Meet the consumer today's business needs to targe

W E S T I N G H O U S E H A S S O M Esimple ideas,T OA C C O M P LgreatI S Hthings.W E S T I N G H O U S E E L E C T R I C C O M P A N Y L L CThe Westinghouse AP1000 TM is ready for global use.China will build four AP1000s, beginning in 2009.The AP1000 has also passed all the steps for compliance withEuropean Utility Requirements. And, the AP1000 is the onlyGeneration III+ plant to receive design certification by theUS Nuclear Regulatory Commission, with many US utilitiesalready having selected the AP1000 as their technology of choice.Westinghouse nuclear technology will help provide futuregenerations with safe, clean and reliable electricity.Check us out at www.westinghousenuclear.com

Parliamentary BriefA Special Report in association with the United Nations Development ProgrammeIn Brief Vol.ContributorsPaul Skinner, chairman of Rio Tinto,and chairman of the CommonwealthBusiness Council.Jane Nelson. a senior fellow anddirector of the Corporate ResponsibilityInitiative at Harvard’s Kennedy School.Dave Prescott, freelance writer specialisingin social issues at the interfacebetween large firms and internationaldevelopment.David Wheeler, Dean of the Facultyof Management at Dalhousie University.Sahba Sobhani, Programme Managerat UNDP’s Growing Inclusive Marketsinitiative.Allen Hammond, William Kramer,Robert Katz, Julia Tran andCourtland Walker, co-authors ofThe Next Four Billion: Market Size andBusiness Strategy at the Base of thePyramid.Bruce Jenks, Assistant SecretaryGeneral and Director, PartnershipBureau, at the United NationsDevelopment Programme.Jean-Michel Severino,Managing Director of the AgenceFrançaise de Développement.Rosalind Eyben, a Fellow at the UKInstitute of Development Studies andformerly Chief Social DevelopmentAdviser for the UK’s Department forInternational Development.Andy Sumner, a Fellow in the Vulnerabilityand Poverty Reduction Team atthe Institute of Development Studies,Sussex, England.Jacqueline Novogratz, the CEO ofAcumen Fund.Suzi Sosa, Chief of Staff of MPOWERLabs Inc.Marcela X Escobari, executive directorof the Center for InternationalDevelopment at Harvard University.Beth Jenkins, Learning Director of theFull Economic Citizenship Initiative atAshoka.Lisa Dreier, Director of Public-PrivatePartnerships at the World EconomicForum.OCTOBER 200812 No. 1 October 20084. FOREWORD5. Teamwork wins the day in AfricaPaul Skinner on why business and government needsto work in partnership to deliver the MDGs7. What must be done if we really mean businessJane Nelson and Dave Prescott9. The Light DawnsDavid Wheeler and Sahba Sobhani11. Horses for Courses. What works in the marketAllen Hammond, William Kramer, Robert Katz,Julia Tran and Courtland Walker13. Doing Well, Doing GoodBruce Jenks and Jean-Michel Severino16. Delivering more by thinking outside the boxRosalind Eyben17. Half-way but to what?Andy Sumner19. How Uncle Sam could become a world championJane Nelson21. Learning to live againTelefonica O2’s campaign to eradicate child labour takes58,000 young children back to school23. When the poor can’t pay but there’s still a profit...Jacqueline Novogratz24. ...And when a mobile can also mean a bankSuzi Sosa & Marcela X Escobari26. The field day beckoning the money marketsBeth Jenkins28. Helping the hungry to feed themselvesLisa DreierPARLIAMENTARY BRIEFTel: +44 (0)20 7381 1611email: editor@parliamentarybrief.com web: www.parliamentarybrief.comPhotos (bottom to top): Adam Rogers/UNCDF, O2, Tiviski, UNICEF/Julie Pudlowski

BRUCE JENKSSet by world leaders in 2000 toprovide time-bound, measurabletargets to fight extreme poverty,hunger, and gender inequality, whileimproving the health, environmentand education for all, the MillenniumDevelopment Goals (MDGs) provided acommon vision for a better 21st Century.Today, with just seven years to go tothe MDGs 2015 deadline, and despiteimpressive progress on a number of fronts,the challenges we face are significant. Anestimated 2.6 billion people earn less than$2 a day. More than a billion people haveno access to clean water, and 1.6 billionpeople lack electricity.If we are to remain on track to meetthe MDGs on time, there needs to be aredoubling of efforts on the part of governments,international organisations, andcivil society. And there needs to be anincreased role for the private sector, giventhe importance of its dynamism, investmentsand innovation.To this end, UNDP has been workingwith the private sector to present sugges-ForewordWe needbusiness tohelp finishthe jobMany reasons are put forward as towhy the Millennium DevelopmentGoals should be supported.Since 9/11, arguments about security havecome to the fore. Whatever the merits ofthat, the foundation of the MDGs is aboveall about justice and mercy. And whateverour professions, as politicians, diplomats,businessmen or indeed journalists, thereis something humbling in looking at thestories of people whose material circumstances,experience and expectations are somuch less than anyone likely to be readingthis special report.Before we are called to consider theMDGs from a professional standpoint, weare called to consider them as individualsand align ourselves, however temporarily,with the vast majority of our fellow humanbeings. Surely we can acknowledge this:that when our history is written, this willbe a matter upon which judgments aboutour generations will be made. Did we riseto the Call to Action, or did we walk onby?The MDGs encapsulate the desire tosee justice done and mercy shown. Busitionsand models that show how businessescan find financial gains while furtheringhuman development by including poorwomen and men in their business strategies.Whether it is the financial servicessector or agribusiness, a robust andengaged private sector can help alleviatepoverty and contribute to human developmentby creating incomes and decent jobs,as well as by meeting the needs of poorconsumers with better access to neededgoods and services.On the occasion of the upcomingHigh-level Event on the MDGs beingconvened at the UN at the end of thismonth, UNDP, together with a range ofpartners from the UN, the private sectorand government, including the UnitedKingdom, will be organising a number ofevents to encourage companies further todo business in developing countries in wayswhich are both profitable and at the sametime pro-development.Just past the halfway point to theMDGs target date, it is essential thatthe force of the private sector’s vitality isbrought to bear even more as part of globalefforts to reach these Goals. Challengingand helping companies to find new businessopportunities and develop businessmodels that can also contribute to theachievement of the MDGs is an excellentway of helping to make that happen.Bruce Jenks is Assistant SecretaryGeneral and Director, Partnership Bureau,at the United Nations DevelopmentProgramme.Success is not an aim, it is a moral dutyRoderick Crawfordness, as this edition demonstrates, canhelp deliver them. There are numerousexamples of good practice in these pagesand plenty of reasons to be confidentthat business will contribute significantlyto this. But the political classes cannotabdicate their role without the MDGsfailing. Aid pledges must be met, debtrelief fulfilled, and trade opened up. At atime of economic crisis such as this it is easyto focus on keeping the home fires burning,to harden our hearts against the themes ofbetter days. This would be a mistake, butworse, it would be a crime.The war on terror has filled the imagination,seized the headlines, appropriatedfunds, and defined the recent age. Reaffirmingthe MDGs offers an opportunityto restore a moral balance, and to stakea claim on history that will be celebratedacross the world.Roderick Crawford is editor ofParliamentary Brief.

