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

I had spent a lot of time trying to figure out how best to work at the base of the pyramid, even before I knew what BoP was.

In 2003, I moved to Nigeria to pursue a career in international development, focusing on democracy and governance. Nearly two years of this work taught me that democracy, or the pursuit thereof, doesn?t always pay the bills. In a country where collaborative government means equitable access to oil wealth, one quickly understands how deeply poverty impacts life in Nigeria. But market forces are alive and well there?from the shoeless boy hawking newspapers in the street to the shops selling eggs at midnight. This is what spurred my interest in business and economic development?that and Todaro’s textbook, Economic Development. However, I realized that despite my interest in development issues, I was less impressed with the institution of development.As a result, I sought to discover whether or not development aid is an effective means to end poverty. As with many worthy questions, the answer is far from clear. However, this lack of clarity probably also indicates that once again, I’ve asked the wrong question. The better question may be: “Can development aid help make people less poor?? William Easterly, the author of my favorite book ever, The White Man’s Burden: Why The West’s Efforts to Aid the Rest Have Done So Much Ill And So Little Good, would probably agree with the spirit of my question, if not the phrasing. (Ironically, Mr. Easterly is also a Fellow at the Center for Global Development, my second favorite think tank. Can you guess which one is my first?) My boy Bill may be more inclined to mold the question around a specific goal. For example, ?how can development aid help the poor secure reliable access to clean water??

Substitute the words ?BoP business development? and you understand why this way of thinking is so catalytic. There is inherently more power in being a buyer than a beneficiary. Consequently, BoP business development purports to profitably and effectively address the needs of the world’s poorest citizens. Interestingly enough, doing so unlocks access to a $5 trillion dollar market comprised of a number of key sectors including health, ICT, water, transportation, housing, energy, food and financial services.

But what about those that can afford to pay next to nothing or nothing at all for critical services? That leads us back to Bill. Despite the pointed title of his book, Mr. Easterly does envision a role for development in helping the poorest of the poor, albeit not the one that it’s been playing. As he explains it, development aid has traditionally been conceptualized and delivered by ?Planners,? those who ask questions like, ?what does the end of poverty require from aid?? He would rather that development interventions be run by “Searchers,” people who ask questions like, ?what can foreign aid do for poor people?? (11)

Easterly asserts, rather brilliantly I might add, that development agencies could be more effective if they eschewed utopian strategies and focused on concrete, measurable goals in specific countries for which they are held accountable individually, not collectively. (142, 180-181) Additionally, development aid tends to focus on projects that yield ?general, invisible, and unaccountable outcome(s), like a contribution to economic growth? instead of those that generate concrete results. (181) For example, Easterly characterizes the several ?piece meal interventions? in Africa including increase in ?adult literacy, electrification and electric production (until 1990)? as successful due to their ?measurable outputs.? (140-141) What happens when outputs are difficult to measure? Not surprisingly, aid agencies sometimes choose to measure ?inputs? instead, i.e. the amount of official development assistance disbursed, the number of people trained, number of adults tested for x disease, etc.?, an approach that fails to address the heart of the problem. (181)
But how then, do you generate measurable results? Easterly describes a set of general principles as a guide to getting things done.

1. Have aid agents individually accountable for individual, feasible areas for action that help poor people lift themselves up.
2. Let those agents search for what works, based on past experience in their area.
3. Experiment, based on results of the search.
4. Evaluate, based on feedback from the intended beneficiaries and scientific testing.
5. Reward success and penalize failure. Get more money to interventions that are working, and take money away from interventions that are not working. Each aid agent should explore and specialize further in the direction of what they prove good at doing.
6. Make sure incentives in (5) are strong enough to do more of what works, then repeat step (4). If action fails, make sure incentives in (5) are strong enough to send the agent back to step (1). If the agent keeps failing, get a new one. (382)

The bottom line is that development agencies might be better off focusing on empowering ?Searchers? to address specific problems, in specific geographies, leveraging what they do best, because clearly, lack of accountability does not generate real, measurable results. (29-30, 170)

This leads us back to the BoP and development agencies. It has been repeatedly suggested by the likes of Hart, Lodge, Prahalad, the authors of the BoP Protocol, etc. that multinationals will likely need to partner with NGOs, and yes, development agencies to reach their target markets. For example, Easterly highlights Prahalad’s case study of Hindustan Lever’s collaboration with ?the government, aid agencies, and NGOS to [create] a program called Lifebuoy Swasthya Chetna (Life Glowing Health)?, designed to educate children on how to use hand washing to prevent disease. (208) HLL wisely recognized that it could increase the market for soap if it could connect its use to the prevention of ?diarrheal diseases.? (208) Just to be clear, this is not an endorsement of HLL, per say, as I’d like to avoid ?Fair & Lovely?-related flaming. My point is to emphasize the multi-sectoral partnership that powered the initiative.

Personally, I would like to see [name your favorite bilateral or multilateral development agency] expand seed funding and technical assistance to entrepreneurs (both business and social), ala The Acumen Fund, Global Giving, the World Bank’s Development Marketplace, Ashoka, Echoing Green, OneWorld UK, etc.

Or what if development agencies leveraged their formidable data-churning machines to generate relevant market information to support private enterprise? In their book Untapped: Creating Value in Underserved Markets, Weiser, Kahane, Rochlin and Landis prescribe the use of information brokers, “experts who specialize in gathering and analyzing information about underserved communities, to generate relevant market research data.” (23) I can?t imagine that there aren?t numerous personnel at the World Bank, USAID, DFID, the UN, etc. that fit the bill.

Oh, and if this approach sounds familiar, it’s probably because it’s been done before. In fact, it resulted in The Next Four Billion, the WRI report that elucidates the ?aggregate purchasing power and consumer behavior of four billion low income consumers.? As you already know, it was published by WRI and the International Finance Corporation of the World Bank Group.

Now while I hope that I have made a convincing case for development agencies at the BoP, I don?t expect you to take my word for it. So, I leave you with the words of the erudite William Easterly:

Acknowledging that development happens mainly through homegrown efforts would liberate the agencies of the West from Utopian goals, freeing up development workers to concentrate on more modest, doable steps to make poor people’s lives better. (29)

Indeed.