animpenetrable shadow, the portrait of a continent cast in dark-ness. NASA’s satellite image reveals the sheer magnitude of aproblem that affects an estimated 1.6 billion people, repre-senting 1/3 of the global population. The problem is particular-ly acute inAfrica, wheremore than90percent of the rural pop-ulation and 74 percent of the total population live outside gridconnectivity. Consequently, the 500million “energy poor” arereliant on traditional forms of energy to meet their lightingneeds, dominated by fuel-based sources such as kerosene, a

costly and inefficient alternative that consumes 10-15 percentof annual household income. For the poorest families, the sig-nificantly high expenditures on kerosene for meeting theirlighting needs affects their ability to pay for other day-to-daynecessities, such as children’s education, family health careand nutrition, etc. Exacerbating this problem, fuel-basedlighting also produces greenhouse gases (GHGs), leads toincreased indoor air pollution and associated health risks,inhibits productivity and jeopardizes human safety.

The opportunity

AFRICAN PEOPLE can neither afford to wait for electrificationaccess rates to rise to the level of other world regions nor con-tinue relying on expensive, inefficient, and unsafe fuel-based

SPECIAL REPORT

Lighting AfricaLighting lives and livelihoodsthrough market transformation

Students using LED lighting at home in Accra, Ghana.


products to meet their lighting needs. Fortunately, new evi-dence suggests that solving Africa’s lighting issues may bemore achievable than ever before, largely the result of recentadvances in modern lighting technologies, such as improved,efficient products like CFLs (compact fluorescent lamps) andLEDs (light-emitting diodes), coupled with new findingsrevealing that Africans may be willing and able to pay as muchfor modern lighting technologies as they are already payingfor kerosene and other inefficient sources. At the same time,an increased focus by international donors on promotingenergy access in Africa, for example through the World Bankand the International Finance Corporation (IFC)’s CleanEnergy and Investment Framework and the Africa EnergyAction Plan, provided an opportunity to develop innovativeand clean energy solutions for off-grid populations of Africa.

Recognizing the opportunity at hand, supported by grow-ing interest from the international lighting industry lookingto move into new growth markets, The Lighting Africa programwas conceived in 2007. Opting for a market-based approach,Lighting Africa was designed to support the private sectorinnovate and deliver off-grid lighting products and solutionsto Africa, in turn aiming to accelerate access to non-fossilfuel-based, low cost, safe, clean and reliable off-grid lightingproducts with associated basic energy services, with the ambi-tious goal of reaching as many as 250 million people in Sub-Saharan Africa by the year 2030.

Engaging global and local private sector

THE PROSPECT of increased revenues through the Africanoff-grid lighting market, the potential of substantive socialand environmental impact in Africa, and Lighting Africa’scommitment to support the industry in growing this newmar-ket area, continue to persuade global and local entrepreneursto follow its lead. But surely, one is entitled to ask whetherthose 1.6 billion people lacking access to lighting really repre-sent a promising market? The argument is exceedingly con-

vincing: at a time when oil was $50/barrel,research indicated that approximately US$38billion/yr was spent globally on lighting, $17billion of which was spent in Africa alone, ina commercially viable, functioning market.For African entrepreneurs, this represents amuch welcomed new opportunity to increasewealth and, concurrently, improve standardsof living. It alsomeans new partnerships withstakeholders across the global lightingindustry supply chain, and for many Africanbusiness developers, a first chance to stepinto the international business arena, and atthe same time, foster economic developmentin their own continent.

But despite the promise of this uniqueopportunity, global and local entrepreneurswho are interested in this market find them-selves ensnared by the inevitable hurdles andperceived uncertainties that accompany the

development of a market as undiscovered and undefined as thisone. The barriers they have identified aremany, including a lackof information about consumer needs, product preferences, andaffordability or willingness to pay; the first cost barriers associ-ated with new product development and market entry; policyimpediments such as kerosene subsidization and tariffs onimported products (such as CFLs and LEDs); absence of institu-tional mechanisms which would facilitate the identification ofsuitable partners for product sale and delivery; product stan-dards and quality assurance; and legal concerns like protectingintellectual property rights. To help solve these and other issues,Lighting Africa has started working with global lighting compa-nies, local private sector service providers and distributors,NGOs, and the domestic financing industry (including microfinance organizations) to develop appropriate and viable busi-ness models for delivering modern, clean and safe non-fuelbased off-grid lighting solutions. The project focuses predomi-nantly on reducing market entry costs, providing informationabout African markets and consumers, and developing anenabling institutional and regulatory framework.

Lighting Africa’s commitment to support the private sectoris carried out through various initiatives, including:

Market researchLighting Africa is helping entrepreneurs gain a better

understanding of the African consumer, providing answers toquestions like, “What does the Africanmarket look like?Whatkinds of products do African’s want? What technologies dothey prefer? What are they currently spending on lighting?How do products get frommanufacturer tomarket successful-ly? What modes of communication reach the African con-sumermost effectively and howmight onemarket a new prod-uct in a way that attracts consumer attention?” To answerthese and many other questions, Lighting Africa is sendingteams of researchers to conduct surveys in households andsmall businesses beginning in five countries- Tanzania,Zambia, Ethiopia, Kenya, and Ghana- to gather critical insid-

Family using LED lighting.

J U N E 2 0 0 8 23

er information to share with the industry. This component ofthe project will determine the key parameters essential to aneffective market transformation.

Business to business web portalAimed at exposing the African off-grid market opportuni-

ty to the global industry, facilitating the exchange of marketand consumer knowledge and information, and promotingbusiness partnerships between global and local actors of theAfrican off-grid lighting supply chain, Lighting Africa hasdeveloped an interactive business to business web portal.Navigating through one of its most popular features—adynamic business opportunities forum which allows entre-preneurs to post and receive business leads—the LightingAfrica Web Portal has become a Mecca of online social net-working activity, which has so far attracted over 1200 entre-preneurs, investors, and other stakeholders interested inpursuing new investments and establishing partnershipsacross the supply chain to deliver their products and services.

The Development Marketplace Grant CompetitionThe Development Marketplace Grant competition is a

competitive grant program which plans to award up to$200,000 each to about 15 to 20 finalists for presenting themost innovative and viable ideas for designing, developing,and delivering modern off-grid lighting products and servic-es to Sub-Saharan Africa. Based on the premise that a sustain-able market is one that grows the local economy, the competi-tion required that each project team include a partner organ-ization based and operating in Africa. 400 proposals from 54countries, including 38 African countries, were received inthe first round, creating an extremely competitive applicantpool. Of the 54 finalists in the current second stage of thecompetition, about 15 to 20 winners (of the grants) will beselected and announced after final proposals have been pre-sented to an international panel of jurors during the LightingAfrica 2008 Global Business Conference, to be held May 6-8,2008 in Accra Ghana.

First Global Business Conference and DevelopmentMarket Place Competition for Off-grid Lighting in Africa:Lighting Africa 2008

Bringing together global players from the lighting industry,international and domestic financial institutions, privatedevelopers, government agencies, non-governmental organi-zations, and international and bilateral development agencies,this event is, unequivocally, a defining moment for all who areinterested in shaping the off-grid lighting market in Africa.The first of its kind, Lighting Africa 2008 will give participantsthe unique opportunity to connect with global entrepreneursfrom around the world, gain key insights and exchange knowl-edge, view the latest technological innovations, and meet thepeople whose lives will be transformed by their efforts.

Quality assuranceTo shield African consumers from poor-performing light-

ing products and avoid market spoilage for the industry,

Lighting Africa is conducting a wide range of activities toenhance consumer awareness and boost confidence in newlighting products and services. These activities range from thetesting of solar lanterns in the market against existing qualitystandards, to the development of specifications for LED-based lanterns and to the development of a product qualityassurance strategy, in collaboration with the industry.

Mainstreaming carbon finance benefitsFuel-based lighting produces carbon dioxide, amajor con-

tributor to GHG emissions. For instance, a kerosene lanternused for 4 hours per day is estimated to release more than 100kg of carbon dioxide into the atmosphere over the course of ayear. With the objective of reducing GHG emissions and, atthe same time, enhancing the financial viability of modernoff-grid lighting projects (e.g. by offsetting the relatively highfirst costs) which substitute fuel-based lighting, LightingAfrica is helping develop both project- and program-basedmethodologies for the CleanDevelopmentMechanism (CDM)and voluntary carbon markets.

Expected outcomes for Africans

IT IS EASY TO FORGET the considerable impactmodern light-ing has in our lives;manymay evenwonder how lighting relatesto social, environmental and economic development. In fact,modern lighting services change how we live inmore ways thanone, allowing us to expand productive time, improve living andworking conditions, and enhance safety and security. Similarly,modern off-grid lighting can improve lifestyle and create newopportunities for Africa’s poor, for example:� Extending the working day for small and medium enter-

prises (SMEs), thus increasing production, expandingincome opportunities, improving working conditions, andincreasing customers.

L i g h t i n g A f r i c ac o n t i n u e d o n p a g e 3 3

Nurse using LED lighting


SPECIAL REPORT

BY IBRAHIM ISMAYILOV,SAMIR TAGHIYEV, OLGA GODUNOVAAND FARZIN MIRMOTAHARI

Background

IN 1994 THE MULTINATIONAL energy company BP, togetherwith a group of other oil companies, signed a production shar-ing agreement with the government of Azerbaijan to developthe country’s oil and gas wealth. This agreement was officiallycalled the Azeri-Chirag-Guneshli (ACG) oil development andBaku-Tblisi-Ceyhan (BTC) oil pipeline projects, but was

widely referred to as the “Contract of the Century.” It offeredAzerbaijan, an independent country following the collapse ofthe Soviet Union in 1991, the opportunity to use its naturalresources to improve the lives of its people and amelioratewidespread poverty. The International Finance Corporation(IFC) was one of the leading financiers of this project.

During the late 1980s and early 1990s, Azerbaijan hadendured the collapse of the Soviet Union, economic disinte-gration, and a devastating war with neighboring Armenia. Thescale of economic collapse was severe even by Soviet standards:In 1995 GDP was only 42 percent of its 1990 pre-independ-ence level. Unemployment was endemic: out of a total popula-

Developing the Local Supply Chainfor the Contract of the Century

The BP managed Sangachal terminal in Baku, Azerbaijan, boasts one of the world’s most high-tech training centers for the handling of robots which do someof the manual labor on oil drilling rigs.

J U N E 2 0 0 8 25

tion of 8million, about onemillion Azerbaijanis were refugeesand internally displaced persons who had fled the areas occu-pied by Armenian forces and another 2 million Azerbaijanishad left the country, mainly for Russia to find work.

All this could change with the “Contract of the Century.” Itcould not only provide massive oil revenues for theAzerbaijani government, but also offer an opportunity for alarge part of the Azerbaijani private sector to rebuild itself byworking with BP and other major oil and gas service compa-nies. But to do this Azerbaijani companies would have to com-pete with international firms for contracts which demandedinternational quality levels. For most local companies, thisseemed an almost insurmountable obstacle.

The Enterprise Centre

TO ADDRESS THIS CRUCIAL ISSUE, in 2002 BP launched theBakuEnterpriseCentre (EC)as aone-stopshopwhere local sup-pliers could obtain information, training and other forms oftechnical assistance, in order to bid for andwin supply contractswithBPandother large companies inAzerbaijan. IFC, as the leadfinancier of the ACG-BTC Project hired a Small and Medium-sizedEnterprise LinkagesCo-ordinatorwhowasbased in theECin order to co-ordinate BP and IFC support for SMEs. Varioustypes of training and mentoring services in technology, tendersand bidding, basic business disciplines and other fields werelaunched and continue to be provided at the EC.

The Centre also built a comprehensive supplier database tohelp link local firms with foreign companies in need of a ven-dor. To this day an electronic job board lets companies knowin a timely, efficient way about potential opportunities. Inaddition, the EC sponsors a variety of fee-based courses toenhance general economic opportunities for entrepreneurs,and to improve the chances that small local businesses willwin contracts on which they bid.

The EC also encourages international contractors to investin training and infrastructure and to source materials andservices locally, and provides a forum/collaboration facilityfor various NGOs, international financial institutions anddevelopment agencies that contribute to business develop-ment in Azerbaijan.

In another joint project between IFC and BP, theAzerbaijan Bank Training Center (ABTC) was contracted todeliver small business courses in local languages using a fee-based system. The goal was to build up the local small businessservices sector, create amarket for such services, and improvethe skills of the local consultants providing them. Post-proj-ect, ABTC continues to provide training and consulting serv-ices to local companies in Azerbaijan in a commercially sus-tainable way.

In June 2007, BP and its co-venturers in the oil and gasprojects in Azerbaijan also launched the EnterpriseDevelopment and Training Program (EDTP)—a new three-year multi-million initiative in support of local businessdevelopment. The program is part of BP’s efforts to continueto increase the local content share of their total contracts inAzerbaijan, and is financed through the oil and gas co-ventur-

ers Regional Development Initiative and coordinated by theEnterprise Center.

The need for access to finance

DESPITE THE SUCCESS OF BP’S local enterprise develop-ment efforts, it became apparent early on that the technicaland business support and training were insufficient by them-selves. Without access to affordable finance, local enterpriseswould find it very difficult to compete with international com-panies for the contracts offered by the BP’s oil and gas proj-ects. Most local SME suppliers required new technology andequipment to achieve the quality of service required by BP.Financing from local banks was not available, as they requiredcollateral equal to 100 percent-150 percent of the loan amountand the terms were inflexible.

BP and IFC began to consider a proposal to develop thefinancing to improve access to finance for local SME suppli-ers. Out of these discussions came the concept of the SupplierFinance Facility (SFF) pilot project, to be developed jointly byIFC and BP, and implemented through a local bank inAzerbaijan. The parties agreed to start a pilot project with theobjective to test the viability of supplier finance, to gain expe-rience and identify key lessons.

In June 2006, IFC and BP launched a $316,000 pilotSupplier Finance Facility (SFF) involving the MicrofinanceBank of Azerbaijan, providing medium-term funding forworking capital and capital expenditures to small andmediumoil services suppliers to BP and its partners in Azerbaijan.Suppliers were able to use their contracts with BP as collater-al, thereby reducing the need for using fixed assets and cash(which in many cases were not available). In late 2006, thepilot was expanded to a $15million investment project involv-ing the three parties. So far, applications from eight suppliersin a number of industry sectors have been evaluated – fromtransportation services to printing, engineering and wastemanagement. Two applications have been approved and asubstantial increase in credit applications and disbursementsis expected in 2008, according to IFC estimates.