Parliamentary BriefPaul Skinner, chairman of Rio Tinto, argues that business hasa vital role to play in partnership with governments to deliver thesustainable economic growth upon which the delivery ofthe Millennium Development Goals dependsTeamworkwins the dayin AfricaSub-Saharan Africa is the only region that, atcurrent rates, will not meet any of the MillenniumDevelopment Goals (MDGs) by 2015. Ofthose employed in the region, 55 per cent do not earnenough to lift themselves and their families above the$1 a day poverty line.Few would argue that providing a decent chancein life, basic education and healthcare should notbe an important international priority. But whatis the relevance of business to theMDGs? Surveys of businesses suggestthat they see the UN or donor governmentsas most responsible fordelivering the MDGs, with almost aquarter knowing nothing at all about them.Yet, in reality, it is national governments andbusinesses in Africa that have both the primeresponsibility and the capability of deliveringon the MDGs.Whilst philanthropy is important, the mostsignificant way business can contribute to theMDGs is through generating jobs, payingtaxes, opening up supply chains and creatingstronger linkages with local economies.It is this that will cause the type of growththan can deliver a significant social impact.Getting the fundamentals right to create sustainableeconomic growth is the most criticalfactor in delivering the MDGs and enterpriseis the foundation for this.Consequently, we must do all in our power to liberatethe energies of Africa’s entrepreneurs — menand women, farmers, traders, small and mediumenterprises (SMEs) and larger companies. Withoutthis, governments will never be able to pay for publicservices and aid will be a revolving door that keepsspinning — the jobs and income needed to supportthe young and growing population will never becreated and the MDGs will remain targets.Business can play a catalytic role in partnershipwith governments in improving the conditions fordoing business and tackling development needs. Torealise this will require that business is built more systematicallyinto economic planning and prioritising,and change a paradigm where business perspectivesPromoting economicdevelopment in Ba-PhalaborwaThe Palabora Foundation in South Africaprovides the sewing machines and the materialsfor this class.Despite a long-standing community programme,Palabora, South Africa’s largestproducer of copper, historically sourced fewsupplies locally. Therefore, in collaborationwith two other major mining operators inthe Ba-Phalaborwa region, a programme wasestablished to maximise the supply of goodsand services sourced from local companies.The programme created a common set ofprocurement standards and set up businesslinkage centres to assist companies in identifyingand developing their ability to provideservices and goods in a sustainable, independentand competitive way to the three localmining companies. The mining companiesalso maximised their local spend with localcompanies. The centres also identifiedpotential business opportunities and helpedlocal businesses to exploit them.The programme achieved its aim oftransforming the interaction of the miningoperations with the local economy. Froma very low base, around 40 per cent of suppliesof goods and services now come fromlocal companies. Over a decade, around65 sustainable businesses have been established.In areas where there is less economicdevelopment, additional effort is neededto realise the benefits that investment canbring.www.palabora.comOCTOBER 2008

Parliamentary BriefWhatmust bedone ifwereallymeanbusinessPhoto: American Development BankThis year of 2008 marks the half-way point in theglobal effort to achieve the Millennium DevelopmentGoals (MDGs).The United Nations, the World Bank, the WorldEconomic Forum (WEF) and others have all noted thatdespite a sustained period of global economic growth,which has contributed to some progress on the goals, anenormous surge of effort is now required if the world isto meet its targets. As the global economic outlook startsto look less positive, and in the face of high food andenergy prices and the impacts of climate change, thatsurge is even more necessary.The ‘development emergency’ declared at Davos in2008 echoed an earlier finding from WEF’s GlobalGovernance Initiative that the world is making ‘lessthan half the effort’ required to meet the MDGs. TheIMF and World Bank’s 2008 Monitoring Report alsoconcluded that ‘most countries are off-track to meetmost of the goals, with those in fragile situations fallingbehind most seriously’.Significant progress towards the goals remainspossible but a massive injection of political will andgovernment leadership is required to make this happen.It has also become increasingly clear that the MDGscannot be achieved in the absence of a diversified andproductive private sector.The economic growth and wealth creation that isessential for their achievement will come primarily fromprivate enterprise, whether driven by large multinationalcorporations, national companies, small and mediumfirms or social enterprises.Such enterprise will also be the source of most ofthe innovations in new technologies, products, processesand financing mechanisms necessary for tacklingOCTOBER 2008Jane Nelsonand DavePrescottFor furtherinformation on theissues covered inthis article, pleasevisitwww.iblf.org/mdgsenvironmental challenges. It is private enterprise thatwill build what UNDP describes as ‘inclusive businessmodels’, which explicitly include the poor as consumers,employees, entrepreneurs, suppliers, distributors,retailers or sources of innovation in economically viableways.Governments in both developed and developingcountries clearly have a crucial role to play in creatingthe appropriate enabling framework for such enterprisesand for ensuring accountable and responsiblemanagement of public revenues and services. Yet theycannot meet their commitments to the MDGs withouteffectively enabling, regulating and partnering with theprivate sector.This is not to suggest that companies and marketsare a panacea. Far from it. In situations of bad or weakgovernance, private enterprise can rarely make a sustainedpositive impact and in some cases can seriouslyundermine the MDGs.In a growing number of cases, however, businessoffers a variety of solutions ranging from the job creationand income generation impacts of successful enterprise,to the targeted adaptation of individual business products,processes and value chains to collective action bygroups of companies and multi-stakeholder alliances.The business roleThe specific business contribution will depend notonly on factors such as the industry sector and thecompany’s business model, ownership structure andsize, but also on the MDG in question and type ofdevelopment intervention needed, such as increasingaccess to jobs, education, health, energy, water, technologyand markets or improving accountability and

