Rob Katz

Morning Roundup: Water Privatization and Dignified P2P Lending

There have been some interesting base of the pyramid-related topics afoot in both the mainstream media and the blogosphere lately, including a call for water privatization in developing countries and a self-critical blog post authored by the founder of a media-darling BoP startup. Without further ado, what follows is a quick roundup of the latest rumblings and grumblings in the base of the pyramid world:

Water privatization is not a new concept, nor an uncontroversial one. The latest to take up the banner is George Mason economics professor and Marginal Revolution author Tyler Cowen. I admire Cowen and read his blog regularly–he’s particularly good at making esoteric economics arguments come alive in readable language. He authored an opinion piece in Forbes back on June 19 entitled Pay For It, in which he argues that government-run water monopolies in developing countries should be completely deregulated.Of course, Cowen is not blind to the perils of deregulation:

But for all the problems deregulation can bring, the status quo seems much worse. And it’s worth asking what these higher prices are relative to. Carrying water on your head costs much more–in terms of both money and effort–than piped water. If you’re a poor person, wouldn’t you rather face a private monopolist, selling you water through pipes, than not have any water company at all? Whether we like it or not, those are the real world alternatives.

Even so, Cowen’s arguments seem awfully academic and not the least bit practical in a real world sense. Yes, base of the pyramid consumers are willing to pay for clean, safe water. But full-on deregulation? It’s likely that it would negatively impact the poorest of the poor at the price of improving service for the middle and emerging middle classes. Besides, it’s politically infeasible; see Bolivia, Cochabamba.

Next up is a revealing blog post authored by Kiva co-founder and CEO Matt Flannery (kudos to Social Edge for getting Flannery to write and putting his voice out there.) Entitled Catfood and Commoditization, the post touches on questions of equality and dignity with respect to Kiva’s lenders and borrowers.

Evidently, many Kiva lenders (most of whom are in the United States) use photos of their pets in their lender profiles. This isn’t abnormal when it comes to online profiles–check out various folks’ Facebook, MySpace, Friendster, etc. pages and you’ll see plenty of dogs and cats where you’d expect to see people. With Kiva, however, this presents a particularly interesting dilemma:

The entrepreneurs on the site don’t get the chance to mask themselves behind a feline facade. Rather, they are baring it all: their work, their families, their struggles, their finances and most importantly their hope for a better life. Most of the time, they don’t fully understand the role of the Internet and that their funding is coming from dozens of computer users in over 70 countries who want them to succeed. Explaining the people aspect of this is hard enough. How could a person in Fresno really care about me here in Samoa? Explaining the dynamic gets even trickier when the entrepreneurs scans a printout of her lenders and sees that a cat is actually her main financier.

At this point, Flannery could have written about the business challenges of explaining why Americans like to show pictures of their pets to any and everyone who is willing to look. But he doesn’t–and the resulting reflection is powerful, insightful and frankly quite brave:

Certainly, it can be very degrading to learn that the pet of an American was able to make a life changing loan to your business in Western Kenya. Are we commoditizing, rather than dignifying the low-income entrepreneurs getting loans on our site? If so, we need to pull a u-turn fast.

Say what you will about Kiva–they get too much attention, they mask the fact that borrowers pay interest but lenders ’lend’ at zero percent, they have powerful friends (eBay, PayPal, Google)–but when the CEO can credibly question his own business model because it may be degrading, you know that his heart and mind are in the right place. This post gives me a lot of faith in Kiva’s ability to stay true to its social mission. Way to go, Matt.

Finally, if you are in the Washington, DC area, be sure to check out the Society for International Development’s July event: Small and Medium-sized Enterprise Finance and Technical Assistance: The Next Microfinance? (OK, they need to work on catchy titles, but still.) Seriously, the event will feature speakers from the Small Enterprise Assistance Fund, the IFC’s soon-to-be-spun-off Grassroots Business Initiative and the Overseas Private Investment Corporation. I have met with Harold Rosen and John Simon in the past, and know them both to be insightful and honest. Should be a good event.