Positive results to date

IN 2007 , BP and its co-venturers spent approximately $111million on procurement from local SMEs, increasing dramat-ically from a baseline of $13 million in 2002. During 2006 thecompany worked with 393 SMEs. From 2003-2006, 1606 newbusiness contracts, worth $249million, were awarded to localSMEs. During this same period, 562 SMEs received trainingon the contract tendering process, quality control, and health,safety and environment (HSE) standards.

Case study: Debet

AN EXAMPLE OF A LOCAL COMPANY which benefited fromthe EC and SFF was Debet. Founded in 1997, the companymanufactures and supplies quality safety gloves, helmets,work wear, corporate clothing and promotional wear for BP


and numerous other companies in Azerbaijan. CurrentlyDebet Uniform employs 117 people.

The development of Debet Uniform was possible throughthe supplier development project launched in 2004 andimplemented in partnership with German TechnicalCooperation (GTZ), the Enterprise Centre, and IFC. GTZ wascontracted specifically to provide an experienced specialist—amentor—that could provide the technical and business trainingand advisory services that were needed. A gap analysis of Debetwas conducted which showed where the key areas that neededimprovement were. Since 2006 this project has been fundedby BP’s Regional Development Initiative (RDI), a long termsocio-economic development program funded by BP and itsco-venturers in major oil and gas projects in Azerbaijan.

In 2007, BP awarded a $6million, 3-year contract to DebetUniform Ltd for the supply of personal protective equipmentin Azerbaijan and Georgia. A key condition for Debet to beable to fulfil this contract was to obtain medium/long-termfinancing. Debet Uniform received a loan from the SuppliersFinance Facility, using its contract with BP as collateral, andwith a term of 3 years, equal to the term of the BP supply con-tract. Debet’s work, which was previously performed by a for-eign firm, was an example and signal to the market place thatwith proper support and assistance, local companies couldcompete and win in the international market place!

Due to rapidly increasing oil exports and the high oil price,Azerbaijan’s economy grew at an amazing rate of 34 percent in2007. BP and IFC’s assistance will help ensure than smallbusinesses can also participate, develop and benefit from thisgrowth.

Ibrahim Ismayilov is BP Manager of the Regional Development

Initiative (RDI) in Azerbaijan.

Samir Taghiyev is BP Manager of the Enterprise Centre in Azerbaijan.

Olga Godunova is Operations Officer of PEP-CEU in Baku, Azerbaijan.

Farzin Mirmotahari is Operations Officer of the Global Linkages Unit

for Azerbaijan at the International Finance Corporation.

income data are buttressed by detailed, standardized expen-diture data in a substantial subset of countries.

A new way of thinking about povertyreduction

THE BOP MARKET ANALYSIS in this study is intended to helpbusinesses and governments think more creatively about newproducts and services that meet BoP needs and about opportu-nities for market-based solutions to achieve them. For busi-nesses, characterizing the market in empirical terms is animportant first step toward identifying business opportunities,considering business models, developing products, andexpanding investment in BoP markets. Put simply, while ananalysis of the depth of poverty does not generate private sectorenthusiasm for investment, an analysis of BoP market size andwillingness to paymight—and is thus a critical step towardmar-ket-based solutions. For governments, such an analysis canhelpfocus attention on reforms needed in the operating and regula-tory environment to allow a larger role for the private sector.

Themarket-basedapproach topoverty reductionandempir-ical market data described in this report are equally importantfor thedevelopment community.They canhelp frame thedebateonpoverty reductionmore in terms of enabling opportunity andless in terms of aid. A successful market-based approach wouldbring significantnewprivate sector resources intoplay, allowingdevelopment assistance to be more sharply targeted to the seg-ments and sectors for which no viable market solutions canpresently be found.Market-based approaches and smart devel-opment policies are synergistic strategies.

Perhapsmost important, amarket-oriented approach rec-ognizes that only sustainable solutions can scale to meet theneeds of 4 billion people.

Allen L. Hammond is Vice President for Innovation and Special

Projects at the World Resources Institute.

The Next Four Billion: Market Size and Business Strategy at theBase of the Pyramid is an International Finance Corporation/World Resources Institute joint publication. Visit www.nextbillion.net.

Endnotes1 In this study, current U.S. dollars means 2005 dollars. Unless otherwisenoted, however, market information is given in 2005 international dollars(adjusted for purchasing power parity); for convenience, BoP and mid-marketincome cutoffs are given in international dollars for 2002 (the base year towhich household surveys used in the analysis for the report have been normal-ized). U.S. dollars are generally denoted by US$, international dollars by $.2 World Resources Institute, World Bank, United Nations DevelopmentProgramme, and United Nations Environment Programme, World ResourcesReport: The Wealth of the Poor, 2005, Washington DC.3 International Labour Organisation, Key Indicators of the Labour Market,2nd ed., 2002. Geneva: ILO.4 Frederich Schneider, “Size and Measurement of the Informal Economy in110 Countries around the World” Working Paper 2005-13, Center forResearch in Economics, Management and the Arts, Johannes KeplerUniversity of Linz.

T h e N e x t 4 B i l l i o nc o n t i n u e d f r om p a g e 9

A local company, Azmetco, was awarded a contract by BP to check andtest various types of meters.

J U N E 2 0 0 8 27

BY ISRAEL MORENO BARCELO

CEMEX is a growing global building materials company thatprovides high-quality products and reliable services to cus-tomers and communities across the world. Founded inMexicoin 1906, CEMEX now operates in more than 50 countries andmaintains trade relationships with more than 100 nations.

The challenge

ADEQUATE HOUSING is a basic human right enshrined in theUniversal Declaration of Human Rights. Yet, like many other

human rights, not everyone has experienced it. Mexico faces asevere housing shortage that affects the daily lives of morethan 20 million people. Many low-income families devotetheir free time to building their homes. These homes are typ-ically very basic, and construction is slow and inefficient.

The opportunity

THE LOW INCOME segment has traditionally been a greatcement consumer: it consumes 30-40 percent of baggedcement produced in the country. However, high market frag-mentation and dispersion, as well as the small size of purchase

SPECIAL REPORT

Patrimonio HoyLow-income housing that improves quality of life

Construction materials for this house in La Paz (on the outskirts of Mexico City) were purchased through the CEMEX housing program.


transaction, make serving this segment bothcomplicated and costly. Additionally, it is diffi-cult to create substantial brand differentiatorsthat may be kept up over time.

In 1998, CEMEX decided to invest inresearch which made it possible to betterunderstand the segment’s behavior and findout if it was possible to design value offers thatwould contribute significantly to a better qual-ity of life for low income communities throughbetter housing conditions.

Social research design

AN INTERDISCIPLINARY TEAM was put togeth-er in order to achieve a wider scale in the identi-fication and analysis of the critical aspects of theconstruction and social patterns of low incomecommunities. Its primary objective was toincrease knowledge related to these practices,their reason for existing and their consequences.The team was given an explicit instruction toconduct an impartial observation process ofcommunity mechanisms and practices, refrain-ing from making judgments related to what isusually expected from the cement business.

Pilot selection

THE EARLY OBJECTIVE was to develop a visionof the performance of the segment which wouldbe representative of low-income communitiesin Mexico. An area situated in the northeastsection of the city of Guadalajara named MesaColorada was selected for this purpose. Themain reason was that both cultural features andconstruction practices could be found in a largearea of the country’s western and central zones,as these comprise some of the major Mexicanurban centers. It was also important to consid-er that the northern region of the country hastraditionally included more dynamic commu-nities in economic terms. Conversely, thesouthern regions of Mexico have traditionallyshown weaker macro-economic indicators.

Furthermore, the size of the communityunder study was a highly significant factor. Atthat time, the population of Mesa Colorada was90,000 habitants, which provided an amplescope for surveys and community consultations.

Initial access

COMMUNITY VISITS started by seeking directcontact with families. Team members wentdoor to door, introducing themselves asCEMEX representatives with an interest in

learning about the problems families facedwhen trying to go forward in the expansion oftheir dwellings. Families living in partially builthouses were chosen.

Initial conversations were short but alwayspleasant. Familieswere asked if theywerewillingto go furtherwith their building plans in the nearfuture. The team faced several barriers such asthe fact that the companywas somehowunknownto the community, as well as that it was not sim-ple to conduct the interviews with housewives—who were usually the ones available at home—given that some of the teammembers weremen.

The teamopted for a series ofmeasureswhichresulted very effective: a) they started to work ascouples, women and men held conversationswith housewives and when this was not possible,the appointmentwas set upwith twoneighboringladies in order to have the interview with bothsimultaneously; b) they kept strictly to the visitscheduled; c) the garments used visibly showedthey pertained to the “cement company,” as t-shirts always bore the logo of the cement brandpredominating in the area.

Conditions found in thecommunity

THE DAILY, direct and close contact with thecommunity started bearing fruit. Once the levelof trust needed for effective communicationwas established, the families began to speakabout a variety of indicators that reflected theirindividual and social practices for facing life.

The traditional construction process turnedout to be intrinsically intermittent and took along time to be achieved. Periods of 20 to 25years for the construction of a five-roomdwelling are par for the course. Access to tech-nical knowledge about building and the bestway to expand a home is practically inaccessibleto the families. The purchase of building mate-rials was done under a criterion centered exclu-sively on price. Thus, it was common to pur-chase each building material from a differentsupplier. Given the small amount of the typicalbuying transaction, this process did not allowhome delivery of materials needed. On theother hand, the buyer usually was unaware ofthe adequate proportions of a given buildingmaterial one job called for versus another. Theconstruction process was a single family activi-ty as the community lacked the ability to createa collaborative network that could facilitate it.

Financial resources typically came weekly tothose who were employed. Although those whohad a trade earned money in sundry fashions,

�Adequate

housing

is a

basic

human

right

enshrined

in the

Universal

Declaration

of Human

Rights.

Yet…

not

everyone

has

experienced

it.

�

J U N E 2 0 0 8 29

many of the payment commitments within the communitywere also on a weekly basis—for instance, purchases on creditfrom the corner store. No formal saving practices such asbanking accounts were found; for the most part, savings cred-it was achieved through small groups of people who deliveredtheir earnings to one of the members of the group randomlychosen every week—amechanism known inMexico as a tanda.

A tandawas the savingsmechanism used bymany people inthe community. However, it was not effective for certain pur-poses such as construction, due to the great number of divert-ers that show up once people have access to accumulatedresources. Access to formal credit was practically non-existentbecause of the impossibility of guaranteeing payment, the fearof making long-term commitments, and finally, little famil-iarity with the formal processes implicated in obtaining andoperating financing: all of these, insurmountable barriers.

Lastly, the inability to obtain resources, lack of knowledgeand access to technical guidance, and the low buying powerstemming from the attainment of a low level of service result-ed in a slow building process. The building process was alsovery costly due to waste stemming from surplus materials thatcould not be stored for lack of space. Most of the families thatattempted to build progressively were caught up in thisrestrictive cycle. This evolved into a state of resignation wherethe family found itself incapable of freeing itself of any of therestrictions that limited their ability to obtain more space andbetter housing conditions in the short term.

Proposal adaptation process

THE FIRST VERSION of the proposal designed for communi-ties did not work. The challenge was to produce a solutionpackage that would solve most of the restrictions. Some of themain problems that came up were:� Generating trust. The proposal called for the family to par-

ticipate with their previous savings in order to obtainmaterials on credit. Verbal and written communication didnot generate enough confidence for the families to delivermoney in exchange for the promise of building materialson credit.

� Technical advice at home. The families were visited in orderto provide counseling in situ. Complying with scheduledappointments was an indispensable requisite for an effi-cient process. Social practices such as “flexible” schedules,together with misgivings about housewives having to let aman enter the house to takemeasurements for the project-ed building, did not allow advising at home to be feasible.

� Keeping up the tanda groups. The traditional tanda wasadapted as a savings mechanism to apply resources for thepurchase of building materials. The complexity of keepingtogether groups of 10 to 12 people -during the 70 weeksneeded for an expansion project of at least one room-could not be resolved.

� Keeping up the tanda coordinator role. It was not possible togive the tanda promoter tasks such as the timely collectionand delivery of funds, as well as the forthright and consis-tent explanation of the building program to participants.

The adjustment process of the initial proposal was carriedout in participation with members of the community, typical-ly meetings discussed the best way to adequate the compo-nents of the program so they wouldmake sense and show valueto the community. This was a great achievement. It tookalmost 18 months of group work to adequate and stabilize themain features of the program.

Results

PATRIMONIO HOY has become a progressive housing pro-gram serving low income communities. It provides individualtechnical advice to meet the needs of every family interestedin improving its housing conditions. The building plan isfragmented into packages of materials that are ordered in anadequate sequence according to needs. The acquisition ofthese packages is facilitated by means of micro-financing.With a previous saving of 20 percent of the materials neededfor completing the construction project, credit is granted forthe resting 80 percent. The weekly charge per family is $163Mexican pesos (about USD$15), $138 (about USD$13) of whichpay for the materials, and the remaining $25 (USD$2) ofwhich covers the services including:� Free access to technical consultants� Fixed prices guaranteed for 70 weeks (typical duration of

projects)� One year of materials storage� Home delivery of materials packages� Financing for 80 percent of the value of the materials

received.The program creates a collaborative network within the

community: families in need of better housing conditions,CEMEX distributors with presence in the regions who are incharge of deliveringmaterials, and CEMEX providing familiesdirectly with financial services and technical advice.

By the end of 2007, a total of 185,000Mexican families hadbeen benefited through the Patrimonio Hoy program, build-ing the equivalent of 95,000 ten-square meter rooms. To thisend, credits for 83million USD had been granted, with an on-time payment rate of more than 99 percent.

The future

THE PROGRAM has been successfully implemented inColombia, Venezuela, Nicaragua and Costa Rica. The idea is toassess the potential replication of Patrimonio Hoy in othermarkets where CEMEX operates andwhere the socio-econom-ic conditions could make possible its financial viability.

Israel Moreno Barcelo is Founder and General Manager of Patrimonio

Hoy for CEMEX in Mexico.

`


SPECIAL REPORT

BY SUBHI QURAISHI

Introduction

THE RAPID GROWTH of information technology in India hasspurred an overall economic growth in the region. India hascreated a new identity on the world map in this era of global-ization. The country is growing with new townships mush-rooming with more opportunities for youth to work in the ITindustry. This is the story of all major cities of India. Indeed,India is shining. But this is not the entire story. The benefits

of the IT boom still need to reach out to the grass-root level.There still exists a huge disparity among the population, andan even bigger digital divide.

