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NextBillion News Vol. 26 June 26, 2008
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Exploring the Impact of the Food Crisis, Faith and the Green Movement on the BoP, plus Interviews with Innovative Social Entrepreneurs

[Contents]

1. Manuel Bueno Analyzes Food Price Inflation and the BoP

2. Featured Blog Posts:

Two innovative social entrepreneurs featured in NextBillion.net interviews:  

    "Harnessing the World's Untapped Talent Through 
     Responsible Outsourcing: An Interview with Leila Chirayath"
     Francisco Noguera

    "Lapdesk: An Interview with Shane Immelman"
     Tayo Akinyemi

"Why the Base of the Pyramid Movement Needs God"
Moses Lee

Nextbillion.net Team Welcomes New Members: Introducing Summer Associates Joseph Bornstein and Teresa Newhard
Rob Katz

3. The Exploration of the Green-BoP Nexus Continues:

   "Being Green at the Base of the Pyramid - It Just Makes Sense"
    By Derek Newberry

   "Do You Have to be Rich to be Green?"
    By Guest Blogger Tracy Smith

4. Featured Event: Small and Medium-sized Enterprise Finance and Technical Assistance- the Next Microfinance?

5. Jobs/Careers: VP Sales and Operations, VisionSpring
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1. Food Price Inflation and the BoP

By Manuel Bueno

Most of NextBillion's visitors have heard about the current jump in food prices. These higher prices have already triggered responses locally in the form of riots in countries such as Haiti, Egypt and Bangladesh. The OECD and FAO have recently issued a report predicting that food prices have moved permanently to higher levels compared with past prices (the Financial Times offered an advance of the study's highlights some time ago). Although the reasons for this trend are beyond the scope of this post I suggest readers who are interested read this article.

In this post, I would like to explore the likely effects of higher food prices on the budgets of Base of the Pyramid consumers. An argument widely heard these days is that such food rises at least might improve the plight of poor farmers in developing countries, however, a recent study (which due to lack of data available includes only 16 countries) from the World Bank claims otherwise.

Price increases have a negative effect on urban areas since they are net buyers. In most rural areas, the effects are negative too. The overall impact in rural households is negative since possible benefits depend not on what they produce, but on the net sale of these goods. Often rural households have to acquire other goods for which the price has risen too, so the increased income is more than offset by the other price rises.

Most poor people are net consumers of food, and not net producers.
The only exceptions might be rural Peruvians thanks to high maize prices and rural Vietnamese thanks to high rice prices (although the Vietnamese government has set restrictions on rice exports to keep national prices under control).

At any rate, in every country taken into account by the authors of the study, the poverty rate increases and people who were already poor are made even poorer by high food prices.

According to the Next 4 Billion, the $5 trillion market that the BoP as a whole represents, around 58% of their budget is spent on food. How would the price rises affect their budgets? Firstly, let us assume that people will not cut back on their food shopping and that they will keep buying the same amounts of food regardless the price. BoP consumers are rarely able to avoid expenditures on food regardless  of price changes; that is, they tend to be demand inelastic.

Secondly, for the sake of simplicity, let us assume that every region has one or more staple food, which it will consume most. I will use the rise of the price of these staples as a "guesstimation" of food inflation in this area.

Considering that the prices of wheat, rice and maize have increased (from 2005 to 2007) 70%, 25% and 80% respectively, the BoP food market size would increase around 35% due to price rises. The percentage of BoP budgets spent in food might go from 58% to between 75% and 80% in average.

This figure should be considered by all means as an upper-band approximation, because market buyers will migrate to cheaper alternatives (like the potato) or cut off the luxuries within their diet (such as fresh fruit). National governments will tend to offer help to poor citizens (the first movers are the Inter American Development Bank and the World Bank), and food suppliers will adjust the production of food upwards to profit from the rise in prices (FAO predicts a bumper crop for 2008-2009).

At any rate, the increase in food prices will affect the expense allocation in BoP households. It is difficult to guess how BoP consumers will adjust to this shock. It is likely that depending on the region and particular circumstance of every community spending on housing, energy or transport will be cut in different degrees.