Parliamentary Briefpublic capacity.Regardless of the differences, most companies havethe potential to make a contribution to the MDGsthrough one or more of the following three areas:1. Core business operations and value chains (seeBruce Jenks’ article on page 13 for case studies of companieswith profitable business models that act as drivers ofMDGs)2. Social investment and philanthropy (on page 5Paul Skinner explains how Rio Tinto invests in the communitiesin which they operate)3. Public advocacy, policy dialogue and institutionstrengthening (David Wheeler and Sahba Sobhaniprovide a study of how business can engage in advocacyand dialogue on page 9).Large firms are now acknowledging that combatingpoverty is not only important for contributing toa stable operating environment and managing risk,but can also represent a major opportunity. They areimplementing new business practices, often in partnershipwith public and civil society bodies, in orderto develop these opportunities.Political leaders and governments are, in turn,publicly supporting company activities that contributeto the MDGs. For example, UNDP’s GrowingInclusive Markets initiative is a strategic effort bringingtogether business leadership coalitions, donors,universities and foundations to study and promotemore inclusive corporate value chains and effectivepublic-private partnerships. UNDP’s GrowingSustainable Business programme is now operating inover 12 countries and many other UN agencies andbilateral donors are developing dedicated privatesector units and partnership building programmes.Another example is the MDG Call to Action, aninternational effort begun by the UK government andcurrently supported by 48 Heads of State and over 60CEOs. Within this broader initiative is the BusinessCall to Action, aimed at engaging the core competenciesand value chains of business to accelerate progresstoward growth and the MDGs.The Clinton Global Initiative is another nongovernmentalorganisation launched within the pastfive years which engages business, philanthropic andcommunity leaders to work on practical projects insuch areas as education, energy and climate change,global health and poverty alleviation. In addition, theWorld Business Council for Sustainable Development(WBCSD)-SNV Alliance is helping to create inclusivebusiness opportunities by linking local communitieswith big business.At a local level, social entrepreneurs and small andmedium enterprises (SMEs) continue to make a majorcontribution to the MDGs. Most of the world’s privatesector activity takes place at this level, rather thanwithin and between large firms.Contact between large firms and the SME sectortakes place through company supply chains. As such,enterprise development and business linkage initiativesand other projects to transfer skills, technology andfinance to small companies and social enterprises is oneof the most important contributions that large nationalcompanies and multinational corporations can maketo the MDGs.Photo: Adam Rogers/UNCDFThe business responseArticles in this special report exemplify the growingevidence that many companies are making a seriouseffort to align their core business functions with theneeds of the societies in which they are operating. Eventhough business solutions often require complex collaborationwith non-traditional partners as well as asignificant re-think of conventional business models,there are a growing number of companies that haveprofitably navigated these challenges, and the developmentbenefits appear to have been significant. However,despite these signs of progress, such projects must beurgently replicated and scaled up if the MDGs are tobe met.More work is needed on evaluating what worksand what doesn’t — both in terms of new businessmodels and partnerships, as well as public policyinnovations.There is a need to build greater awareness andcapacity within business and government on theissues at stake, the business case for engagement andthe tools for engagement. Above all, there is a needto engage thousands more companies, ranging fromestablished multinationals to the emerging corporateleaders of Asia, Latin America, the Middle East andAfrica.While the private sector is playing an increasinglyimportant role, much more could be achieved withgreater vision and leadership on the part of businessleaders themselves and with better policy frameworksand incentives from government.The Global Business Coalition on HIV/AIDS,TB and Malaria notes, for example, that companiesare currently doing ‘a fraction’ of what they could bedoing in order to address these diseases. Market incentivesand competition between companies may providefurther impetus. Governments, multilateral groups andlarge NGOs in turn can all show leadership by recognisingand encouraging the business contribution, aswell as collaborating on solutions.Progress charts from the UN Millennium DevelopmentGoals 2007 report prompt a set of questions: whatproportional contributions have private sector effortsmade to the MDGs, versus public and civil societyefforts? Which initiatives have been most successful,and what were the success factors? What can be learnedfrom unsuccessful initiatives?At the moment it is hard to answer these questions.This in turn raises a further point: meeting the MDGsis, to a large degree, a hugely complex information managementchallenge. The best information managementskills in the world lie in the biggest and most successfulcompanies. Harnessing such skills in the context of theMDGs may be a crucial success factor in achieving thegoals.Dave Prescott is a freelance writerspecialising in social issues at the interfacebetween large firms and internationaldevelopment. Jane Nelson is a senior fellowat Harvard’s Kennedy School and directoro ofbusiness leadership and strategy at the IBLF.This article is adapted from the authors’ workBusiness and the MDGs: A framework foraction. 2nd Edition. IBLF and UNDP 2008.OCTOBER 2008

Parliamentary BriefPhoto left: Adam Rogers/UNCDF; Photo right: SmartThe light dawnsOCTOBER 2008David Wheeler& Sahba SobhaniMali is one of the poorest countriesin the world. Roughly 64 per centof its 12 million inhabitants livebelow the poverty line, and only ten per centhave access to electricity. In some regions ofthe country that figure drops to a mere twoor three per cent. For those with access toelectricity, the price is higher than in neighboringcountries due to infrastructure andnatural resource issues.Seeing an opportunity for wealth creationand social impact the energy giant Électricitéde France (EDF) and its partners the FrenchAgency for the Environment and EnergyEfficiency, the Dutch energy companyNUON and the French TOTAL together setup independent Rural Energy Sectors Companies(RESCOs).However, when the RESCOs were firstcreated Mali didn’t have a regulatory frameworkfor public electricity provision, let aloneprivate. But through the lobbying of EDFand its partners, with help from the WorldBank, the Malian government adopted regulationsthat have opened electricity provisionto private companies.As a result, competition has been introduced.In 2006 alone Mali’s energy agencysigned more than 50 contracts with smallenergy operators, a few of which are alreadyin operation. Already 24 villages and 40,000people — increasing figures — have access toelectricity through the Malian-run RESCOs.Their low-cost electricity, based on solar homesystems or small low-voltage village micronetworkssupplied by diesel generators, haveled to new income-generating activities.These in turn have improved the qualityof health care and education, increased accessto clean water and reduced CO 2emissions bybetween 80 and 90 per cent when comparedwith traditional energy sources such as coal.And despite the low tariffs for customers, theRESCOs expect to turn a profit this year.The RESCOs would not have been possibleor successful without engaging thegovernments of both Mali and France. Soeffective was that dialogue that EDF wonan award from the European Commissionfor Best Renewable Energy Partnership withDeveloping Countries.As part of the global effort to meet theMillennium Development Goals, privateand public sectors need business modelsthat include the poor on the demand side asclients and customers and on the supply sideas employees, producers and business owners.Such models lay the foundation for sustainableand far-reaching development.While many businesses have creativelyworked around constraints to doing businesswith the poor, private enterprises cannotovercome all the obstacles by themselves.Governments, civil society, donors andthe poor themselves must participate and apolicy discussion between private enterprisesand government is one of the most powerfultools.Governments have great control overmarkets no matter how free they may be.Executive authorities decide regulations andlegislation, how tax revenues are collectedand spent, and how open or closed theirdomestic market will be to the internationalcommunity as well as to the private sector.