ZMQ Software Systems, a Delhi based innovative softwaresolution provider, has taken up a mission to reach out to thegrass-root communities using its core competency ofInformation and Communication Technologies (ICTs) to pro-vide e-learning, gaming, edutainment, knowledge manage-ment and human performance solutions. The company’sfocus is on developing world class learning, training, edutain-ment solutions addressing basic literacy, girls and children’s

ZMQEnablingBottom-up Development

The Chief Technology officer at ZMQ Software Systems plays one of the four games created by his firm to spread awareness of HIV/AIDS.

education, health, skills development, micro-finance andenvironment. Entrenched in ZMQ’s mission is the fervor touse its core competency to offer assistance to communitiesthrough social development projects.

ZMQ recognizes HIV/AIDS not only as a health issue butalso an economic issue. As a member of Global BusinessCoalition on HIV/AIDS, the company has taken up a pioneer-ing initiative to reach out to the common person in Indiausing technology. One such initiative has been the use ofmobile phone games to educate on HIV/AIDS, and createawareness of it among people. The program has been chris-tened “Freedom HIV/AIDS” (www.freedomhivaids.in).

ZMQ—a strategic mission

ZMQ HAS BEEN DEVELOPING commercial software solutionsfor a variety of clients from corporate to government and fromacademic institutions to schools. The company’s prime busi-ness is developing innovative e-Learning solutions, mobilegames, human performance management systems, andknowledge products. Around 80 percent of the company’sturnover comes from this source.

As a socially conscious organization, ZMQ is driven by theneed to develop socially relevant information and communica-tion technology for the benefit of themasses, and uses its expe-rience to develop innovative solutions for the grass-root com-munities using ICTs. Since inception, ZMQ’s founders made acommitment to spend a substantial percentage of its profits insocial development using its core competency to reduce thedigital gap. One indication of ZMQ’s dedication to this cause isthat 12 percent of its annual profits go into Corporate SocialResponsibility (CSR) activities. It is important to point outhere that funds are not earmarked for community develop-ment work, as such, but for the development of tools.

The company’s social developmentteam, which drives its CSR strategy, workshand in handwith itsmarketing, businessdevelopment and technical teams. Thesocial development team identifies devel-opment issues, finds technology gaps,builds new partnerships with local organ-izations, and prepares blueprints of prod-ucts and solutions for the social initiativeprograms. Then the team hands over theprogram to ZMQ’s core technology andmarketing teams to create solutions andprepare the dissemination strategy of thesocial programs and initiatives. Some ofthe focus areas are health, education,agriculture, and skill development for theunder-privileged.

The social programs and initiativesare well integrated with the core businessstrategy of the company. The primeobjective of the CSR strategy is toempower masses with technology toolsand solutions related to health and edu-

cation. At the same time, it also creates environments andchannels for ZMQ business for these newer markets. Apartfrom its pure philanthropic initiatives, ZMQ’s social teamcreates new programs before entering a new region ormarket.This exercise serves a dual purpose, it not only empowers themasses and bridge the digital divide, but also provide feed-back to the business development team for creating new prod-ucts, solutions and services for the region. ZMQ firmlybelieves that in the new market scenario, the future of anyenterprise is a right blend of both business strategies anddevelopment programs.

ZMQ’s success is attributed to 3 main features: technologyinnovation, understanding issues related to grass-root com-munities and using local resources (like, multi-lingual con-tent and local knowledge). Nevertheless, there has alwaysbeen a challenge, the mammoth task of reaching out to thecommunity for effective dissemination. This issue has beensuccessfully tackled by collaborating with local partners, at thelocal, regional, and national levels.

By working closely with NGOs and local communities toidentify their needs and possible solutions to developmentalchallenges, ZMQ is able to create tools that can be used toaddress these challenges. The company firmly believes thatsocial development can be complementary, and that for a suc-cessful business to thrive in the newmarkets it is important tohave both running in synchrony.

Empowering communities

ONE OF ZMQ’S VERY FIRST INITIATIVES for grass-root com-munities has been the development and dissemination of aneducational package called the “Entry Level Literacy” program.The program is designed for three categories of people; femalechildren, out-of-school children, and adults. Each package is

J U N E 2 0 0 8 31

NON-PROFIT FOR-PROFIT

ZMQ’S MODEL

SOCIAL DEVELOPMENT (CSR)

Social Initiative Programsand CSR

(e.g. Mobile Games onHIV/AIDS)

New Products and Solutions(e.g. Mobile Care-Support-

Treatment System)

Stage II

Stage II

NEW MARKETS

CORE BUSINESSProfits

Source: ZMQ


comprised of 3 basicmodules, two of which are common for allthe 3 categories—Basic Alphabetization and Basic Numeracy.In addition to this, there is a Basic Life-skills developmentmodule for female children; Scientific Games for out-of-school children to inculcate scientific thinking; and a Ruraltechnology module for adults to be able to produce usefulproducts themselves. The package was developed in two locallanguages—Hindi and Urdu—for the northern Indian states ofUttar Pradesh, Haryana, Rajasthan ands Madhya Pradesh.

ZMQ has also developed a livelihood package for ruralwomen titled “Technology for grass-rootswomen.”Thepackageis comprised of over 20 different rural technologies for womento generate livelihood using basic village resources, such asmaking soap and urea or extracting oil. The package also has amicro-finance module to train women about basic economics,creating awareness and involving them in income generatingactivities to sustain their families; and explaining concepts ofmoney transactions, profit, loss, loans, etc. The package wasagain developed in Hindi languages blended with iconic lan-guage to be useful to a maximum number of potential users.

ZMQ’s fight against HIV/AIDS—Creating awareness

OVER 2 .5 MILLION PEOPLE in India are infected withHIV/AIDS (National AIDS Control Organization of India,December 1, 2007). Acutely aware of the magnitude of theproblem, ZMQ recognizes it not only as a health problem butalso as a business and economic issue, which affects labor andproductivity. In the global fight against HIV/AIDS, ZMQ hasfound a major break-through by reaching out to grass-rootcommunities using mobile phone devices.

Recognizing the lack of information and health manage-ment tools on HIV/AIDS, ZMQ committed itself to developquality content and applications to reach the common person.Over the last 10 years, the reach of mobile devices hasincreased not only in urban areas but also in rural areas at thegrass-root level. The mobile phone is the most popular tech-

nology tool in the hands of the common person across theglobe. Today youth, mobile workers, truckers, farmers,laborers and people living in medium and small towns andvillages are using mobiles. Hence, ZMQ, thought of exploit-ing the reach of mobile technology to disseminate valuableinformation through mobiles.

On World AIDS day—December 1, 2005–ZMQ under theaegis of “Freedom HIV/AIDS,” released four mobile gamesfor HIV/AIDS awareness, which were launched on India’slargest mobile operator, Reliance Infocomm. FreedomHIV/AIDS was the first initiative to disseminate healthawareness through mobile games and mobile devices, and isnow the largest ever social initiative on mobile devices.

Initially the games were launched on 9 million handsets,and later were scaled up to 40 million handsets. The mobileoperators promoted the games through regular SME mes-sages offering the games free for download, and in a span of14 months, there was a record download of 10.4 milliongame sessions. The games were specially designed for low-

end black-and-white mobile devices, to be able to reach thegrass-root communities. Different mobile technology plat-forms were also considered to cater to over 100 devices andhandsets covering over 80 percent of device specifications.The gameswere deployed on everything from low-end and lowcost handsets to sophisticated high-end devices.

Freedom HIV/AIDS comprises four different types ofmobile games involving different mindsets and psychologies ofmobile users. The game Safety Cricket is a role-play game withawarenessmessages based onCricket, which is like a religion inIndia with a huge following. Ribbon Chase is an arcade basedgame, and is for people who are engaged in game playing. TheMessenger is an adventure game for casual users, who enjoyplaying exciting but easy-to-handle games. Finally, Quiz withBabu simulates a live quiz show, attracting users whose bent ofmind is more towards quizzing, questioning and reasoning.

Scaling to new regions:The Africa Reach Program

AS AN EXTENSION to Freedom HIV/AIDS, ZMQ laterlaunched the Africa Reach Program, to reach Africa withmoreregion specific games and applications in the local languages.The Africa Reach Program is a classic example of scaling localinnovations, creating successful newmulti-stake holder part-nerships in new regions, and creating a sustainable businessmodel for new markets. ZMQ tied up with Hivos, a leadingDutch development organization, and KPN, the largest Dutchtelecom company, under the STAR program to reach out toKenya, Tanzania, and Uganda in Eastern Africa and Malawi,Mozambique and Namibia in Southern Africa.

In order to successfully replicate the program in Africa, itwas also important to create local partnerships. A Nairobibased local technology company Mobile 4 Good has beenpartnered with tomanage the program in East Africa. Tomakethe program sustainable it was important to replenish it withnew mobile content and games, for which more new partner-

Demonstration of a cell phone displaying a game to spread awarenessof HIV/AIDS.

J U N E 2 0 0 8 33

ships were created. NGOs and knowledge organizations werealso invited to be partners, such as Mathare Youths SportsAssociation (MYSA), Skills for Life, and Straight Talk for exca-vating local content, creating new games and other mobileproperties.

A revenue sharing business model was set in place for sus-taining each organization. To maximize the reach of games tothe last mile customers, the games were also designed for low-end mobile phones with an innovative pricing model. Thegames and othermobile properties like wallpapers, ring tones,and screen savers were priced at 60 percent less than the exist-ing mobile products on the market. Seeing the success of theprogram, the company is planning a secondphase of expansionof the business in Africa—both horizontally and vertically.

Services for people living withHIV/AIDS

MOBILE DEVICES can also be highly effective for patientmanagement and monitoring, specially suited for thosepatients who are situated at remote locations. In the absenceof any preventivemedication against HIV/AIDS, patientman-agement is the only effective solution to prolong the life ofpeople living with HIV/AIDS (PLWHAs). Today, there are noICT based tools or applications which can be used to monitorand manage the medication and medical history of patientsliving with HIV/AIDS.

ZMQ is developing the M-CST System (mobile care, sup-port and treatment), which is a universal solution for treat-ment and diagnostics of PLWHAs. The application will beavailable in two modes: single patient management and groupmanagement for organizations working with PLWHAs. Now inthe pilot phase, the application will eventually be made avail-able for free to people affected with HIV/AIDS. ZMQ is cur-rently identifying partners for scaling the application to amuch larger level.

Conclusion

AS A SMALL-MEDIUM SIZED company, ZMQ believes that bycontributing 12 percent in the formof hard cashwould only be adrop in the ocean. So ZMQ churns this 12 percent of its profitsfor social development in form of tools, products, applicationsand solutions using its core competencies. As there is a hugedigital divide, we believe that we can contribute by bridging thegap by developing appropriate solutions for global need.

The company has hugely benefited from this approach, andhas gained global recognition for its work. This could not havebeen possible for a small company like ZMQ by spending thatsmall 12 percent of its profits on promotional activities.ZMQ’s social development initiatives have been a blessing indisguise for the company’s growth.

Subhi Quraishi is CEO of ZMQ Software Systems.

� Enhancing safety and security via outdoor lighting for per-sonal, business, and community activities.

� Creating conditions to attract teachers, retain students,expand time for student reading and studying, andimprove grades and school retention rates.

� Providing opportunities for adult literacy and higher edu-cation programs.

� Improving health services delivery and thus reduce pro-ductivity loss due to illnesses.

� Reducing GHG emissions and toxic gases, decreasing risksof illnesses caused by air pollution and mitigating theimpact of climate change.

� Reducing fire hazards associated with kerosene lamps andcandles which every year lead to tens of thousands of firescausing serious injuries and destroying assets.

A good start...towards a promisingfuture

UNTIL RECENTLY, the global lighting industry had shown lit-tle interest in the African off-grid lighting market, generallyunaware of its vast potential. But through the Lighting Africaprogram, and with the support of its sponsorship, the WorldBank, IFC, and their partners have been able to attract hun-dreds of global and local entrepreneurs to look into thisemergent market, and to support the group’s effort to providemillions with exciting new off-grid lighting alternatives. Asthe program’s agenda moves full steam ahead, this new mar-ket area is poised for take-off and the excitement is becomingcontagious.

Rising fuel prices and market volatility continue to exertpressure on African consumers who may become unable toafford lighting services, making the development of modernlighting markets more urgent than ever. Time will tell whenlights will begin to shine in Africa and the shadow that loomsover the continent will dissipate, slowly giving way to a bright-ly lit future for millions of lives.

Katia Theriault is Communications Specialist at the International

Finance Corporation.

Lindsay Madeira is Project Officer at the International Finance

Corporation.

Patrick Avato is an Energy Analyst at The World Bank.

Lighting Africa is supported by multiple donors. Key partners include: TheGlobal Environment Facility; the World Bank’s Public-Private InfrastructureAdvisory Facility (PPIAF) and Energy Sector Management Assistance Program(ESMAP); Good Energies Inc.; the Renewable Energy and Energy EfficiencyPartnership; the European Commission; and the Governments of Norway,Luxembourg, the Netherlands, and the United Kingdom.

L i g h t i n g A f r i c ac o n t i n u e d f r om p a g e 2 3


SPECIAL REPORT

BY MARC VAN AMERINGEN, BERANGÈREMAGARINOS AND MICHAEL JARVIS

THE IMPACTS resulting frommaternal and child undernutri-tion are enormous: 178 million children under five years ofage are stunted; 55 million children are wasted of which 19million suffer from severe acute malnutrition; and overall,undernutrition is the underlying cause of 3.6 million deathseach year.1Moreover, 2 billion people suffer from vitamin andmineral deficiencies, which result in premature death, illnessand impaired physical and mental abilities.

In the face of this scourge, the Global Alliance for ImprovedNutrition (GAIN) is committed to reducing malnutrition

through the use of food fortification and other proven strate-gies aimed at improving the health and nutrition of popula-tions at risk. Created at theUnitedNationsGeneral Assembly’sSpecial Session on Children in 2002, GAIN is a SwissFoundation funded by the Bill and Melinda Gates Foundation,USAID and CIDA. GAIN builds partnerships between the pub-lic and private sector, and enables innovative solutions toimprove nutrition at a large scale by providing financial andtechnical support. GAINmeasures progress to demonstrate thereturn on investment, improve its program and communicatesuccess. Furthermore, GAIN advocates for better nutritionworldwide as a cost-effective way to make people andeconomies stronger, healthier and more productive.

