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

Is it my imagination or are targeted remittances the next leap in private sector-led development? Enterprises large and small like SMART Communications and FirstMile Solutions have considered implementing programs to tap into this over $170 billion a year industry. But one local NGO, PEOPLink, has already launched a preliminary version of this service- Paramipueblo.com – that takes advantage of this growing field of possibilities. I had a chance to interview the organization’s founder, Daniel Salcedo, earlier this summer for a great discussion on his remittance site, the philosophy behind the innovative CatGen software and where the worlds of the ICT sector and the BOP collide.

Imagine you are a migrant worker living in the US. You want to send cash back to your family in El Salvador but you are concerned that a large chunk of that money will never arrive, either because you may be charged as much as 15% by Western Union or you know one of your relatives is liable to horde that money for him/herself. These very real scenarios are why PEOPLink has created Paramipueblo.com (audio), a website where remitters can search businesses in their hometown and electronically purchase specific goods from groceries to concrete. When a product is purchased, money is transferred electronically to the business which then holds the items ordered for pickup by the remitter’s family. Basically, instead of sending a sum of cash and hoping a significant amount will be spent on medication for your son’s asthma, for example, you can purchase directly from your local pharmacy and cut out several “middlemen” in between.

This simple but powerful tool is reflective of the underlying PEOPLink philosophy that the democratic nature of technology can empower consumers and producers at the base of the pyramid to increase their incomes and assert themselves in the international marketplace. As Daniel discussed in our interview, the availability of technology and the ability to use it collectively have dropped the cost of e-commerce to almost zero. This makes capital constraints much less of an issue in starting up small businesses, a point that has plagued private-sector development in labor-intensive economies. The benefit of technology for the BOP is its communal nature- a small village can work with one computer, several villages can upload e-commerce materials onto a few central servers, and a whole network of artisans can increase sales dramatically by branding itself on one group of linked sites. The main focus here is the need to scale up to create a meta-market, a point that drove PEOPLink to invent its CatGen software.

The results are promising. Paramipueblo is expanding the number of businesses it works with and CatGen is downloaded 300 times per month by small businesses in emerging economies looking to create their own online catalogues. More users such as these Nepalese artisans are reaping the benefits of international trade and equalizing the distribution of wealth from commerce by entering the international marketplace on their own terms, even without extensive IT training. But don’t take my word for it, check out the UNDP commissioned study on CatGen that had this to say about its effects: “The largest impact of implementing this ’pro-poor’ e-commerce approach was on income and employment. Firms using it reported jobs that were directly attributable to the on-line promotion [including employment of] 3918 women.” Initiatives like this that empower the BOP in a financially self-sustaining fashion help create great prospects for tomorrow’s emerging economy entrepreneurs. They ensure that the next generations of innovative businesses will increasingly come not from Silicon Valley but from towns in Brazil, Nepal and Nigeria. To learn more about the CatGen and Paramipueblo services, check the updated activity capsule or listen to the full interview here.