Parliamentary Brief‘Sometimes individual public-policy engagement by entrepreneurs andcompanies can have far-reaching implications, changing market structuresand in some cases opening entirely new markets’They can gather and provide market informationthrough household surveys or settingresearch priorities.It is therefore in the interest of privateenterprises to share priorities and informationwith the government of their owncountry as well as that of the country inwhich they want to operate, if they are amultinational. They can inform the government’sresearch priorities by highlighting newmarket opportunities; they can also lobby forimprovements in education and other basicservices, for legal empowerment of the poor,and for safeguarding human rights and environmentalquality.Policy makers, on the other hand, dependon accurate and up-to-date informationto inform their decisions. But they are notalways aware of the market dynamics andconstraints to doing business with the poor,especially when new market actors or newproducts are introduced.Private enterprises can provide this informationto governments transparently andwith accountability. They can calculate andshare the positive effects of infrastructuralor legislative changes on their customers,employees, suppliers and business partners.Once a dialogue is open and active, thepublic and private sectors can go on to createcollaborations and facilitate cross-sectoralpartnerships. As Harvard economist DaniRodrik wrote in his working paper, IndustrialPolicy for the Twenty-First Century, thiscommunication is ‘an interactive process ofstrategic co-operation between the private andpublic sectors which, on the one hand, servesto elicit information on business opportunitiesand constraints and, on the other hand,generates policy initiatives in response.’There are many different ways businessesand government can begin this ‘interactiveprocess of strategic co-operation’. Thesediscussions can happen unilaterally or collectivelyas part of a business association,policy initiative or stakeholder dialogue. Atthe same time some companies have affectedpolicy simply by being innovative and successful— the demonstration effect.For the individual company, engaginggovernment alone can be the best availableoption to address a limited and specificconcern such as encouraging the provisionof public goods or services that are needed tooperate in a particular locale.Sometimes individual public policyengagement by entrepreneurs and companiescan have far-reaching implications, changing10market structures and in some cases openingentirely new markets.For other firms, collaboration is the preferredand often most successful option. Thesecompanies work in co-operation with companiesthat do similar business or with otherstakeholder groups to pool their resources,skills and knowledge on specific and systemicconstraints that affect the success of inclusivebusiness models.‘Policy change is most likely to occurwhen there is a critical mass of institutionsand interests with the same concerns that arewilling to act together,’ wrote UN Departmentof Economic and Social Affairs and theUN Capital Development Fund in BuildingInclusive Financial Sectors for Development.An example of a successful collaborativedialogue is the World Business Council forSustainable Development and SNV NetherlandsDevelopment Alliance (WBCSD-SNVAlliance), which advocated Ecuador’s newgovernment of Rafael Correa to put economicinclusion on the social development agenda.Correa took office in January 2007, and theAlliance soon assembled a powerful advocacynetwork of government agencies, businesses,NGOs and development agencies.By August 2007, the president announcedthat in an effort to overcome Ecuador’s highlevel of poverty he would make economicinclusion a part of his social developmentagenda. Overall the government set asidecredit lines totalling $87m for the next fouryears, with the aim to create some 250,000direct and indirect jobs.As the Alliance states on their website, ‘Inorder to achieve long-lasting result, the buyinof the public and private sector, as well ascivil society, is indispensable.’Individual or collaborative engagement iseffective, but demonstration effects can alsoinfluence policy, particularly when regulatoryframeworks or public goods and servicesare absent or inadequate.Irrespective of whether obstacles havetaken the form of inadequate infrastructure,missing knowledge and skills, or restrictedaccess to financial products and services,thriving enterprises that have used creativityand innovation to overcome them haveproved the benefits of removing such constraints.Granted, the government must firsthear about a business’s experience in order tolearn from it. Either direct or mediated bya third party such as a development agency,communication about a winning inclusiveenterprise is vital.In the Philippines, Smart Communications,whose network covers over 99 per centof the population, offers low-cost, prepaidmobile phone airtime cards and eases financialtransactions through the option to sendremittances using short messaging service(SMS) technology. Smart was an innovator,and the success of such products as Padala,the world’s first international cash remittanceservice linked to mobile phones, gave thecompany a foundation upon which to pursuemore innovations and open discussions withthe Filipino government.Now Smart, other mobile phone operatorsand banks are in a policy dialogue withthe Filipino government to address inadequatelegislation on mobile banking, as wellas many of the more delicate issues, such aspayment systems, customer due diligence,consumer protection, deposit taking, electroniccommerce, anti–money launderingand combating the financing of terrorism.So far, local policy makers have expandedregulation and enforcement to combatmoney laundering and the financing of terrorism,enabled customer due diligence to beconducted by retail agents and allowed banksto regard prepaid card accounts as accountspayable and not deposits.In turn, these measures have created amore effective, lower-cost regulatory regime,increasing the ability of operators such asSmart to expand access to the poor.But businesses and governments cannotcreate more inclusive markets and combatpoverty alone — civil society, donors andnon-government organisations should play arole to ensure that these dialogues are beneficialto all.More than 50 countries were poorerin 2000 than they were in 1990. A privatesector actively engaged with governments increating new opportunities for the poor isnecessary if we hope to reverse that trend andmeet the MDGs by 2015.David Wheeler is Dean of the Faculty of Management at Dalhousie University and theco-chair of the Case Studies Working Group for Creating Value for All: Strategies for DoingBusiness with the Poor. Sahba Sobhani is the lead author of Creating Value for All and theProgramme Manager at UNDP’s Growing Inclusive Markets initiative.OCTOBER 2008

Parliamentary BriefHORSESFORCOURSESThe messagein Mexicois not one thatwould makesense in ruralMaliAllen Hammond, William Kramer, Robert Katz,Julia Tran & Courtland WalkerIn an informal suburb of Guadalajara,Mexico, a growing family is strugglingto expand its small house. Help arrivesfrom a major industrial company called Construmexin the form of construction designs,credit and as-needed delivery of materials,enabling rapid completion of the project atless overall cost.In rural Madhya Pradesh an Indianfarmer gains access to soil-testing services,to market price trends that help him decidewhat to grow and when to sell, and to higherprices for his crop than he can obtain in thelocal auction market. The new system is theinnovation of a large grain-buying corporation,which also benefits from cost saving andmore direct market access.Four billion people such as these form thebase of the economic pyramid (BOP) — thosewith incomes below $3,000 in local purchasingpower. The BOP makes up 72 per cent ofthe 5.75 billion people recorded by availablenational household surveys worldwide, andan overwhelming majority of the populationin the developing countries of Africa, Asia,Eastern Europe, Latin America and the Car-ibbean — home to nearly all the BOP.This large segment of humanity facessignificant unmet needs and lives in relativepoverty: in current US dollars, their incomesare less than $3.35 a day in Brazil, $2.11 inChina, $1.89 in Ghana, and $1.56 in India.Yet together they have substantial purchasingpower: the BOP constitutes a $5 trillionglobal consumer market.The wealthier mid-market populationsegment, the 1.4 billion people with per capitaincomes between $3,000 and $20,000, representsa $12.5 trillion market globally. Thismarket is largely urban, already relatively wellserved, and extremely competitive.BOP markets are by contrast often rural,especially in rapidly growing Asia. They areoften very poorly served, dominated by theinformal economy and as a result are relativelyinefficient and uncompetitive.Discussion of global business opportunityin the 21st century tends most often to beframed in terms of geographically defined‘emerging markets.’ In contrast, the BOPmarkets that we describe in this paper aredefined in terms of income.OCTOBER 2008 11