Business andMalnutritionOpportunities and challenges for the food industry

in reaching the poor

Grameen Danone Foods fortified yogurt factory in Bangladesh.

The business case for engagement

GAIN RECOGNIZES the importance of engaging the privatesector if results are to be achieved on sufficient scale to elim-inate vitamin and mineral deficiencies. GAIN has found greatwillingness within the private sector to explore how they cancontribute to tackling malnutrition. This reflects growingrecognition that it makes good business sense for food com-panies to prioritize engagement with the poorest. Knowingthat some four billion low-income consumers live in relativepoverty with an income below $3,000 in local purchasingpower parity, food companies are increasingly open to servingthis huge market. While their combined purchasing poweramounts to 5 trillion international dollars (purchasing powerparity exchange rates), most of that money is spent on food. 2

Therefore, the private sector increasingly researches marketsand delivers foods to those most at risk of malnutrition.

Tackling malnutrition has a high economic benefit-to-costratio. The public benefits are significant: it reduces health carecosts, increases tax returns, and spurs the economic develop-ment of the developing world by integrating the poorest in theformal economy and reducing dead capital. A concrete exam-ple of the fact that “three billion people are prevented fromachieving their full potential as students, parents, workers, andcitizens due to micronutrient deficiencies” can be found iniron deficiency and resultant anemia (Bestani and Klein,2006). The Asian Development Bank projects that the 10-yearproductivity loss due specifically to iron deficiency, of the fivecountries that it analyzed, was over US $25 billion.

Food companies are increasingly becoming nutrition com-panies with an expanded health agenda. The food industry sig-nificantly contributes to the goal of poverty alleviation fromimproved distribution that expands access to quality productsthat decrease malnutrition, to social marketing, to health edu-cation strategies that raise nutrition awareness about properneonatal, perinatal, and child care amongst the poor. In fact,investments of the food industry targeted at the base of thepyramid achieve many of the same goals as governments andnon-governmental agencies. For example, if the private sectoris providing affordable fortified complementary foods for lowincome children 6-24 months of age, it is making available acritical additional component to programs addressing childsurvival. Generally, investment from the private sector needsto be recognized and integrated into national poverty reductionstrategies and into development budgets.

Emerging business models

IT IS CLEAR from the examples to date that firms face a myr-iad of challenges to effectively integrate poor consumers andproducers in regard to supply of fortified foods. In addition tostriking the balance between economic and social benefits intheir operations, companies must juggle issues related tosourcing strategies, distribution networks, and issues of qual-ity control. Companies must attempt to innovate and reducepoverty through sourcing strategies including microfinanceor other financial mechanisms that empower local producers

and suppliers, as well as through distribution networks.Packaging, necessary to ensure affordability and sustainabili-ty, is also a key issue. Packaging companies are under pressureto offer solutions for delivering quality products to the poor.

In the face of these challenges GAIN understands that part-nerships are fundamental, and successful companies in thissector will be those companies that develop business strategiesthat prioritize the following challenges and lessons learnt:� Ensuring and monitoring quality products through local

supply chains while managing cost in an environmentwhere clear standards may be lacking.

� Formalizing collaboration in contracts between the for-mal and the informal sector.

� Developing partnership strategies that include a publichealth approach in the food and beverage sector to opti-mize company impact.

� Investing in understanding and complying with interna-tional standards and codes of conduct such as the WHOInternational Code on the Marketing of BreastmilkSubstitutes.

� Using philanthropy to help leverage innovative businessmodels.

� Building the capacity of companymanagers to understandpoverty, to build partnerships and to engage with theinformal sector.

Building capacity for business action

WORKING WITH BUSINESS has become an important differ-entiation factor for GAIN and the collaboration with the pri-vate sector can take many different forms. However, the mostimportant role of business in nutrition remains in the deliv-ery of quality, affordable and accessible food. In the past threeyears of working with companies, GAIN has started to betterunderstand their challenges in dealing with poverty. We haveheard many people state that large companies will neverbecome relevant to the poor. We have also heard a lot of busi-ness leaders telling us that they genuinely wanted to accessnew markets, change their traditional models and deliverhealthy choices to those in need.

In response, GAIN is trying to help those firms committedto working at the base of the pyramid to manage some of theexternalities around the businessmodel such as socialmarket-ing and demand creation. GAIN can help companies navigatethe local soft infrastructure by facilitating partnerships thatleverage resources for thenon commercial aspect of their busi-ness models serving the malnourished. One example is that ofShijiazhuang Zhenji BrewGroupCo. Ltd. in China. The compa-ny agreed to participate in the “TwoWheels Turning Together”program of the China Center for Disease Control (CDC). Theinitiative enlisted support from manufacturers to help tacklethe pervasive problem of anemia through a soy sauce fortifica-tion program. Zhenji managers saw an opportunity to benefitlocal public health and to expand its market for soy sauce,especially in rural areas where the brand had little presence.Although initial efforts had only limited success, a turningpoint was the facilitation and financial support provided when

J U N E 2 0 0 8 35


GAIN joined the project in 2003, including a $3 million grantto China CDC to support health education and socialmarketingof the iron-fortification campaign from 2003-2008. Thishelped increase public faith in the claims of those selling ironfortified soy sauce. Zhenji has seen sales of fortified sauce dou-ble each year since 2003 (World Bank Institute/GAIN 2007).

Another key factor in the equation is the measuring ofbusiness performance and impact on improved nutrition.Investment in research and development is proving essentialto ensure nutritional benefits upon consumption, and is cru-cial for companies in demonstrating that their efforts are hav-ing social as well as economic benefits. In that context GAIN isselecting and financing leading academic experts, such asCornell University and John Hopkins, to conduct the studies.GAIN ensures the management of the partnership betweenthe research teams and the companies andwill ensure the dis-semination of study results. This has proven invaluable intracking the nutritional impact of a school feeding program inNasarawa state in Nigeria, funded by the state government butwith technical assistance from Tetra Pak. The company’sexpertise has been crucial not just in developing packagingthat allows a fortified drink for children to be stored in hot cli-mates so it retains its nutritional value, but also in creating alocal supply chain for the drink’s production.

In similar fashion, GAIN is also supporting a joint venturelaunched inMarch 2006 betweenmultinational food company

Danone and leading micro-lending institution Grameen.GrameenDanone Foods produces Shoktidoi, a yogurt designedto help meet the nutritional needs of Bangladeshi children atan affordable price (around $0.08 per pot). GAIN is managinga trial designed to measure the benefits obtained from regularconsumption of Shoktidoi. This initiative brings togethermany features into one experimental business model—it mustbe profitable but also will be judged on non-financial criteria.It seeks to make up for the nutritional deficiencies suffered bylocal children, while also utilizing a local production and dis-tribution system designed to create jobs for the local commu-nity, including “Grameen ladies” who will make sales door-to-door, and minimizing its environmental impact. Even thepackaging for the yogurt pots are made from material that isentirely biodegradable. Muhammad Yunus, Nobel prize-win-ning founder of Grameen, hopes the initiative “will be animportant landmark in the annals of business.”3

The value of partnership approachesand the GAIN Business Alliance

TIME WILL TELL how effective such initiatives as that ofGrameen Danone Foods will be, but it is clear that there is acontinued need for capacity building to facilitate understand-ing of what works, what does not, and what gaps remain,requiring the perspective beyond that of any one firm’s oper-ations. It was to help address some of these capacity needs,particularly in the realm of partnership and knowledge shar-ing, that GAIN partnered with the World Bank Institute (WBI)to utilize its experience in capacity development and privatesector engagement. Following initial dialogues with industry,GAIN and WBI launched the GAIN Business Alliance (BA) inthe belief that strategic alliances, which include local partner-ships, can help companies overcome obstacles encountered atthe base of the pyramid. Such alliances foster hybrid businessstrategies that have a wider-reaching impact than the publichealth sector could have alone, and the GAIN BA operates as alaboratory, of sorts, to help discover nutrition solutions.

Since its launch in Beijing in October 2005, GAIN hasestablished five regional or national alliances in Africa,China, India, North America, and Switzerland. A Europeanchapter will be launched at the next Forum inMay 2008. So farthe BA has mobilisedmore than 350 business leaders throughits events worldwide. Leading private sector partners includeDanone, Unilever, P&G, Cargill, Akzo Nobel, DSM, Tetra Pak,Britannia Industries and a range of Chinese, Indian andAfrican companies from the different parts of the food supplychain, and even from outside the food sector.

Paulus Verschuren of Unilever and Chair of the globalBusiness Alliance describes a three phase process that mostcompanies go through when they participate in the BA:

Awareness—Through its events, GAIN creates awarenessabout malnutrition and about the potential for win-win sce-narios.

Commitment—In the second phase, the business leaderwho initiated a dialogue with GAIN needs to return to his or

A social marketing campaign for Shoktidoi Yogurt in a small shop inBogra, Bangladesh. Shoktidoi, produced by Grameen Danone Foodsand supported by GAIN, is designed to meet the nutritional needs ofchildren at an affordable price.

J U N E 2 0 0 8 37

her own team and ensure internal buy-in at the highest levelof the company to demonstrate an institutional commitmentto GAIN and to malnutrition.

Delivery—The third phase is about turning commitmentinto action and delivering concrete products and services tothe target population.

Serving as a mechanism to catalyze bottom of the pyramidinitiatives in the food industry, the Business Alliance thusfosters a productive enabling environment to unlock privatesector investments and helps companies explore how they cancontribute to nutrition strategies. GAIN supports their effortsthrough presenting and sharing projects, creating businessand networking opportunities, offering ways to report on theirinvestments, and sharing knowledge on new businessmodels,including development of a series of case studies with WBI.

The Fast 50, Fast Company magazine’s annual reader’schallenge has recognized the model as innovative and power-ful. It demonstrates that the challenge of eliminating malnu-trition cannot be left to governments and internationaldonors alone. Much of what is required to meet the challenge—new thinking, business models, and resources—resides inthe business community that produces and distributes food.

Conclusion

THE FOOD SECTOR has boundless development potential andthese projects are influential. They involve farmers, commu-nity cooperatives, and sales forces from the communities(who often are women), improve the health status and pro-ductivity in a community, and even increase school atten-dance. The solutions are not yet fully available andmuch workneeds to be done and support given to companies who aretesting innovative strategies to devise high-impact sustain-able interventions. Foundations can play an important inter-mediary role in supporting new approaches that are oftenhybrids of philanthropic and purely market-driven models.Accordingly, GAIN and its partners can play a useful role ininviting companies to reflect on potential business modelsleading to improved nutrition, in assisting the efforts of indi-

vidual firms, and in providing a platform where companiescan present their achievements and challenges in serving thepoorest, and can shop for solutions and partners.

The experience to date also underscores the importanceand need for development agencies and donors to continue tosupport business solutions and, thus,maximize productivity ofthe poor. GAIN can mobilize development partners from thepublic and non-profit sectors to create an enabling environ-ment for companies interested in investing in nutrition for thepoor. Of course, business action is only part of the solution.Grants are still very important to reach the poorest of the poorand to support government programs. Nevertheless, we canimagine positive synergies between a GAIN investment sup-porting a government or civil society infrastructure and aGAIN investment supporting a base of the pyramid businessmodel. In both cases the main goal is to create long term sus-tainability and reduce the number of those whose health andlivelihoods are undermined by malnutrition.

Marc Van Ameringen is Executive Director of Global Alliance for

Improved Nutrition (GAIN).

Berangère Magarinos is Senior Manager of GAIN.

Michael Jarvis is a Private Sector Development Specialist at the World

Bank Institute.

References

Bekefi T. (2006) “Business as a Partner in Tackling Micronutrient Deficiency:Lessons in Multisector Partnerships,” Corporate Social ResponsibilityInitiative Report.

Bestani, R. and Klein J (2006). Housing Finance in Asia. Asia DevelopmentBank, Manila.

Davis S, Lukomnik J, Pitt-Watson D, (2006) The New Capitalists, How citi-zen investors are reshaping the corporate agenda, Harvard Business SchoolPress.

Eade D. and Sayer J, (2006) Development and the Private Sector,Consuming Interests, Kumarian Press, Inc.

Hammond A., Kramer W., Katz R., Tran J., Walker C. (2006) The Next 4Billion, Market Size and the Business Strategy at the Base of the Pyramid.WRI/IFC Report.

Jenkins R (2005) “Globalization, Corporate social Responsibility andPoverty,” International Affairs 81.3: 525-40.

Khanna T, Palepu K. and Sinha J. “Strategies that fit emerging markets,”Harvard Business Review, June 2005.

Nelson J (2006) “Business as a Partner in Overcoming Malnutrition, AnAgenda for Action Corporate Social Responsibility Initiative,” The ConferenceBoard and International Business Leaders Forum (IBLF),CSRI Report No. 14.

Wilson C. and Wilson P. (2006) Make Poverty Business: Increase profits andreduce risks by engaging with the poor, Greenleaf Publishing.

World Bank Institute and GAIN (2007) Two Wheels Turning: Partnership inChina’s Soy Sauce Fortification Program, Case Study, World Bank Institute.

Endnotes1 The Lancet, Series on Maternal and Child Undernutriton, Volume 371,January 2008; and UNICEF/Micronutrient Initiative, Vitamin & MineralDeficiency: A Global Progress Report, January 2004.

2 IFC/ WRI report, The Next 4 Billion—Market size and business strategy atthe base of the pyramid, March 2007.

3 Sheridan Prasso, Saving the world with a cup of yoghurt, Fortunemagazine, January 29, 2007.

One of the farmers sourcing the Danone factory and benefiting fromGrameen financing.


BY ANDY COLE, MOHAMED AFIFIAND REEM SALAH

RECENT INDICATORS show that the quality of health ofEgyptians has improved, but challenges still remain for thegovernment to reach underserved clients in isolated areas.Egypt’sMinistry of Health and Population (MOHP) has the willto undertake these challenges, and together with the UnitedStates Agency for International Development (USAID) isadopting a “business mentality” to do so. To sustain improve-ments in health service provision, “win-win” social responsi-

bility partnerships with the private sector are being developedthrough the USAID-funded Integrated Reproductive HealthServices Project—known in Egypt as Takamol.

Why Social Responsibility?