For all our BoP readers working in the field: Have you perceived this shock? If so, how are people adjusting to higher prices? What kind of expenditures are they cutting? How would you suggest these communities to adapt at the local level to this shock?

2. Featured Blog Posts: 

Harnessing the World's Untapped Talent Through Responsible Outsourcing: An Interview with Leila Chirayath     

By Francisco Noguera

I recently had the pleasure of spending some time speaking to Leila Chirayath, founder and CEO of Samasource (previously Market for Change), an organization that promotes socially responsible outsourcing to fight "the waste of talent" around the world. This first part covers Leila's background, the experiences that led her to become an entrepreneur and identify outsourcing as a vehicle for positive social change. The second part of the interview explores Samasource's business model, and its perspectives in more detail.
 
Read more: Part One, Part Two

Lapdesk: An Interview with Shane Immelman

By Tayo Akinyemi

Welcome to part II of the "Endeavor" series. You may recall that part I involved a rather interesting conversation with Dan Isenberg, a Harvard Business School professor who had written a case about Endeavor entrepreneur, Lapdesk. Given that dialogue, it seemed only natural to continue the dialogue with Shane Immelman, founder and CEO of Lapdesk. So with no further ado, let's have a chat with Shane.

Read more

Why the Base of the Pyramid Movement Needs God

By Moses Lee

In my previous post, I suggested that BoP enterprises should consider partnering with faith based organizations (FBOs) on the ground, particularly in countries where religion plays a large role. In this post, I'd like to put forth another distinct, but similar idea: FBOs in the West can play a large part in the overall BoP Movement. Crazy, right? Maybe not.

Read more

Introducing Summer Associates Joseph Bornstein and Teresa Newhard

By Rob Katz

If you've noticed a few unfamiliar names floating around the site lately, you're not alone. I have heard from some NextBillion.net readers asking who Joseph and Theresa are, and what their roles will be on-site.

So, without further ado, introductions: Joseph and Theresa are Summer Associates working with World Resources Institute (Joseph) and Acumen Fund (Theresa) this summer. We're incredibly happy to have them on board. Already, Joseph has been posting news and events on-site; Theresa's edited our blogroll and has begun working on the Resources page.

Read more

3. The Exploration of the Green-BoP Nexus Continues:

Being Green at the Base of the Pyramid - It Just Makes Sense

By Derek Newberry

Are people at the base of the economic pyramid more "green" than those at the top of the pyramid? There is an ongoing debate about this - and one of the key assertions made by those who answer "yes" to that question is that the BoP are better conservationists. Karen pointed out in her post last week that the people who depend most directly on "ecosystem services" are the ones most likely to utilize them properly and productively in a sustainable manner.

Reading this, memories flashed through my mind of traveling around highways in Mexico where brick sellers would line certain parts of the road - stacks of adobe bricks made from baked mud and straw arranged behind them.

Read more.

Do You Have to be Rich to be Green?

By Guest Blogger Tracy Smith

A few days ago, my neighbor installed 20 feet of gleaming solar panels in her backyard. She assured me that over the next ten years the savings in energy costs would nearly pay for the panels and besides, she would be doing something good for the environment. I left her backyard thinking, you have to be rich to be green.

But as a member of the clean energy community, I should know better. I know, for example, that throughout the developing world, farmers, teachers, nurses - all kinds of people are installing solar panels on their roofs, lighting their homes with hydro electric energy, powering their equipment with biogas and generally catching onto the benefits of clean energy much more quickly than one might expect.

Read more.

4. Featured Event: Small and Medium-sized Enterprise Finance and Technical Assistance- the Next Microfinance?

Date: July 10, 2008

Location: Chemonics Conference Room, 1717 H Street, NW, Washington, DC

Governments, multilaterals, foundations, socially motivated investors, and financially motivated investors are moving into the Small and Medium-sized Enterprise area.  For many years, the development community has supported microfinance.  Microfinance has developed a series of for-profit companies and has attracted financial investors.  With the success and reach of microfinance, there has been a renewed focus on providing money and advice to the Small and Medium-sized Enterprise (SME) sector. 

Read more.