Parliamentary BriefThe more we knowabout the bottomof the pyramidthe more we can doto turn it from‘them’ into ‘us’In a world where high-margin profitopportunities in mature markets are increasinglycostly to identify and to pursue,ascending BOP markets have particularcharacteristics that may make them moreattractive now to business than ever before.Their size alone provides significant incentivefor attention. More significantly, theyare rich in opportunity to arbitrage what wecall the ‘BOP Penalty’ — higher prices, lowerquality, and poor access.These are the very signals of competitiveopportunity that businesses seek everyday for the markets they already serve. Ofcourse, risk — or the perception of risk — isa major inhibition to many companies. Inthis regard, the lack of accurate and currentdata is a further deterrent.The Next 4 Billion: Market Size and BusinessStrategy at the Base of the Pyramid, whichwe co-authored in 2007, draws on data fromnational household surveys in 110 countriesand an additional standardised set of surveysfrom 36 countries. Using these data onincomes, expenditures, and access to services,it characterises BOP markets regionally andnationally, in urban and rural areas, and bysector and income level.The report suggests significant opportunitiesfor more inclusive, market-basedapproaches that can better meet the needs ofthose in the BOP, increase their productivityand incomes, and empower their entry intothe formal economy.Household surveys, while limited from amarket research standpoint, provide directinformation on the BOP as consumers thatis not available from other sources of economicdata. The result is the first systematicempirical characterisation of BOP markets.The Next 4 Billion shows emphatically therich differences among those in the BOP andthat the entire market must be analysed andaddressed for private sector strategies to beeffective. Of course, there are segments of theBOP for whom market-based solutions arenot available or not sufficient.Without hard data, it is easy to thinkabout the BOP as a single, undifferentiatedmass — ‘them’, certainly not ‘us.’ Weknow a good bit about us, the rich citizensof advanced industrial countries. But neitherbusinesses nor governments have gone tomuch trouble to understand the BOP as consumers,as producers, or as rational economicactors.It is not surprising that the data revealgreat differences among and within BOPpopulations. We see economic choices inexpenditures and variations in expenditurepatterns across income segments, acrosssectors and between countries. The numbersreveal the choices of the BOP, many ofnecessity. Logically, food dominates BOPhousehold budgets.Food and other sector expenditures arenot static, however. As incomes rise the sharespent on food declines while the share forhousing remains relatively constant — andthe share for transportation and telecommunicationsgrows rapidly. These changes inspending preference have real implicationsfor business and for government policy ifBOP $3,000BOP $2,500BOP $2,000BOP $1,500BOP $1,000BOP $500Data: page 13, The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, WorldResources Institute and International Finance CorporationKnowing more about the pyramid: the BOP constitutes a five trillion dollar global consumermarket; knowing more about them makes sense from both a business and development pointof view. The above table gives a breakdown of total by income segment, giving a hint of thevariation to be found within the BOP.they are to encourage competitive and equitablebusiness engagement with low-incomecommunities.Four billion is a big number and it willtake the efforts of millions of entrepreneurs,hundreds of thousands of enterprises,large and small, and the collective efforts ofbilateral and multilateral aid agencies andnon-governmental organisations to makeheadway in alleviating poverty.The tools employed in the initial effortdescribed here are not purpose-built, andboth market research firms and private sectorcompanies can and should carry out newmarket research. National household surveyscan and should be amended to improve datacollection that will better inform our understandingof the ‘BOP penalty.’All this knowledge will in turn catalysefurther private sector activity which benefitsthe majority of the world’s population: thebase of its economic pyramid.Allen Hammond, William Kramer, Robert Katz, Julia Tran and CourtlandWalker are co-authors of The Next Four Billion: Market Size andBusiness Strategy at the Base of the Pyramid, a book published by theWorld Resources Institute (WRI) and the International FinanceCorporation (IFC). More information on ‘The Next Four Billion’ can befound at www.nextbillion.netFOOTNOTES 1. In the report current US dollars means 2005 dollars. Unless otherwise noted, however, market information is given in 2005 international dollars adjustedfor purchasing power parity; for convenience, BOP and mid-market income cutoffs are given in international dollars for 2002 (the base year to which household surveys used in thisanalysis have been normalized). 2. The high-income population segment is approximately 0.3 billion worldwide. But neither its size nor its very large aggregate income can be reliablymeasured by household surveys, because the sample of such households in national surveys, especially in developing countries, is too small.12OCTOBER 2008

Parliamentary BriefBig business has discovered that in helping the poor of this worldboth they and their customers can end up better offPhoto: ITC LimitedDoing well doing goodWith more than two billion peopleliving on less than $2 a day, 1.6billion lacking access to electricityand another one billion without access to safedrinking water, it is imperative to find a wayto meet these needs in a rapid, effective andsustainable manner. In the race to achieve theMillennium Development Goals (MDGs) by2015, one of the greatest untapped resourcesat our disposal is the enormous potential ofthe private sector.The working poor, while lacking manybasic goods, do not lack ideas, energy orthe desire to take care of their basic needsthemselves. Businesses that engage with thepoor not only on the supply side as producers,employers and business owners but alsoon the demand side as clients and customerscan reap vast benefits beyond mere incomegeneration. The first and groundbreakingreport from the United Nation’s DevelopmentProgramme’s Growing InclusiveMarkets Initiative (GIM), Creating Value forAll: Strategies for Doing Business with the Poor,presents examples of organisations that havesuccessfully and simultaneously pursuedboth revenue and social impact.In 2006, then UN Secretary-GeneralBruce Jenks &Jean-Michel SeverinoKofi Annan requested a commission headedby Paul Martin, the former prime ministerof Canada, and Ernesto Zedillo, Mexico’sformer president, to produce the report,Unleashing Entrepreneurship. That report wasa strong argument in favour of more privatesector involvement in alleviating poverty.However, it was only the beginning of theGIM Initiative, which has continued sincethen to work towards its aims: raising awareness,through demonstration, of the mutualbenefits of doing business with the poor;inspiring the private sector to action; andclearly presenting ways in which businesses,governments and civil society organizationscan help facilitate more inclusive markets.The GIM team achieves these aims byfocusing on developing world businessesand by promoting business models thatcreate value through incorporating the poor.These models are not so focussed on philanthropythat they become commerciallyunsustainable, valuable though such purelyphilanthropic ventures are to development.In addition, the initiative has a multi-stakeholderapproach, with an advisory group thatcomprises an extensive network of developmentagencies, global business organizationsand some of the world’s foremost researchinstitutions.Creating Value for All draws from 50specifically commissioned case studies fromresearchers and academics in predominantlydeveloping countries from across the globe,including studies based in Peru, Kenya andthe Philippines to name just three.Entrepreneurs have been able to successfullyimplement strategies from the report toovercome constraints that have hampered theability of both local and international smalland medium-sized companies to do businessin a developing region. The report alsoexplores strategies for multi-national companies.This bottom-up process, anchoredin local knowledge, is producing a growingnetwork of development practitioners,policy-makers, business people and civilsociety actors.Drawing from these studies, we haveidentified the five main constraints to creatinginclusive markets, both for the businessesOCTOBER 2008 13