DURING THE LAST DECADE, an international movement toencourage broader involvement and social responsibility (SR)toward communities and humanitarian needs has developed.Today, corporations understand that this engagement creates apositive public image, and consequently improves investment

SPECIAL REPORT

Bridging Gaps in ReproductiveHealth Care in Egypt throughPrivate Sector Involvement

Social responsibility contributes US$1.4m towards improving maternaland child health, family planning and reproductive health care in Egypt

A mother with her children on a crowded bus in Cairo. As the country’s population continues to grow, the private sector is playing an increasingly importantrole in improving health outcomes for newborns, women and families.

J U N E 2 0 0 8 39

opportunities, shareholder commitment and brand loyaltyamong customers.

As this awareness matures, companies recognize that part-nerships with non-governmental organizations (NGOs) andgovernments can provide significant opportunities to engagein corporate social responsibility (CSR). This is as true in thearena of healthcare as in other areas. As the healthcare sectorincreases its international commitments in CSR, govern-ments are presented with the unique opportunity to expand,enhance, and sustain these efforts through mutually benefi-cial partnerships.

The fact is that resources do exist within Egypt that can bemobilized in support of national or local development efforts,but these resources have been largely untapped to date.Business entities, for example, have considerable resources—products, funds, in-kind assistance, distribution channels,and expertise. Furthermore, many business leaders have akeen sense of SR but are unsure how to apply it. This is true ofthe largest multinational corporations and of the “smallest”local business.

The Takamol project is tapping into these resources bylinking the MOHP with private sector companies, and mobi-lizing their involvement in maternal and child health, familyplanning and reproductive health (MCH/FP/RH) by develop-ing partnerships in which all parties experience mutually-beneficial outcomes.

The Takamol project’s approach

THE TAKAMOL PROJECT is a five-year USAID-funded projectthat focuses on increasing the use of quality integratedMCH/FP/RH services in primary health care clinics and hos-pitals. It also gives prominence to bringing about positivebehavior change while improving the government's capacityto sustain the performance of integrated health services. Theproject began in March 2006, and is implemented by aPathfinder International-led group of national and globalorganizations.

The project’s scope is to implement an integratedMCH/FP/RH model in 200 villages and more than 25 hospi-tals in the neediest areas of 11 Upper and Lower Egypt gover-norates. The principle focus of Takamol’s efforts—to improvethe quality of health care—includes the renovation and equip-ping of clinics and hospitals as a focal point for the communi-ty, and integrated clinical, management and on-the-jobtraining for service providers. Meanwhile, providing capacitybuilding to MOHP stakeholders from national to grassrootslevels is expected to increase their ability to provide, manageand sustain quality health services.

The project emphasizes community mobilization and par-ticipation in health as driving forces for change. For example,the project includes training of a number of key groups toallow them to disseminate accurate health messages in thenatural course of their interactions with others. These includereligious and civic leaders, government officials, local NGOs,outreach workers, media professionals, literacy facilitators,agricultural extension workers, and community members.

Negotiating win-win partnerships toachieve successTHE TAKAMOL PROJECT has played a significant role in nego-tiating a number of agreements between the MOHP and theprivate sector. Where possible, it has also ensured that nego-tiated partnerships are long-term. The results of Takamol’sCSR work can be seen through the increased involvement ofbusiness partners and through changes in the attitude of thedifferent stakeholders.

To encourage private sector involvement in Takamol’sintegratedmodel, and thereby theMOHP’s efforts, the projectfirst conducts extensive market research to identify prospec-tive partners, and then designs a formal, customized presen-tation highlighting areas of common interest. The projectexplains the efficient, accountable mechanism through whichcontributions are channeled, which is welcomed by the pri-vate sector. Following a period of negotiation, the MOHP andTakamol collaborate with companies and organizations onmutually-beneficial partnerships. Takamol serves as the“mediator” for the partnerships.

Central to the sustainability of this approach was the estab-lishment of a social responsibility working group within theMOHP. The working group has been charged with advancingthe MOHP’s recognition, connection and collaboration withunder used resources from other sectors. Working groupmembers receive training on the concept of CSR before join-ing the process of negotiating social responsibility partner-ships with Takamol staff. Through hands-on experience,working group members acquire the necessary skills to iden-tify areas of common interest between the project and privatesector companies, and how to seek and negotiate win-winpartnerships with them. Areas that need strengthening areidentified by Takamol’s CSR team and become the focus oftraining workshops that are aimed to create a cadre of SR pro-fessionals within the MOHP.

The project employs a number of strategies to encouragecompanies to become involved in social responsibility. Inrural areas, following orientations on SR, individuals andsmall businesses have stepped forward with unprecedentedcollaboration to demonstrate their social responsibility. Inaddition, clinic management boards that have received orien-tation on the concept of CSR are also adopting a businessmentality to look at other ways to meet community needs, andgenerate income for the health facilities.

At the national and governorate levels, Takamol and theMOHP approach corporations and large businesses, fromboth health and non-health sectors. At the local level,Takamol conducts orientations in SR for the democraticallyelected health facility management boards. An added advan-tage of public-private partnerships is that health facilities canlearn to operate more cost-effectively and with more trans-parency through interactions with the private sector, whichgives priority to good governance and accountability.


Donor appreciation of the need for SR

INTERNATIONAL DONORS are well aware of the benefits ofprivate sector involvement in social development. In Egypt,USAID advocates for public-private partnerships thatencourage healthy behaviors. Thus, SR components wereincorporated from the very outset of the Takamol project’splanning phase. The project tracks resources leveraged fromcorporate and community contributions that support relatedhealth services and calculate the amount as a proportion of theproject’s total operational expenses.

It has been proven that private firms and NGOs in Egyptare ready andwilling to support initiatives of theMOHP if theyfind these to be of good quality and of high importance.USAID understands that sustainable relationships betweenthe MOHP, local communities, and private companies, willcontribute to the sustainability of program interventions aswell as the commitment of all stakeholders.

US$1.4 million leveraged

MORE THAN US$1.4 MILLION has been leveraged to date bycompanies, business organizations and individuals throughpartnerships with the Takamol project to support health ini-tiatives in Egypt. Contributions range from the large-scalecontributions of multinationals (US$181,754 from Procter &Gamble Egypt) to themoremodest, but no less valued, contri-butions of small community businesses and philanthropiccommunity members. Whatever the source, all contributionsindicate a growing desire to become involved at some level toimprove local health services.

Examples include:� Barclays Bank Egypt. The Bank “adopted” a clinic in a

poor urban area of Cairo—covering all renovation andequipping costs—and transforming the clinic into a com-munity health center providing quality health care servic-es. Barclays staff then returned to the clinic a year later aspart of Barclays’ “Make a Difference Day”—a global com-munity service and volunteering initiative. Barclays’ col-laboration with the Takamol project was also used as a casestudy at a national CSR conference in Cairo in 2007, tohighlight how the private sector can become engaged inimproving health outcomes in Egypt.

� Procter & Gamble (P&G)/Egypt P&G utilized the MOHP’sexisting platform of outreach workers to deliver generichygiene messages to women in hard to reach areas. Inreturn, P&G includes reproductive health messages in arange ofmarketingmaterials targeting adolescent girls andwomen, and contributes towards clinic renovation costs.

� PriceWaterhouseCoopers (PWC). The Egyptian fran-chisee of PWCdonated funds to purchase income-generat-ing equipment for women’s clubs in clinics renovatedunder the Takamol project.

� Mentor Graphics. This local Egyptian company providedfunding to furnishwomen’s clubs in three renovated clinics.

� RWE Dea. The German petroleum company covered therenovation costs of two classrooms under a joint initiative

between Takamol and Egypt’s National Council forChildhood and Motherhood.

� Multipharma and Future Pharma. These local Egyptianpharmaceutical companies provided free of charge con-doms and medicines.The key to the success of these partnerships was to ensure

that true “win-win” agreements were reached during thenegotiation stage. The fact thatmembers of theMOHP’s socialresponsibility working group were involved in the negotia-tions means that further agreements with the same partnersafter the project phases out are a very real possibility. TheTakamol project also ensures that the contributor is part of theimplementation and follow-up process—they see where andhow their money is being spent through regular feedback,monitoring and evaluation.

Overcoming the challenges

ONE OF THE KEY CHALLENGES the project faced in trying tofacilitate CSR partnerships in support of the MOHP was a lackof shared vision between the private and public sectors, andno real sustainability mechanisms to maintain the momen-tum for collaboration. A solution was found in the form of theEgyptian Finance Executives Foundation (EFEF). The founda-tion is a reputable, registered NGO whose members includefinancial officers of many leading Egyptian andmulti-nation-al businesses. With a mutual interest in expanding the role ofCSR in supporting better health outcomes through theEgyptian health sector, the EFEF adopted an intermediaryrole between the MOHP and the private sector, encouragingmember organizations to become more involved in health-related CSR initiatives. The involvement of EFEF providedcredibility to the initiative, and is expected to contributetowards sustaining private sector support for health initiativesin the future.

B r i d g i n g G a p sc o n t i n u e d o n p a g e 5 1

When renovated primary health care units, such as the one pictured,become a focal point for the community, health indicators areexpected to improve.

J U N E 2 0 0 8 41

BY CHRISTY L. WISTAR

Overview

FROM A MACRO POLICY PERSPECTIVE, governments, econ-omists and organizations working in international develop-ment have recognized that investments in education, healthcare, nutrition, infrastructure, transportation and other sec-tors of development contribute to economic growth. At anindividual level, access to improved healthcare services andeducational opportunities provides new options and opportu-nities to improve livelihoods and economic status. Whilethese conclusions seem intuitive, finding a direct correlation

between health interventions and economic outcomesremains largely elusive.

In part, this gap of knowledge may be due to a lack ofappropriate metrics, complexity and costs of measuring rela-tionships between health and economic growth, or becauseeconomic indicators fall outside the stated purpose of a par-ticular program. Hence, organizations that may attempt toassess the broader economic impact of their programs arelargely left with anecdotal evidence.

Abbott Fund is a private foundation founded in 1951 byAbbott, a global health care company. The Fund’smission is tocreate healthier global communities by supporting four majorprogram areas: global AIDS care, access to health care, science

SPECIAL REPORT

Improving Health ImprovesEconomicWell-being

One company’s experience

Mother and child are cared for at a rural health facility in the Mbeya region of Tanzania that receives Abbott Fund support.


and medical innovation, and com-munity vitality. Programs haveranged from health care workertraining and infrastructure modern-ization to support of community-based organizations, creation ofreferral networks and specific inter-ventions to reverse trends in malnu-trition andmaternal and infant mor-tality. The HIV/AIDS-related pro-grams concentrate on improvingaccessibility and quality of HIV test-ing, counseling and treatment serv-ices to patients.

These programs, whether in urbanor rural settings, were conceived witha high degree of local communityinput and based on assessments ofcommunity needs. Program-related measures were createdand tracked in alignment with the health objectives of the pro-grams. In many of the communities, there has been tangibleevidence that health improvements have created an enablingenvironment for individuals to return to work, seek employ-ment, care for their families and for children to return orremain in school. The improvements have been noted at everylevel, from the individual up through national health systems.

One of our greater program investments has been in mod-ernizing the health systems of Tanzania. This paper will pro-vide an overview of the Tanzania program and examine itsperceived economic benefits as well as propose how econom-ic impact could be better captured in the future.

Health needs in Tanzania

TANZANIA HAS APPROXIMATELY 38 million residents.According to most recent World Bank estimates, Tanzania hasa GNI of $12.4 billion, and GNI per capita of $340. In the pastdecade, expenditures on health as percentage of GDP havebeen low, rising to about four percent. Health infrastructurewas largely neglected due to lack of available funds.

HIV/AIDS is the leading cause of death among adults 15-59, with a recorded prevalence of seven percent (TanzaniaNational AIDS Control Programme). Infectious diseases,many avoidable, account for most premature deaths and up toone half of all deaths occur among adults in the productiveyears of life, between 15 and 54. With more than 80 percent ofits workforce employed in agriculture, forestry or fishing,industry has been persistently affected by health factorsresulting in low productivity and incomes. There currently isonly about one doctor per 25-30,000 Tanzanian residents.

Abbott Fund and the Government of Tanzania formed apublic private partnership in 2001 to modernize the country’shealth system and expand access to HIV testing and treatmentservices. This partnership has coincided with an influx ofglobal HIV donor funds and the implementation of a nationalHIV/AIDS treatment program. With outdated infrastructuregeared towards emergency inpatient services, and a crippling

lack of trained health care profes-sionals, the country faced manychallenges.

“When we first began our discus-sions with Abbott Fund, I am sure weregarded each other with a certainamount of distrust,” said AnnaAbdallah, former Minister of Health,United Republic of Tanzania. “Theywere wondering if Tanzania was aworthwhile investment and we wereapprehensive about entrusting suchan important part of our health sys-tem to a group that works very differ-ently than we do. But more than fiveyears later, the results speak forthemselves.”

Strengthening Tanzania’s healthsystems

THE FIRST PHASE of the Tanzania program centered atMuhimbili National Hospital, the country's leading teachingand reference hospital, with the understanding that changesin Muhimbili would trickle down to the rest of the system.

Physical changes at Muhimbili included the building andequipping of a modern three-story outpatient clinic atMuhimbili, which provides health care services to all patients,reducing stigma for those seekingHIV treatment. The hospital’slaboratory has been modernized, allowing patients to get testresults on the same day, rather than coming back days or weekslater to receive a diagnosis. One of themost extensive hospital ITsystems in East Africa has been installed at Muhimbili to trackhealth history, referrals, test results and drug prescriptions, andhospital staff have been trained to operate the system.

“For the first time, we have the systems in place so we eas-ily locate records, track the progress of our patients, accesstheir laboratory tests and knowwhatmedications they are tak-ing. This has made a tremendous difference in our work envi-ronment as well as the patient’s care and experience at thehospital,” said Professor Leonard Lema, Chief ExecutiveOfficer, Muhimbili National Hospital. “On an administrativelevel, it helps us to maximize the valuable hours of each of ourdoctors and nurses.We are also able to bemore effectiveman-agers because of rapid access to financial, human resourceand supply records.”

In addition to Muhimbili Hospital, the Tanzania programhas extended tomore than 90 hospitals, clinics and rural healthfacilities across the country. This includes both training andphysical renovations at more than half of the country’s regionalhospitals. These 90 sites are now offering voluntary counselingand testing services for HIV, allowing testing to reach somerural areas for the first time. More than 150,000 patients havenow accessed testing services at the improved facilities, andtoday about one in three people enrolled in the government’snational HIV treatment program are receiving services at afacility that has benefited from Abbott Fund improvements.

