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

By Nathan Kommers
Nate Kommers is a Press Officer with the World Resources Institute.

Yesterday, the Aspen Institute held a book event in here DC with Nick Sullivan, author of You Can Hear Me Now: How Microloans and Cell Phones are Connecting the World’s Poor to the Global Economy, and Iqbal Quadir, the man behind the GrameenPhone phenomenon in Bangladesh.Bill Kramer and I attended to see what topics carried the day.

Sullivan pointed out that the GrameenPhone case seems to have achieved the trifecta of economic benefits, a bridged digital divide, and an instance where the private sector has played a significant and positive role in development.

It is this last point that was of keen interest to Quadir, who on a couple occasions discussed the difference between foreign aid and private sector development. Foreign aid usually goes to governments, with the unfortunate effect of making those governments less beholden to the interests of their citizens. Private sector development, on the other hand, has usually put money directly into the hands of the public. In developing countries, Quadir argues, this is where wealth needs to be built.

In the case of cell phone penetration in Bangladesh, GDP growth that can directly be traced to the introduction of millions of new phones is bigger than much of the foreign aid distributed to the government.

In other words, more aid should be devoted to fostering an effective business climate and entrepreneurial spirit. Quadir went so far to suggest that if this isn?t possible, then perhaps aid should be cut off.

Sullivan’s book is an excellent look at the potential of private sector forces in development, but one questioner raised a point on how to harness these forces in aid policy. The US, in pursuing its interests with aid to governments, has to see it interests are better served by offering aid that benefits citizens, and not necessarily the governments that can preserve those interests. Even in a post-cold war era, how do you do that?

The question wasn?t settled at the event, and probably won?t be settled for some time. Meanwhile, the private sector, and the capital markets that can give it so much muscle, will be finding ways to connect the world’s poor to the global economy.