Parliamentary Brief14Delivering the MDGsThese case studies of companiesfrom across the worldshow how business can driveprogress toward the MDGs.MDG 1: eradicatepoverty and hungerJuan Valdez Café Company, Colombia;CocoTech, PhilippinesJuan Valdex Cafe offers higher, more stableincomes to over 500,000 small-scale coffeegrowers. But even smaller-scale projects canhave great repercussions. In the Philippines,where coconut farmers are among the poorestpeople, CocoTech involves more than 6,000families in cocofibre net production.MDG 2: Universalprimary educationTsinghua Tongfang (THTF), ChinaTHTF markets computers to China’s ruralpopulation that include pre-installed distanceeducation software, both for primary andmiddle school education and for minoritylanguage education. The minority languageprogramme’s online video classes, recordedin quality middle schools with minority students,allow THTF’s rural customers to learnin their own language.MDG 3: Gender equality andthe empowerment of womenForus Bank, RussiaFinancial institutions can increase accessto finance — an important need for themany women micro-entrepreneurs in developingcountries. In Russia, over 80 per centof Forus Bank’s clients are women, most ofthem in retail businesses; in 2006 the bankhelped create 4,250 direct and 19,950 indirectjobs.MDG 4: Reducechild mortalityPesinet, Mali and SenegalIn Mali, where in 2000 more than 22 percent of infants died before their first birthday,Pésinet is making a difference in the communitieswhere it operates by providing an earlywarning method for monitoring the healthconditions of children under age five fromlow-income families. In Saint Louis, Senegal,where Pésinet started, the infant mortalityrate fell by more than 90 per cent between2002 and 2005 from 120 per 1,000 livebirths to eight per 1,000.MDG 5: Improve maternalhealthVidaGas, MozambiqueThe liquefied petroleum gas providedby VidaGas to clinics in Cabo Delgadoimproves the sterility of medical instrumentsused to deliver babies. Where most publicclinics were once short of essential drugs, andmost maternal deaths resulted from infectionand hemorrhage caused by complications inpregnancy, today’s reliable fuel supply, coldchain for medicines and better distributionof medicines all improve maternal health.MDG 6: Combat HIV/AIDS,malaria and other diseasesA to Z Textile Mills, TanzaniaA to Z provide affordable, long-lastinginsecticide-treated bed nets that preventmosquitoes from spreading malaria, reducingdeaths by 50 per cent. The success ofthis enterprise lies in its extensive privatepublicpartnerships. Sumitomo, a Japanesecompany, transfers technology and chemicalsto A to Z through a loan from AcumenFund. A to Z then buys resin for the netsfrom ExxonMobil, which donates funds toUNICEF to buy the treated nets for the mostvulnerable children.MDG 7: Create the basicconditions of decent housingA South African bank supported by theAgence Française de Développement (AFD)is increasing the number of its social housingprojects, targeting a growing number of thepoorest households through the payment ofan intermediary aid subsidy. It exemplifiesthe type of business model that includes thepoor and offers gain for all.MDG 8: Develop a globalpartnership for developmentSmart, the PhilippinesSmart is reducing the ‘digital divide’ andhelping develop a partnership for developmentby providing low-cost, prepaid mobilephone airtime cards. It also eases financialtransactions by providing the option tosend remittances using technology. Witha network covering over 99 per cent of thepopulation, Smart’s focus on the low-incomemarket enables it to serve 24.2 millionpeople. In 2003, Smart was the year’s mostprofitable of the 5,000 largest corporations inthe Philippines.and for the poor themselves. These are:limited market information, ineffective regulatoryenvironments, inadequate physicalinfrastructure, missing knowledge and skills,and restricted access to financial productsand services.To overcome these constraints takes creativityfrom and co-operation between manyactors. In the report we note five of the mostconsistent and effective strategies: to adaptproducts and processes, to invest in trainingor infrastructure to remove constraints, toleverage the strengths of the poor to increaselabour and management pools and to expandlocal knowledge, to engage in policy dialogueswith governments, and to work withsimilarly-minded businesses, non-profitorganizations or public service providers.By using a more inclusive businessmodel businesses drive innovation, developnew markets, enlarge the labour pool andstrengthen supply chains, and at the sametime are helping the poor to meet their basicneeds, increasing their incomes and empoweringthem.Moreover, business with the poor can beprofitable, sometimes even more profitablethan more traditional businesses. The NarayanaHrudayalaya (NH) hospital group, acardiac health care provider to the poor inIndia, uses a business model that attractsfull-price paying patients who, along withthe NH foundation, subsidize surgeries forthe poor. No one is denied health care even ifthey are unable to pay.Yet profits are 20 per cent — higher thanthe leading comparable traditional hospital.Such financial self-sustainability allowsenterprises like NH to increase their reachand thus their impact, particularly withregard to achieving MDGs.A closer look at several of the case studiesdemonstrates the direct impact inclusivebusiness models have on the MDGs (seeDelivering the MDGs, left, to discover howcompanies from across the globe are usingbusiness acumen with a social conscience tocreate drivers of MDGs in their local communities).Creating Value for All, by presentingthese case studies, is intended to encouragethe development of more inclusive businessmodels like these. It also presents practicaltools to enable businesses to see this through.One tool is the strategy matrix, which isdesigned to help identify market constraintsand also to look at various strategies toaddress them. Another effective tool consistsof so-called ‘heat maps’, which identifybusiness opportunities by visually presentinggeographical overviews of access to water,credit, electricity or telephone service for specificregions; see Tools for the job (page right)for a more detailed example.Even when these tools are employed andOCTOBER 2008