Tanzanian Minister of Health David Mwakyusa(left) and Abbott Chairman and CEO Miles D. White(right) dedicate a modernized laboratory atMt. Meru Hospital in Tanzania to fight HIV/AIDS.

J U N E 2 0 0 8 43

Training of healthcare professionals has been integral tothe scale up of programs across the country. To date, morethan 10,000 health care professionals and community healthworkers have been trained through this partnership.

In 2007, Abbott Fund and Ministry of Health recognizedthat outdated laboratories around the country remained a keyimpediment in improving patient health. In response, AbbottFund has committed to modernizing the laboratories of all 23regional hospitals across Tanzania. The first phase of this pro-gram began in 2008, with the renovation of four rural andurban hospital laboratories.

Economic benefits

THE PROGRAM HAS NOTED a number of anecdotal reportsabout the economic impact of these health system improve-ments. Executive directors at several hospitals, includingMuhimbili, have reported that improved working conditionshave enhanced staff morale and productivity. They believethat upgraded facilities, training, and updated tools will posi-tively impact staff retention at their institutions.

“We believe that the recent changes at Muhimbili willresult not only in better care for the patients, but in greaterstaff retention,” said Dr. Deodatus Mtasiwa, Chief MedicalOfficer, Ministry of Health & Social Welfare, United Republicof Tanzania. “At the Ministry of Health, we have done our partby improving the incentives scheme. The Abbott Fund hascontributed by creating a work environment where the staffwants to come to work and feels better able to do their jobs.”

Based on feedback from patients and health workers, theavailability of health care services and same-day tests results andprescriptions saves themmultiple return trips and lost wages. Inrural and semi-urban centers, access to testing and medicalservices where people live and work appears to be a stabilizingfactor within communities, reducing the time and expensesrequired for individuals to travel great distances to receivemed-ical services. As a result of medical treatment and services, it ispresumed that many people living with HIV are returning towork and able to leadproductive lives and support their families.

One impact that can bemeasured is that strengthened hos-pital management practices at Muhimbili Hospital increasedhospital-generated revenues by more than 50 percent in thefirst two years of the program. The hospital is now focusing oncontinued operational improvements to its modernized cen-tral pathology laboratory that will attract referrals and externalresearch funding.

Last, the work that has been done encourages other fun-ders to invest in Tanzanian health. Those who contributetraining or goods are met with a working system that can han-dle the influx.

“When the Elizabeth Glaser Pediatric AIDS Foundationembarked upon an ambitious HIV care and treatment programin Tanzania, we learned that there were already systems inplace in several health facilities that would allow us to reachmore of the people we wanted to servemore quickly,” said AnjaGiphart, Country Director for EGPAF in Tanzania. “AbbottFund support already had improved the facilities where we

would be working, providing an excellent foundation for us.This was extremely encouraging for our work in Tanzania.”

Discussion

IT IS EVIDENT that economic and health improvementsappear to be inextricably linked, although not easily quanti-fied. Abbott Fund's programs have gone beyond their originalhealth-related goals, and have helped to create an enablingenvironment for economic growth. These programs have beena catalyst that attracted resources of other private sector organ-izations, facilitated in retention of valuable health care workersand contributed to amore productive and healthier workforce.

In order to have a more comprehensive understanding ofthe economic impact of these programs, it would be interest-ing to document the following indicators:� Number of jobs created by programs� Number of people trained that resulted in employment� Number of trained healthcare workers who stay in their

home countries rather than seek employment abroad� Number of people on medical treatment returning to the

workforce� Productive work hours gained as a result of efficiencies in

health system.While there are many economic impacts that can be trans-

formational at the individual and family levels, many cannotbe easily measured. For example, there is a tremendous qual-itative household benefit for a mother who is able to care forher entire family rather than concentrating on a sick child ora spouse. Likewise, a child who is able to stay in school versusdropping out to support the family will have better livelihoodoptions in the future as a result of an education. People livingwith HIV who have to travel a day each way to a hospital sud-denly gain a productive day of work when they no longer haveto keep returning to get test results.

Measuring economic impact goes well beyond current pro-gram resources of individual donors or private sector actors.This is amuch larger enterprise requiring the expertise of aca-demia, health economists and international developmentorganizations to create new models to capture the economicmultiplier effect. Capturing these economic benefits mayencourage the governments of developing countries to investin their own health care systems if it contributes to a growing,healthy economy. It would also help guide policymakers to besttarget health care spending thatmay alsomultiply the econom-ic impact of their resource allocations. The data could also helpgovernments attract public and private funds, by showing thepotential impact from investing in a healthy work force.

Christy L. Wistar is Vice President of Abbott Fund Tanzania.

Sources

WHO: World Health Statistics 2007

World Bank

2007 WHO National Health Accounts Series

Tanzania Ministry of Health, UK Dept. for International Development; TheAdult Morbidity and Mortality Project

Tanzania Ministry of Health

BY NACHIKET MORAND BINDU ANANTH

Introduction

A KEY AND ALMOST AXIOMATIC belief in our work on creat-ing access to financial services is that almost all regions ofIndia possess a set of economically viable occupations (such asbuffalo rearing, running a rural provision store, fruit and veg-etable vending and engaging in simple home based craft) thateven the very poor can almost immediately engage in withoutthe need for any specialized inputs or skill building. Sincethese occupations essentially rely on public goods (such as

public grazing lands) to provide raw materials and “in-homeunder-employment” to provide labor, at the margin they havevery high rates of return—well in excess of 100 percent perannum (Helms and Reille 2004).

An important guiding principle is that the only inputrequired to leverage these sets of economic opportunities isaccess to basic financial services, which include savings, credit,insurance and tools for risk management. This is in contrast tothe view that access to financial services can impact povertyalleviation only if accompanied with other complementaryinputs, typically training and skill development interventions.For example,micro-loans (typically amounts less thanUSD250per household), in a region as poor as the Mirzapur District of


SPECIAL REPORT

Access to Finance andMarketsas a Strategy to Address Poverty

An Indian bank employee counts rupee currency notes.

J U N E 2 0 0 8 45

Uttar Pradesh, can allow families, too poor to afford even twomeals a day, to start with extremely low-skilled occupationssuch as buffalo rearing and gradually reach a level where theycan affordminimalmeals and withdraw their children from thework-force for attending school.1 Even where the micro-loansare not used to finance new income generating activities but torefinance higher cost debt, this immediately releases newresources for the household to finance existing consumption orincremental production activities. Micro loans also provide animportant source of liquidity to meet fixed commitments (suchas school fees) despite income flows being extremely seasonal.

The pathway to universal financialservices access

IF ONE ACCEPTS the premise of the centrality of “access tofinance” in providing a pathway out of poverty for severalhouseholds, then the first challenge to be addressed would behow such access may be universalized with every individualbeing able to avail a basic set of financial services.2 To providethis access, the following steps appear necessary (Mor 2006):

Development of a network of community based financialinstitutions, which have the ability to provide these financialservices. This network of institutions could includeCooperative Banks, Non-Banking Financial Companies(NBFCs), local bank branches of commercial banks, CivilSociety Organizations or Producer Cooperatives, as the casemay be. The requirement is that these institutions are able todevelop operating models that draw on local information andoperationalize sufficiently low cost structures that make thebusiness of serving the poor sustainable over the mediumterm. Within India, the belief is that a network of over 200such entities, each with the capability to serve a millionhouseholds, would be needed (Ananth et al 2004).

The participation of one or more main-stream financialinstitutions that are willing to partner with these entities toprovide:� Financial resources for on-lending: ICICI Bank’s

Partnership Model is an example of a financing model thatuniquely leverages the local presence of these entities withthe ability of the bank to diversify risk and provide whole-sale lending funds in large quantum.3

� Access to equity capital for growth.� Financial engineering: securitization (http://www.econo-

mist.com/displayStory.cfm?story_id=2413549) and prod-uct development, health insurance, rainfall insurance(Hess 2003 and Sinha 2004), savings, risk management.

� Direct links with capital markets as the entities mature(www.gfusa.org/programs/india_initiative/grameen_capital_india/).

Creation of an enabling environment that can support thecontinued growth in the number of entities that make up thisnetwork in India. The following steps have thus far been takenin India in this pursuit:

� Creation of Venture Capital Funds engaged in the task ofidentifying and providing equity finance, and mentoringnew entrepreneurs desirous of creating such entities.4 Thiscombinedwith Takeout Financewhere a bank is prepared toautomatically partner with a successfully created entity andpermit it to repurchase the equity invested by the VentureCapitalist (VC) at a pre-agreed minimum rate of return tothe VC. Once the process of creation is successfully com-pleted, mezzanine equity of the type provided by ICICIBank’s Partnership Model referred to earlier is a cheaperand amore appropriate source of equity for successful enti-ties relative to equity capital being provided by VCs.

� Creation of specialized institutions such as the Centre forMicro Finance (CMF) at IFMR (www.ifmr.ac.in/cmf) andthe Centre for Insurance and Risk Management (CIRM)IFMR (www.ifmr.ac.in/cirm) and the Centre for InnovativeFinancial Design at IFMR (www.ifmr.ac.in/cifd) to provideresearch and product design capabilities both at a basiclevel and at an advanced level.

� Launch of FINO, an Application Services Provider (ASP)that seeks to provide front-end (smart card, point-of-saleterminals), back-end (banking software, performancemanagement and reporting, MIS) and information servic-es (credit bureau) to these institutions (www.fino.co.in).This architecture of technology ASPs enables micro-bank-ing operations to enjoy the same transaction quality andcost as is the case with a large bank.

� Launch of MicroFinanceJobs.com to provide access tohuman resources to these entities so that their expansion isunconstrained (www.microfinancejobs.com).

� Regulation that permits the use of business correspon-dents for extending access to basic banking operations.It is expected that with these three broad strategies it should

be possible to scale the access to finance quite rapidly. In thecase of ICICI Bank in India; operating with this three prongedapproach, it has catalyzed the creation of over 100 microfinance partners and in three years has been able to go fromUSD 1.2 million in micro-loans extended to about 20,000clients to over USD 522 million being provided to about 3 mil-lion clients in a three-year period (www.icicibank.com andAnand 2006).

Addressing other missing markets

FINANCIAL SERVICES for the poor have long been considereda “missing market” owing to the information constraints thatcharacterize it. Once the “access to finance” challenge has beenovercome through the mechanism described in the previoussection (and even while it is in the process of being overcome),the belief is that most of these households would be able tocome up to aminimum level of subsistence. A basic premise ofthe first phase of work described earlier, is to let individualschoose a set of activities based on their capabilities and thecontext in which they operate and focus exclusively on therapid universalization of the provision of financial services.However, it is very likely that such households would continueto be poor and therefore vulnerable to even moderate levels of

1

2

3


systemic shocks to their economic environment (Khanna2006). This is when “missing markets” in other services forthe poor start to become important. These may be in severalareas including skill building, quality control and productivityimprovement.

In our view taking clients to the next level of economicactivity needs a much more concerted effort and one thatbuilds on the fact that a large population of economicallyactive poor now have access to basic financial services andhave “revealed” their preference for certain activities. Thechallenge is to build effective linkages to mainstream mar-kets. For example a majority of microfinance clients areengaged in dairying. Given this, any intervention in dairy pro-ductivity enhancement, while being consistent with a bank’sbusiness objectives, also provides access to such services tothose clients that have already indicated their willingness toundertake this activity. Along the same lines, it may now bepossible to think of other interventions that, while not beingdistortionary, improve value realization within the occupa-tions that individuals are already engaged in. The fact thatclients are willing to pay for these value-added-services bytaking loans provides a powerful signaling device to providers.Traditional models of technical assistance and livelihooddevelopment are unable to resolve whether the phenomenonof clients not paying for the services delivered is due to afford-ability constraints or lack of perceived value.

Towards this goal of addressing missing markets for liveli-hood services to clients, one promising strategy appears to beto complement the existing work of MFIs in financial servicesaccess with supply chain strengthening for various activitiesthat the same client group is engaged in. One such architec-ture is being innovated by the IFMR Trust’s NetworkEnterprises Fund (www.ifmrtrust.co.ins).

IFMR Trust is creating a series of specialized “NetworkEnterprises” (NEs), which will be able to improve producerrealization within specific value chains. Network Enterpriseswill be prioritized in areas that can add targeted services to thelivelihood that clients are already engaged in. Each of theseNEs will address specific supply chain problems and ensureadequate supply of finance by making available to banksopportunities for structured debt.

There are other opportunities forMFIs to positively impactclient livelihoods. A couple of these are detailed below:

Developing carefully structured partnerships betweengrass-roots organizations and large companies so that atterms of trade that are fair, inputs such as commoditymarket-ing and hedging services, cattle feed supply and fruit and veg-etable procurement services can be provided to the clients ofthese grass-roots organizations.5 Once again, the belief is thatclients will be willing to pay for these services if the links toprice realization are directly apparent. The scalability ofmicro-enterprises of micro finance clients is often limited bycredit constraints faced by the individuals/enterprises higherin the value chain. Business models to provide finance toSmall and Medium Enterprises on a very large scale mightserve to increase the market potential of the entire chain.6

Working closely with micro-finance institutions (MFIs)and other grass-roots organizations on health and productiv-ity interventions that are paid for directly or indirectly by theMFI’s client. Examples of interventions in this categoryinclude distribution of smokeless cooking ovens, treated bednets and iron pills to cure anemia. While these have beenviewed as important interventions for several years, themechanism of distribution throughMFIs has the advantage ofbeing able to meet financing requirements to pay for theseinterventions as well as leverage the high frequency of clientcontact that MFIs enjoy.

The belief in all these cases is that in order to provide these“goods and services” at a scaled level and to actually delivervalue to both ends of the supply chain, highly competitive andlarge entities would be required which would seek to linksmall rural producers and service providers with some of thelargest markets in the world. MFIs represent an importantcustomer aggregation channel but may not be effective as amultiple services provider.

Conclusion

IN THE PRECEDING PARAGRAPHS it has been argued thatthere exist a set of market-based approaches that have thepotential to address poverty on a scaled basis. At the heart ofthis approach is building universal access to financial servic-es as a starting point. It is suggested that such access is bestprovided in a commercial and sustainable manner throughcreative partnerships between banks and a network of localfinancial institutions. The information gained from observingthe unconstrained livelihood choices of clients, the scale offinancial access created and the implementation capability oflocal financial institutions then provide the unique opportu-nity to conceptualize well targeted livelihood enhancementinterventions for this population. The belief is that interven-tions that build systematically on an “access to finance” com-ponent and subsequently include an “access tomarkets” com-ponent have the potential to provide large positive incomeshocks. The appeal of this approach is that it is fundamentallyrooted in a commercial proposition both for the participatingclient as well as for the service providers. Therefore, thepromise of scalability is higher than in traditional grant-ledlivelihood development programs.

