Business Ethics at the Base of the Pyramid
Guest blogger Bill Kramer is principal of The Global Challenge Network, LLC, an executive education and training company. From 2001 through mid-2007, he worked on pro-poor business strategies with WRI. Previously, Bill founded a non-profit focusing on the relationship of knowledge to economic development and enjoyed a long career in the private sector, founding a dozen companies, most of which were in the book business.
By Bill KramerLast week’s Wall Street Journal story about ICICI Bank’s micro-finance loan collection tactics and the Business Week article last month about Mexico’s Banco Azteca (and the interesting follow-on posts) raise a series of complex issues around doing business at the BoP. These questions have been present from the movement’s early days, but are taking on new currency as BoP markets mature. Finance and information technology, in particular, are recognized as lucrative opportunities, and BoP-targeted enterprises grow up, rapidly. The debates around microfinance interest rates (cap or not) and business practices (Are banks conning borrowers? Are borrowers getting in over their heads?) have raged since the inception of the modern microfinance industry by NGOs more than 20 years ago.
Nobody will, or should, condone thuggish tactics in debt collection. It’s a problem across the income spectrum (banks do play hardball with the non-BoP, too; I speak from 30 years of entrepreneurial business experience). The current flaps will, I hope, serve to establish higher standards for business at the BOP, something WRI called for back in 2004, and which Cornell’s BoP protocol effort continues to push.
Debtors at all levels can get in over their heads; the impacts on the BoP of such mistakes are, of course, perhaps more profound and damaging. The appropriate responses are not to limit access, but to provide much more financial education, incentives for good business practices, and swift and sure punishment for illegal or unethical practices.
These stories help me clarify my own thinking on ethics at the BoP. (For another examination of BoP business ethics, do read Nitin Rao’s excellent post, Does BoP Success Require the Moral Imperative?) Looking at multiple cases from different industries, I have identified four major aspects of BoP business ethics:
1. The nature of the product itself. One of the most controversial examples of this is the debate over Fair and Lovely skin cream as a BoP product (or not.) See How The World Works, Aneel Karnani and NextBillion.net for details.
2. The business practices associated with provision of the product/service. For example, the recent actions of Banco Azteca and ICICI Bank–it is unethical to use strong-arm tactics for loan collection even though it is ethical for both firms to be expanding into underserved markets.
3. The environmental impacts this product or service as it gains formal traction at the BoP. The most recent example of a BoP product raising environmental questions is the Tata Nano (1-lakh car).
4. The equitable (or not) distribution of rewards from accessing the wealth of the poor. World Resources Report 2005 tackled this question, and focuses on the role of governance–an important and oft-overlooked aspect of BoP business operations and ethics.
I will be talking about the ethical dimensions of BOP business at INSEAD, and the issues will no doubt resurface during next week’s sessions with Schwab social entrepreneurs prior to the World Economic Forum in Davos. I will post some comments on these sessions and welcome readers’ contributions to the debate here on NextBillion.
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