the private sector is ready to engage with thepoor, private businesses alone cannot meetthe needs of the poor. Examples such as A toZ Textiles in Tanzania show without doubtthat businesses, non-governmental organizations,donors and local governments must allbe involved.Local governments can remove manyof the constraints in the domestic marketenvironment. For example, they can reducethe amount of red tape surrounding theupgrading of basic infrastructure such astransportation, electricity, water and datatransmission. In addition governments canimprove the living conditions of their poorestpopulations and encourage local businessdevelopment by ensuring a functional andinclusive financial market, and by providingaccess to the legal system for the poor. In thisway they can unleash the power of business.But local governments cannot stand alonein fostering inclusive business models. Donorcountries can also raise awareness amongbusiness and development practitioners aboutthe opportunities and benefits of doing businesswith the poor.Moreover, donor countries are in a uniqueposition to facilitate dialogues between businessesand governments or other partners.And they can encourage development fromthe ground up by providing ‘patient capital’and other appropriate forms of financing.One such form is the challenge fund forinnovative inclusive business models that canbe used to donate to international developmentprogrammes.Challenge funds associated with the UKDepartment for International Developmentinclude the Business Linkage ChallengeFund and the Financial Deepening ChallengeFund, which offer grants for preparatoryphases and for investments including investmentsto remove constraints on poor people’smarkets.A great example of the success of suchfunding is Vodafone’s mobile transactionsservice in Kenya, a country that has fewerthan two million bank accounts serving 32million people. In partnership with Vodafone,Safaricom Kenya developed M-PESA,an electronic money transfer product to makefinancial transactions faster, cheaper andmore secure through the use of short messageservice (SMS). Now more than 6,000 peoplea day are signing up, helping Kenya and theUK meet MDG 8: developing a global partnershipfor development.UN Secretary-General Ban Ki-moonrecently issued a call to action on the MillenniumDevelopment Goals, urging anTools for the jobinternational effort to accelerate progress andto make 2008 a turning point in the fightagainst poverty. On September 25, the Secretary-Generalwill reaffirm this call at theUN General Assembly. ‘Doing well’ and‘doing good’ can be mutually reinforcingideals. Inclusive business models create moreindependence and interdependence by recognizingthe poor not only as consumers butalso as drivers of growth. Such models lead togreater wealth as well as progress in humandevelopment. In short, when markets includepoor people we all win.Bruce Jenks is Assistant Secretary General and Director, Partnership Bureau, at the UnitedNations Development Programme. Jean-Michel Severino is Managing Director of the AgenceFrançaise de Développement and a member of the blog www.ideas4development.org . CreatingValue for All and more information on GIM can be found at www.growinginclusivemarkets.orgParliamentary BriefCalling the immobileIn South Africa large portions of the country’spoor population lack access to mobiletelephony, despite a quite advanced nationalmobile phone sector. Heat maps like the oneabove show that in urban areas, 43 per cent ofhouseholds living on less than $2 a day haveaccess to a mobile phone but in rural areasonly 31 per cent do. Moreover access variesdepending on the region.Cell phone penetration is strongest in thewest and weakest in the central part of thecountry. Free State has the greatest disparities:at least 40 per cent of people earning morethan $2 have mobile phone access but fewerthan 20 per cent of those earning less than $2a day do. This visual overview can act as a firstlook at possible markets.OCTOBER 2008 15

Parliamentary BriefDevelopment could bemuch more effectiveif we started to thinkoutside of the boxCurrent approaches to effective aidassume that we are in control andthat change is predictable. Neitheris true, but such assumptions are blockingdonors from responding effectively to alargely unpredictable and dynamic policyenvironment. New ways of thinking aboutaid are now needed to make it more effective.International aid agencies have got stuckon a treadmill of a certain way of thinkingwhere the emphasis is on technical mechanismsof resources and architecture. A solefocus on these may render invisible possibleand useful approaches that, if recognised,could be nurtured and strengthened.Addressing power as central to aidrelationships allows for serious critical examinationof the organisational cultures andpractices that shape expectations of whatinternational aid can and should do. Relationalpower produces perverse consequencesin which the orthodox perspective confirmspreviously-held convictions.Evidence is sought to check that one isstill on track, not to ask whether there areother tracks. Alternative ways of understandingand tackling problems are ignored ordismissed as irrelevant. The choice of indicatorsis too often assumed to be just a technicalmatter. Power influences whose ideas countand what is deemed a ‘result’.Once this is recognised, opportunitiescan be opened up for dialogue and learning;aid becomes more effective once donorslook for and appreciate diverse perspectives.Governments and multilateral organisationscan improve the success of their aid relationshipsthrough adaptive learning, recognisingdiverse realities experienced by others and theexistence of political relationships in whichinternational aid is embedded.Aid can be more effective if factors suchas trust and relationships that recognise andaddress issues of power are taken into accountRosalind Eyben— in addition to the technical. For example,according to a UN official cited in a recentpaper, many of her agency’s most effectivecountry level interventions are those thathave not been reported because these wereconcerned with investing in relationshipsrather than achieving the kind of outcomesthat get included in logical frameworks.Perhaps aid is only as effective as it isbecause of what is today not going reported.How many opportunities are we missing formaking aid work better?Donors need to think about how power isoperating in everyday practice. For example,even in an international aid conference, theway in which the conference is designed, howdiversity is recognised and responded to andthe processes that can generate exclusion inthe room unless specifically addressed. Suchcritical reflection costs nothing and can starttomorrow.The following four steps do not requireany additional resources or re-arrangementsof development’s institutional architecture.These are simple low cost steps to more effectiveaid.1. Donors need to learn more about theparticular context in which they are working.What works in one place, may not work inanother or even in the same place at a differentmoment in history or with a differentgroup of donors. Such learning is becominga practical challenge for many donor staff,whose time is spent in donor co-ordinationmeetings or in reporting to their ownmanagement. Staff and their governmentcounterparts need to re-organise their time toget out of the capital city and listen to whatpeople tell them.2. Diverse perspectives need to be builtinto methodologies for defining and assessingthe success of aid. While there are someobvious arguments for better co-ordinationand more efficient use of resources, a balancehas to be struck between this and encouragingdiverse points of view for solving complexproblems.Both consensus and contestation aredrivers of pro-poor change. If the formerdominates, there may be a tendency to lookonly for a single diagnosis and solution, thusshutting out the possibilities of creative dialogueand the collaborative challenging ofimplicit assumptions about how the worldworks that hampers innovation and constrainsimagination.3. In addition to measuring results,donors need to assess the quality of relationsat project/programme, country and internationallevels against indicators agreed withpartners that could be regularly reviewedand widely commented upon. Because anemphasis on performance measurement canlead to mutual risk-adverse behaviour, compensatoryprocess indicators might include‘preparedness to take risks’, ‘embracing andlearning from failure’ and ‘willingness tochange one’s mind’.Such assessments could be supportedby country specific studies to bring to lightthe way relationships are managed and thelessons that can be learnt. Such studies willmake visible processes that may be reinforcingexisting power relations and thushindering the effectiveness of aid resourcesand instruments.4. Aid agencies need to develop thecompetences of staff in organisational andpersonal self-awareness, to develop soundunderstanding of the power, position andbiases they hold in relation to others. Powerhas an adverse effect when we impose ourown point of view. Alternative ways of understandingand tackling problems are ignoredor dismissed as irrelevant; those putting themforward feel disempowered and will drop outof the conversation. Organisational and individualcritical self-reflection delivers benefitsfor donors as well as the others they seek tohelp. Like them, donors also will learn andthink differently, to imagine new possibilitiesand to debate alternative choices.Rosalind Eyben has been a Fellow at the UKInstitute of Development Studies since 2002,after a long and varied career as an international aid practitioner and policy analyst,including serving as the first Chief Social Development Adviser for the UK’s Department forInternational Development. She has authored a number of publications on the internationalaid system including Relationships for Aid published by Earthscan in 2006.16OCTOBER 2008