Nachiket Mor is President of the ICICI Foundation, India; a member

of the Board of Governors of the Institute for Financial Management

and Research (IFMR), Chennai, India, and the Chairman of its

Managing Committee; and a member of the Board of Directors of

CARE USA ([email protected]).

Bindu Ananth is President of the IFMR Trust

([email protected]).

A more comprehensive version of the article with a complete list ofreferences is available at WBI’s Business, Competitiveness andDevelopment website: www.devandbiz.org.

2

A c c e s s t o F i n a n c ec o n t i n u e d o n p a g e 5 1

1

J U N E 2 0 0 8 47

SPECIAL REPORT

BY DEFTA PARTNERS GROUP,THE ALLIANCE FORUM FOUNDATION,AND GEORGE HARA

“IT IS PART OF OUR CORPORATE MISSION to utilize ourexpertise in technology in order to increase the standard ofliving in developing countries.”1 George Hara, GroupChairman and CEO of DEFTA Partners, shared his vision ofimproving the quality of life in developing countries throughimproved technology and communication infrastructure.Representing a simple and intuitive concept in a moderncyber world, these remarks engender a revolutionary

approach to creating an inextricable link between capitalismand social responsibility.

Mission

HAVING ESTABLISHED various successful ventures in thepost-computer technology market in developed economiessuch as the United States, Europe, Israel, and Japan, Mr. Harahas endeavored to bring cost effective information infrastruc-ture technologies to less developed countries in many conti-nents such as Asia, Africa, and Latin America. In 2005 DEFTAPartners launched its first initiative towards reducing poverty

Bringing Bangladeshinto the Digital Age

One of Bangladesh’s most successful business women, Geeteara Saffiya Choudhury, works on a computer at her advertisement firm, Adcomm, in Dhaka.


through bracNet, a pilot project geared to bring Bangladeshinto the digital age.

Pilot project: Bangladesh

WHY BANGLADESH? The United Nations recognizes 50 coun-tries as the “Least” among Less Developed Countries (LLDC),of which per capita gross national income is less than 2 USD aday, the literacy rate is less than 50 percent, and infant mor-tality is more than one of six. As DEFTA expands into emerg-ing markets, Mr. Hara has identified specific criteria that aredeemed to be integral to the success of this initiative.Perceiving location to be a vital element of his endeavor, Mr.Hara focused his attention on politically stable regions void ofsectarian conflicts with a large population base (typicallygreater than 20 million). (In his view, this would yield opti-mum results because DEFTA’s technological efforts wouldbenefit a large percentage of the world’s population).

Given the criteria outlined, Bangladesh appeared to be anideal location to launch DEFTA’s first enterprise to use mod-ern technology in an emerging market. The country has theeighth largest population in the world with roughly 150 mil-lion people, a 50 percent literacy rate, and per capita GDP ofapproximately 400 USD. Additionally, Bangladesh was expe-riencing a current account surplus and has maintained a sta-ble economy that was growing at 5-6 percent a year. The coun-try’s high population density was advantageous to the roll-outof the network infrastructure.

In addition, there was the Bangladeshi intangible: that thecountry was undergoing dramatic transformation that had notyet appeared in the “statistics”. Over 15 million micro-creditborrowers, each of whom were small entrepreneurs or busi-ness operators in their own right, and the growth of the gar-ment business had transformed the country into one thatnever sleeps—constant economic activity is a hallmark of theBangladesh of today, a characteristic duly noted during proj-ect feasibility investigation.

Another key element that contributed to Mr. Hara’s deci-sion to launch in Bangladesh was his encounter withBangladeshi-American entrepreneur Khalid Quadir. Mr.Quadir’s entrepreneurial spirit, tenacity, and enthusiasmcoincided nicely with Mr. Hara’s vision to transform thecountry through the internet—to connect the village with thecity, the school to a remote learning center, the farmer to anationalmarket, the urban worker to his relatives at home andabroad, the household to the community, the local business toits global customer.

Critical partnership

THE BANGLADESH BRACNET PROJECT focuses on the deploy-ment ofWIMAX, anext generationwireless infrastructure tech-nology that enables low cost broadband communications.

DEFTA realized that the entire country could be coveredwith access points at a capital cost in the range of $10 million,versus the 25-50 percent higher cost of rolling out a cellular orfixed line network. The ultimate goal of the Bangladeshi proj-

ect was to use this new technology to increase literacy andenhance education and health care. Establishing the corepartnerships of the project was critical. DEFTA needed corelocal partners to better understand the country’s currentcommunication position. The consortium of partners wasbrought together for technology, investment, and generalmanagement.

More importantly, DEFTA created a joint venture withBRAC, one of the world’s largest social development organiza-tions based in Bangladesh, to form bracNet, for bracNet, ajointly held company for the express purpose of connectingthe country. DEFTA and BRAC shared a common vision that asustainable business could be built on the premise of provid-ing connectivity services to the underserved in Bangladesh.

BRAC’s core NGO activities focus on lending to the less for-tunate or providingmicro-credit, and currently it lends to over5 million borrowers and has achieved a repayment rate inexcess of 99 percent. BRAC also has first-hand experience inBangladesh’s education and health care systems; it operates52,000 schools in the country and provides essential healthcare coverage to 31 million people through its 68,000 volun-teers. BRAC also operates a number of “for-profit” enterprisesin retail, dairy, printing, banking, seed processing and othercommercial operations that support its clientele. Commercialoperation profits are re-invested into further growth of itsNGO operations. By partnering with a local organization likeBRAC, bracNet benefits from having access to local resourcesand contacts, long-term experience with Bangladeshi educa-tion and health care, and a comprehensive understanding ofthe domestic landscape and regional challenges.

Mr. Hara and BRAC’s shared vision and alignment of inter-ests has meant that the company bracNet could be effectivelyrun on a joint venture basis. BRAC appointed the Chairman,Muyeed Chowdhury, one of Bangladesh’s most distinguishedcivil servants, former Advisor to the 2001 CaretakerGovernment and then Executive Director of BRAC, whileDEFTA appointed its core management team and board mem-bers. DEFTAhas arrangedwith BRAC to share the ownership ofbracNet; BRAC currently owns 40 percent of the company andDEFTA Partners owns 60 percent of it.

Implementation strategy

BRACNET’S ULTIMATE GOAL is to be the largest wireless IP-based communications company in Bangladesh by 2010. Inorder to achieve this, the company is utilizing cutting edgetechnology and following a disciplined strategic path forbuilding an integrated, solutions oriented business for thecountry. The initial year of operation was spent on testing therelatively new WIMAX based network technology and rollingout network coverage in major urban areas of the country.Currently the company is focused on building the networkinto Bangladesh’s rural heartland.

BRAC, DEFTA and the bracNet management team havecreated the strategy for building a national network. However,the parties recognize that in a country like Bangladesh, thereis a need for low cost communications, and content and appli-

cations which are suitable and relevant for the mainstreamuser. Accordingly, bracNet is developing a suite of communi-cations and content services that fit the needs of its low-income customers. Such services include IP-PBX whichenables low cost voice communications technologies for largegroups or communities, video services for security, education,health care and other technology programs such as classifiedads and auction sites that enable the creation of “micro”national markets.

With the development of these services bracNet can create amore lasting impact for Bangladeshi residents. Additionally,the company can leverage the DEFTA portfolio companies foradvanced technology. For example, XVD, the most efficientreal-time imaging compression engine, can be used for livevideo applications such as distance learning and health careapplications. Using XVD, less bandwidth is needed for livevideo transmission, leading to lower cost applications.Fortinet, another DEFTA portfolio company, can provideadvanced network security systems and devices. DEFTA’sexperience in developing and accessing technology, coupledwith BRAC’s brand and deep national roots, bracNet has a clearadvantage towards achieving its objectives.

Job creation

A VITAL ASPECT of bracNet’s strategy is human resourcedevelopment. In Bangladesh, as in many other developingeconomies, skilled personnel—whether in the technology orgeneral business arena—are in high demand and are fairlyscarce. To this end, bracNet has focused on recruiting the rightpeople and providing a learning environment for technicaltraining. DEFTA has been an integral part of the implementingthis segment of the strategy, having conducted numerous train-ing sessions with the management and professional staff in thecompany.While advanced technology is only part of the way to acompetitive edge, ultimately it is the human aspects of the com-

pany—how bracNet treats and responds tothe needs of its customers and partners thatwill determine its ultimate success.Ultimately, bracNet plans to increase itexisting workforce of 200 localBangladeshis to 3,000 by the year 2010.

Prospective growth andsustainability

BECAUSE DEFTA PARTNERS is comprisedof an extensive international network ofcorporate partners, investors and advi-sors, it has created accountability andstrong vested interest for multiple globalplayers. Accordingly, it has drawn finan-cial interest from a variety of sourcesincluding Japanese, American, andEuropean corporations, financial institu-tions, and foundations. In addition to

financial capital, bracNet is also supported bya strongmanagement teamwho shares in its vision of improv-ing the livelihood of Bangladeshi residents and ensuring sus-tainability of the project.

Ultimately, prospective growth and sustainability are basedon customer satisfaction and competitive advantage. The ini-tial year was spent assisting Bangladeshi companies of all sizesto connect to the internet; and through proper training andmanagement of internet usage, each company’s customer baseusing internet capabilities has tripled in the past year. From acompetitive standpoint, DEFTA Partners’ experience indeveloping technology has given bracNet an overwhelmingadvantage over other IT firms to establish a national networkbased exclusively on fiber-optic technology. Consequently,DEFTA optimizes its investment by avoiding the need and thehigh costs associated with building new infrastructure.

bracNet recognizes the high costs associated with havingaccess to internet connections. Consequently, the companyhas strategized on how tomake the internet accessible to indi-viduals of all income levels. The bridging of this divide will beaccomplished through a highly specialized network of distri-bution partners. One tier of the distribution will reach house-holds through local neighborhood access providers, typicallyrun by an entrepreneur. These providers, known as bracNetPartners, are trained in connecting households and smallbusinesses who cannot afford a full broadband connection at anominal cost of USD 15-18 per month; the bracNet Partnerwill install a basic internet connection.

A second channel of partnerships is focused on publicaccess, particularly in rural areas. bracNet has developed afranchise of digital centers called “e-huts” to cater to localcommunities, enabling individuals and small businesses toaccess the internet from the center for less than 50 cents.Additionally, bracNet is offering computer training certifica-tion programs inmost of these rural settings. The centers alsoprovide other digital tools that are typically used in conjunc-tion with the internet such as copiers, scanners, and digital

J U N E 2 0 0 8 49

National DirectoryServices LaunchPOS PaymentServices

National Expansion

Begin ConnectingBRAC Schools

IP Based data, voiceand video services

B2B ClassifiedService for SME’sPOS PaymentServices

Portal Content

Wimax-based Dataand InternetServices in Dhaka

IP Data and VoiceCapability

Classified AdServices

BracNet strategy is focused on bringing functional utilities and applications to Bangladeshthat will bring life to internet connectivity

CONTENT/APPS

CONNECTIVITY

COMMUNICATION

COMMERCE

PRODUCT APPLICATION FOCUS

Source: DEFTA Partners


cameras. The recently initiated programhas twelve such digital centers today andthe goal is to develop several hundred ofthese centers in the next 12-18 months.

A third indirect channel to the end userwill be the education sector. BRAC hasover 52,000 schools that educate 1.5 mil-lion students. bracNet has already con-nected several schools in the Dhaka metroarea with the internet, and has a detailedplan to serve all of the remaining schoolsin the near future. bracNet will face ongo-ing challenges as internet connectionswithin schools require a more powerfulinfrastructure. bracNet will be workingwith the public and private sectors todevelop a long-term plan to improve cur-rent standards.

DEFTA Partners’ global presence hassaved Bangladesh over $500 million incapital investments. By 2009, bracNet isexpected to earn $60 million in revenue,with approximately $17 million in pureprofit.

Scalability and globalapplication

DEFTA’S LONG-TERM VISION is to use the experience inBangladesh to apply a similar model to other developingcountries lacking broadband connection. DEFTA Partners isalready planning its second phase in determining the nextproject. A number of countries have expressed interest indeveloping new communication systems to help alleviatepoverty within their respective countries. Atthe ASEAN meeting in June, 2007, CLMV(Cambodia, Laos, Myanmar, and Vietnam)representatives were enthusiastic in deploy-ing the application in their regions.Additionally, countries in the Caribbean andAfrican regions have also expressed theirinterest in implementing this technology toimprove local infrastructure. DEFTA Partnershas tested its model and its ability to be repli-cated within new environments; as a result,DEFTAPartners is prepared to start deployingsimilar technology in other countries.

The double bottom line:Incentive, opportunity,alliance

SHAREHOLDERS HAVE QUESTIONED DEFTAPartners’ recent interest in developing coun-tries, and whether it is in the best interest ofthe company, or whether the new initiativemaximizes shareholder value. As with most

corporations, long-term business plansinvolve expanding overseas, and Mr. Harabelieves his company needs to follow suitin order to remain competitive. To thisend, Mr. Hara has satisfied his sharehold-ers by sharing with them the profit poten-tial and business opportunities inBangladesh and other developing coun-tries. The Bangladesh project shows strongpromise as demonstrated by its growth andstable returns. DEFTA Partners has trulyachieved a “double bottom line”—a win forits investors and a win for the country—through its work with bracNet. It also rep-resents an innovative model for economicdevelopment—bottom line orientation toachieving sustainability, profitability andsocial responsibility—and a markeddeparture from “grant” oriented projects.DEFTA Partners is looking to expand itsproject work to other developing countriesin order to maximize company profitswhile reducing poverty globally.

DEFTA Partners Group www.deftapartners.comAlliance Forum www.allianceforum.org

George Hara is Group Chairman and CEO, DEFTA Partners;Prime Minister’s Government Special Commissioner on Tax Reform;Special Advisor, Ministry of Finance; Ambassador, IIMSAM PermanentObserver Mission to the United Nations Economic and Social Council;WAFUNIF Representative Ambassador.

