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

Last week, John, Cory, and I went to a symposium on the BOP hosted by the Bretton Woods Committee. The symposium was paneled by four individuals from academia, an MNC, a technical assistance non-profit, and a small social for-profit corporation. Kai Schmidtz, EVP and COO of MicroFinance International Corporation (MFIc), delivered a fascinating presentation on MFIc’s conceptualization of remittance flows as a potentially enormous source of capital for MFIs in Latin America. MFIc, a social, for-profit corporation, positions itself as ?the natural financial bridge between the developed and developing worlds.? Remittance funds–USD 52 billion in remittances were transferred to Latin America from the US in 2005–typically accumulate in money transfer systems due to the lag of about three days between the time when a remittance is sent and received. These accumulated, ?floating? funds could be made available for lending to MFIs. MFIc has developed a simple, web-based platform, the Electronic Settlement System, that allows MFIs to process and administer payments; interact with the US banking system; safely maintain interest-generating remittance funds in the US banking system; and use the capital shared by MFIs to create lending programs for participating MFIs.

Bruce McNamer (TechnoServe), and Jeff Morgan (Mars, Inc.), delivered presentations on their business and technical assistance programs for farmers. Mars participates in an industry-wide protocol among cocoa buyers to support higher wages and environmentally sustainable farming practices. Part of Mars? efforts to fulfill protocol requirements includes the establishment of the Sustainable Tree Crops Program, a public-private partnership in Cameroon. STCP provides direct assistance to farmer organizations on business planning, marketing, accounting, and farmer co-ops that can increase farmers? negotiating power and profits.A non-profit with the motto, ?Business Solutions to Rural Poverty,? TechnoServe ?works on the supply side of the BOP,? i.e., views the BOP as entrepreneurs and workers. TechnoServe has offices in 12 countries and an on-the-ground staff of 350. Their approach is moving toward critically examining and improving the entire length of the value chain in sectors that are particularly competitive for developing countries. An example is coffee production in Tanzania, a country with especially ideal conditions for growing gourmet coffee on the sides of Mt. Kilimanjaro. Poor production practices and middlemen kept farmers from maximizing their resources. TechnoServe provided full-scale consultation by helping farmers to professionalize their production, finance and build a coffee processing unit, organize an association of farmers, and creating the gourmet brand ?Kili Caf?.? TechnoServe also connected directly with Tanzania’s Finance Minister to lower the then 21% tariff rate on coffee. In 2005, Peets Coffee and Starbucks began to sell Kili coffee as a premium brand.

Professor C.K. Prahalad, a Distinguished Professor at University of Michigan’s Ross School of Business and one of the first to conceptualize the BOP as a consumer market, delivered a PowerPoint presentation on his concept, ?democratizing commerce,? as the logical next step after his work on theorizing the BOP. To democratize commerce is to foster greater access to the benefits of the global economy by the BOP. Their economic potential as consumers had already been explored in Prahalad’s previous work; ?democratizing commerce? will now address their potential as producers?i.e., entrepreneurs and workers?as well. I thought happily about the Activity Database’s recent retrofitting to include the activity sorting categories, BOP as ?Consumer,? ?Producer,? and as both. Unfortunately, however, Prahalad’s presentation continued on to describe many of the same enterprises as have already been analyzed in his book on the BOP, The Fortune at the Bottom of the Pyramid. Prahalad spoke briefly about e-Choupal, ICICI, Casas Bah?a, Jaipur Foot, and a few others, leaving a hazy impression of how ?democratizing democracy? would be a step in a new direction.