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

Wednesday, March 9, 2011

Four or five years ago, all you had to do to get people excited about poverty alleviation was to mention the words “Prahalad” or “Yunus” and you had their attention. These two South Asian gurus—the late business professor C.K. Prahalad and the microfinance proponent Muhammad Yunus—captured the hearts and minds of hundreds of thousands of business leaders, academics, students, and social entrepreneurs through their messages and models. Importantly, they made many want to work in low-income markets and to find new solutions to sustainable growth in the developing world.

Mr. Prahalad, through his bestselling 2005 book The Fortune at the Bottom of the Pyramid, advanced a vision of the poor as, on the one hand, consumers with a combined $5 trillion to spend, and on the other hand, as producers, if given access to markets. Mr. Yunus, through the Grameen microfinance model, showed us a sustainable business model that directly involved the poor and that could be profitable, scalable and have immense impact.

However, a lot has changed in five years. During the economic crisis, many companies, while excited about the prospect of entering low-income markets, have taken a back seat in order to mind the store, so to speak. Meanwhile, the microfinance industry has gone through a minor meltdown in South Asia in the last six months, touched off by political debate and new regulation. We’ve sobered to the fact that we’re not going to “put poverty in a museum” through microfinance, as Mr. Yunus said, and that we may need to revise the model.