Endnote

1 2003 WSIS (UN World Summit on the Information Society) symposium inSwitzerland

An e-hut outside of Dhaka.

bracNet Chairman Muyeed Chowdhury (center), Stan Sakai, and Taku Furukawa of DEFTAand Rolf Blomberg, bracNet COO and Staff.

J U N E 2 0 0 8 51

Lessons learned

ONE KEY LESSON from this project shows that health and nonhealth-related organizations and individuals can be motivat-ed to participate in health-related social responsibility activ-ities. In presenting an effective proposal to a prospective SRpartner, it is essential for the partner to understand that thepartnership is mutually advantageous.

The impact of Takamol’s SR activities has been enhanced byits relevance to the various components of the Takamol inte-gratedmodel, which provides amutually-reinforcing structurefor SR at the community, governorate, and national level.

Stakeholder benefits

THE TAKAMOL PROJECT has mediated a range of successfulhealth partnerships in Egypt. In these partnerships, eachstakeholder reaps benefits. For example, in the case ofBarclays Bank Egypt, the people of the urban poor area havebenefited from a clean, well equipped clinic that providesquality care.

Meanwhile, Barclays has benefited through its exposure tonew potential clients, through contributions that have beenefficiently and effectively used and hadmeasurable impact. Inaddition it has an enhanced reputation as a socially responsi-ble business.

Everybody wins!

THE VALUE CREATED for all parties when social responsibil-ity programs are implemented is enormous. The Takamolproject has successfully started a trend that an increasingnumber of businesses and individuals are now following. At arecent CSR conference in Cairo, Barclays Bank Egypt’sFinance Director made it very clear why his organizationbecame involved in CSR with the Takamol project; and whyothers should also. In summarizing he simply stated, “becauseeverybody wins!”

Andy Cole is Reporting and Documentation Specialist of Takamol

Project.

Mohamed Afifi is Monitoring, Evaluation and Reporting Team Leader

of Takamol Project.

Reem Salah is Corporate Social Responsibility Specialist of Takamol

Project.

B r i d g i n g G a p sc o n t i n u e d f r om p a g e 4 0

The views expressed in this article are entirely personal and shouldnot be attributed to any of the Institutions with which the authors areassociated. A version of this article was presented for the first timeat the NGO Global Executive Forum at Talloires, France on May 29,2006.

The support provided by Annie Duflo and Russel Stevenage of IFMRand Diviya Wahi, Shilpa Deshpande, and Anant Natu from ICICI Bankis gratefully acknowledged.

References

Ananth, Bindu, Bastavee Barooah, Rupalee Ruchismita and AparnaBhatnagar. 2004. “A Blueprint for the Delivery of Comprehensive FinancialServices to the Poor in India,” Working Paper (Chennai, India: Centre forMicro Finance Research, Institute for Financial Management and Research).Available via the Internet: http://ifmr.ac.in/pdf/workingpapers/9/blueprint.pdf.

Helms, Brigit and Xavier Reille. 2004. “Interest Rates Ceilings and MicroFinance: the Story so Far.” Occasional Paper Number 9, CGAP, September2004.

Khanna, Tarun. 2006. “At home, it’s not just profits that matter.”International Herald Tribune, February 21. Available via the Internet:www.iht.com/articles/2006/02/21/opinion/edkhanna.php.

Mor, Nachiket. 2006. “Financial Inclusion Experiences from India.” Speechgiven at IDB Annual Meeting at Belo Horizonte, Minas Gerais, Brazil,March 31. Available via the Internet: (www.ifmr.ac.in/cmf/FIEInmor.pdf).

Endnotes

1 In 1996 Cashpor Financial and Technical Services began providing micro-credit in the Mirzapur District of Uttar Pradesh. For more details refer towww.fao.org/DOCREP/004/AC154E/AC154E03.htm.

2 Centre for Micro Finance at IFMR in Chennai, India (www.ifmr.ac.in/cmf)is engaged in the task of researching this carefully. Data on the Indian microfinance market are hard to come by. One estimate puts the demand for thesebasic micro-loans with an average size of no more than USD 200 per loan atover USD 20 billion annually in India with close to 100 million householdswithout access to these loans.

3 See Ananth (2005), Harper et al (2006) and Reserve Bank of India,Report of the Internal Group to Examine Issues Relating to Rural Credit(2005).

4 ICICI Bank has recently tied up with three venture capital funds to extendseed capital to start-up microfinance institutions. These three fundsinclude,Bellwether Microfinance Fund (www.bellwetherfund.com), Avishkar-Goodwell Fund (www.aavishkaar.org), and Lok Capital fund(www.lokcapital.com).

5 One such example is the partnership between ICICI Bank and Spandana,wherein, with the help of the Bank, Spandana negotiated with different cat-tle-feed companies for improving the yield of buffaloes and therefore theincome of poor households. For more details referhttp://ifmr.ac.in/cmfr/newsletter/CMF-EOMF-01.pdf.

6 IFMR has set up the Small Enterprise Finance Centre (SEFC)(www.ifmr.ac.in/sefc) to overcome the limited and untimely access to financefor SMEs.

A c c e s s t o F i n a n c ec o n t i n u e d f r om p a g e 4 6


NEXTBILLION.NET is a websiteand blog about how businessdrives positive social andenvironmental change in low-income communities. It servesas a discussion forum,

networking space and knowledge base for individuals andorganizations interested in the “next billion”—the nextbillion people to rise from the base of the economicpyramid (BOP), and the next billion in profits forbusinesses that strive to fill market gaps by integrating theBOP into healthy economies. Its goal is to promote thedevelopment and implementation of business strategiesthat open opportunities and improve quality of life for theworld’s 4 billion low-income producers and consumers.http://www.nextbillion.net/resources/links

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THE CSR INITIATIVEat Harvard’s John F.Kennedy School ofGovernment is a multi-disciplinary, multi-stakeholder program that

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KNOWLEDGE RESOURCES

J U N E 2 0 0 8 53

inWEnt—Capacity BuildingInternational, Germany, is anon-profit organization withworldwide operationsdedicated to human resourcedevelopment, advanced

training, and dialogue. Its capacity building programs aredirected at experts and executives from politics,administration, the business community, and civil society.It is commissioned by the German federal government toassist with the implementation of the MillenniumDevelopment Goals of the United Nations. In addition, itprovides the German business sector with support forpublic private partnership projects. Through exchangeprograms, InWEnt also offers young people from Germanythe opportunity to gain professional experience abroad.http://www.inwent.org/

SCOJO FOUNDATION is asocial enterprise that takesa market-based approach tothe distribution of readingglasses, an essential anaffordable product that iscurrently not available to

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ASHOKA strives to shape aglobal, entrepreneurial,competitive citizen sector: onethat allows socialentrepreneurs to thrive andenables the world’s citizens tothink and act as changemakers.

Ashoka envisions a world where Everyone is aChangemaker: a world that responds quickly andeffectively to social challenges, and where each individualhas the freedom, confidence and societal support toaddress any social problem and drive change.www.ashoka.org

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KNOWLEDGE RESOURCES


BUSINESS SOLUTIONS FOR THEGLOBAL POOR: CREATING SOCIALAND ECONOMIC VALUE,Rangan, V. Kasturi, John A. Quelch,Gustavo Herrero, and Brooke Barton,JohnWiley & Sons, Inc., 2007.Based on research presented at TheHarvard Business School’s first-everconference on business approaches

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THE NEXT 4 BILLION: MARKETSIZE AND BUSINESS STRATEGYAT THE BASE OF THE PYRAMID,The International Finance CorporationandWorld Resources Institute, 2007.This report, based on unique accessto the household income andconsumption surveys of developingand transition countries, offers a new

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BUSINESS ENGAGEMENT FORGOVERNANCE, InWEnt gGmbH,Capacity International, Germany,World Bank Institute, 2008.The 12th International BusinessForum (IBF), organized by InWEnt-Capacity Building International andby the World Bank Institute, broughttogether over 300 participants fromthe private sector, government, civil

society and multilateral agencies worldwide to debatebusiness engagement for improved governance in relationto today's pressing global challenges. Under theoverarching theme of the Millennium Development Goals(MDGs) the 12th Forum dealt in more depth with two

issues high on the international development agenda:climate change and corruption. The report includesbackground analysis of the issues discussed during theForum, viewpoints of the plenary session experts andworking group participants as well as extracts from theblog which provided regular Forum updates.

INCLUSIVE BUSINESS: PROFITABLEBUSINESS FOR SUCCESSFULDEVELOPMENT, World BusinessCouncil for Sustainable Development(WBCSD) and SNV NetherlandsDevelopment Organization, 2008.The Alliance between SNV and theWBCSD gave birth to a new way toovercome poverty: Inclusive Business.Find out how the model works and its

first success stories in Latin America.

BUILDING LINKAGES FORCOMPETITIVE AND RESPONSIBLEENTREPRENEURSHIP: INNOVATIVEPARTNERSHIPS TO FOSTER SMALLENTERPRISE, PROMOTE ECONOMICGROWTH AND REDUCE POVERTYIN DEVELOPING COUNTRIES,Jane Nelson, 2007.Improving the access of small

enterprises to finance, skills, technology, information,responsible business practices, legal rights, and marketsis critical to economic growth and therefore to povertyalleviation. This report analyses different models ofpublic-private partnership and collective corporate actionthat support competitive and responsible small enterprisedevelopment, making recommendations for increasingtheir scale and effectiveness.

OUTSIDERS?, Inter-AmericanDevelopment Bank, 2007.Who are the millions of people inLatin America and the Caribbeanwho have suffered economic andsocial exclusion? How do factorssuch as gender and race influenceexclusion? Why is inequalitygrowing? These and many otherquestions are answered in the IDB's

2008 Report on Economic and Social Progress, whichoffers a detailed description of new forms of exclusion inthe region and the danger they present to social cohesionand democracy.

BOOKSHELF

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CAPITALISM AT THE CROSSROADS,Stuart L. Hart, Wharton School Publishing,2 edition (July 28, 2007).The global context for businesscontinues to change at anunprecedented rate, and Stuart Harthas effectively captured importantinsights into the nature of thiscontextual shift in this updated edition

of Capitalism at the Crossroads.

DOING BUSINESS WITHTHE POOR—A FIELD GUIDE,World Business Council for SustainableDevelopment, 2004.This report applies some basicbusiness questions to SL businessprojects. It shows how leadingcompanies are answering them and

innovating to overcome the barriers to doing business in thisnew territory. Questions include:What are themotivations?Do we understand the real needs of themarkets? Do we havethe right product/service to offer? How do we finance theinvestment?How do we ensure that there is demand for ourproduct/service?How do we ensure that our customers canafford it? How do we reach our customers?How do we collectrevenues? And how do we scale up or replicate?

EXPANDING ECONOMICOPPORTUNITY: THE ROLE OFLARGE FIRMS, Beth Jenkins, 2007.As Milton Friedman might say, “thebusiness of business is business”—and this is exactly what gives firmsthe capability and credibility toexpand economic opportunity indeveloping countries. This report,

drawing on the results of eight industry-specific reports inthe same series, identifies four key strategies companiesuse to expand economic opportunity: creating inclusivebusiness models, developing human capital, buildinginstitutional capacity, and shaping public policy.

THE EXECUTIVE, Egyptian Instituteof Directors, 2008.“The Executive” is a quarterly businessmagazine issued by the EgyptianInstitute of Directors (EIoD). The EIoDis an affiliated entity in the Ministry ofInvestment working on corporategovernance and corporate social

responsibility issues in Egypt and the MENA region.

SAUDI COMPANIES AND SOCIALRESPONSIBILITY, TamkeenDevelopment andManagementConsulting, Jeddah, Saudi Arabia, 2007.The work presented in this reporthighlights some of the keychallenges and ways forward forSaudi Arabia corporate socialresponsibility for it to be an

effective driver for the long-term sustainabledevelopment of the Kingdom. The report emphasizesthe need for more creative frameworks and ideas thathelp companies identify, prioritize and address thesocial and environmental issues that matter most,and where the private sector can make the biggestimpact individually and/or in partnerships with thepublic sector.

MOVING OUT OF POVERTY(VOLUME 1): Cross-disciplinaryPerspectives on Mobility, Edited byDeepa Narayan and Patti Petesch, PalgraveMacmillan and The World Bank, 2007.This book brings together the latestthinking about poverty dynamics fromdiverse analytic traditions. Whilecovering a vast body of conceptual and

empirical knowledge about economic and social mobility,it takes the reader on compelling journeys ofmultigenerational accounts of three villages in Kanartaka,India, twelve years in the life of a street child in BurkinaFaso, and much more. Leading development practitionersand scholars from the fields of anthropology, economics,political science, and sociology critically examine theliterature from their disciplines and contribute newframeworks and evidence from their own works.

THE ARAB ECONOMIES IN ACHANGING WORLD, byMarcus NolandandHoward Pack, Peterson Institute, 2007.This book examines the economics ofthe Middle East, with the aim ofidentifying changes to economic policythat could address at least the economiccomponent of the challenges facing thispart of the globe. The authors analyze

the interaction of trade, productivity growth, and thepolitical difficulties that may ensue as these countriesmove towards greater openness. Relevant comparisons aredrawn from the experience of the transition economiesand India on potentially successful policies and thoselikely to exacerbate existing problems.

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JUNE 2008

2–4 INSME 2008 Annual Meeting: EncouragingSME Innovation and Growth, IncreasingCapital Access through Public-PrivatePartnershipGuangzhou, Chinawww.nextbillion.net/event

9–11 The Annual Bank Conference on DevelopmentEconomics (ABCDE)Cape Town, South Africahttp://web.worldbank.org/

19–21 XXII Annual Conference of the EuropeanSociety for Population EconomicsLondon, UKwww.econ.ucl.ac.uk/espe2008/

JULY 2008

7–9 Knowledge for Growth: European Strategiesin the Global EconomiesToulouse, Francewww.knowledge-conference-france2008.eu

13–25 Making Markets Work(two-week training program)Glasgow, UKwww.nextbillion.net/node/5214

SEPTEMBER 2008

3–5 World Agricultural Forum: 2008 AfricanCongressKampala, [email protected]://www.worldagforum.org/index.php?section=1

15–26 Achieving the Millennium Development Goals:Poverty Reduction, Reproductive Health andHealth Sector Reform (Global Course)Bangkok, ThailandMichelle Morris, [email protected]://web.worldbank.org/

OCTOBER 2008

11–13 Annual Meetings of the International MonetaryFund and the World Bank Washington, DCwww.imf.org

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