Parliamentary BriefEight years ago we could never have imagined whatthe world would be like today. So how can we knowwhat it will be like in 2015?Half-way to what?Andy SumnerThinking back one or two years, whowould have predicted the currentturmoil in global markets for finance,food and fuel? Thinking back further, whowould have imagined the spread of theInternet, the collapse of the Soviet block orthe post-9/11 world?So what are our chances of predictingthe world in 2015? Not great but we cansay something. The current pace of globalchange is accelerating and creating bothchallenges and opportunities. There are somemajor global and regional transformativeprocesses and emerging issues the characterof which is marked above all by increasedinter-dependence between the North andSouth and East and West.Commentators have noted the tendencyof these to destabilize existing livelihoods,unravel social fabrics, create conflict andexclusion as well as disrupt internationalmarkets. These processes are also reinforcingthe diversity in what was once the‘Third World’: at one end of the spectrumthere is a group of accelerated developersin the BRICs (Brazil, Russia, India andChina), the BRICETS (Eastern Europeand Turkey) and the Goldmans Sachs N11(the next countries expected to experiencefast economic growth). At the other endof the spectrum there are the 50-60 countriestermed LICUS (Low Income CountryUnder Stress) that might be classified as‘fragile states’.Distinctions between developed anddeveloping worlds are also changing— China is forecast to have overtaken theUnited States as the world’s largest economyby 2015, with India not far behind. Parts ofGlasgow have lower life expectancies thanSub-Saharan Africa. Four of the world’srichest billionaires are Indian. Many policyissues are common to countries at differentlevels of economic or social development.This increased global interconnectednessis expressing itself in a growing varietyof ways such as volatility in global markets(especially food, fuel and credit), climatechange, natural resources, technology(notably ICTs and industrial bio-fuels) andterrorism and security. The net outcomeof these is rapid and widespread change tolifestyles and livelihoods and potentially anincrease in conflict over resources and largescalenational and international migratorymovements.The MDGs have played a major role infocusing policy since their original incarnationin the 1990s and some bilateralagencies, notably the UK’s Department forInternational Development, have gone asfar as to judge the value of all their activitiesOCTOBER 2008 17

Parliamentary Brief18The rising power of China: already a majordonor and investor, it may well soon overtakethe USA as the world’s foremost economyWhen the Millenium Development Goalswere agreed on the 18th September 2000,who would have predicted that a year laterthe priorities of the world’s leading powerswould be so altered?on the contribution to achieving theMDGs. What happens when we nolonger have the MDGs? What willguide policy after 2015?Development policy is alreadyreconfiguring. We have major newdonors — most notably China andthe new non-state actors such as theGates Foundation; new contextsand institutions — a new aid architecture,decentralisation, terrorismlegislation; newly emerging policynarratives — the resurgence of economicgrowth as key to developmentand the more nuanced agendas of citizenshipparticipation. Such changesmay determine whether or not policyprocesses emerge in favour of thepoor and marginalised.So, how can we promote pro-poorpolicy after the MDGs and amidall these complex changes, some ofwhich mediate in favour of the poorand many of which may not? Hereare four options:1. We could carry forward thesame MDGs without a timeline. Thiswould overcome the distorting effectsof targets such as children in schoolbut with few books, teachers andsometimes not enough buildings.Yet the timeline has been a rallyingcall.2. We could take the same MDGtargets but with a new timeline.Jeffery Sachs has argued for 2025and others for 2020. However, willanother five to ten years be enoughto make progress?3. We could have new or differentkinds of targets with or without atimeline. For example, the aid effectivenessagenda is based on processtargets rather than outcome targets:it calls for nationally ‘owned’ developmentstrategies building on thepoverty reduction strategy process.This might better suit the currentpolicy architecture and would entailmuch greater opening of developmentpolicy to non-state actors.These non-state actors could participatein the formation of a nationalstrategy leading to genuinelynational development goals ratherthan a state dominated approach that subvertsaccountability.4. We might have new or different kindsof targets that go beyond the ‘traditional’ lensof material consumption/deprivation. Wellbeingis emerging as a complement— and even perhaps an alternative— to the more traditional waysof thinking about and measuringpoverty and deprivation. It extendsattention from¡what people can doand be to how people feel about whatthey can do and be. It goes beyondthe material to consider relationshipsand values, beliefs and behaviour.Breaking the inter-generationaltransmission of poverty requires notonly disrupting the transmission ofmaterial deprivation via public policysuch as nutrition or education programmesand projects but also thecreation of progressive norms andvalues in terms of relationships andbehavioural norms via public policycampaigns that seek to influencehow people think and behave — forexample, campaigns on feeding andschooling girls for example.This would suggest public policywould move beyond material provision— public expenditure, growth,etc. — into areas in which policyintervention is considered at besthighly controversial: values, relationships,norms and behaviour. It isthis line of thinking that underpinsthe recent popularity in behaviouraleconomics books such as Thaler andSunstein’s Nudge.In short, international developmentpolicy post-2015 is certain to bemore global as we all become moreconnected by global markets, climatechange, migration and informationtechnology. It is also likely to be morecomplex and less predictable becauseof all these global changes — and thespeed at which they are happening.Society-owned strategies and goalswill be needed to guide developmentpolicy as will continued reflectionon the impact of global changes onthe transmission of intergenerationalpoverty. And policy will need to takeinto account non-material deprivation,taking into account values, norms andbehaviour.Andy Sumner is a Fellow inthe Vulnerability and PovertyReduction Team at the Institute ofDevelopment Studies, Sussex, UK. After2015: International Development Policyat a Crossroads will be published byPalgrave MacMillan in early 2009.OCTOBER 2008

Parliamentary BriefJane NelsonIn 1970, 70 per cent of resource-flows fromthe United States to developing countriesoriginated from the US government inthe form of Official Development Assistance(ODA). Today, the United States Agency forInternational Development (USAID) estimatesthat private capital from Americancitizens, residents and companies accountsfor 85 per cent of these resource-flows.This private capital is being channelled todeveloping countries through a combinationof foreign direct and portfolio investment,commercial bank loans, remittances, nongovernmentalorganisations, religious groups,universities, foundations and corporate philanthropy.Together with new approachesto ODA it is changing the face of America’sengagement in international development.The US business community, rangingfrom multinational corporations and corporatefoundations to trade and industryassociations, has played an increasinglyimportant role in this transformation,engaging in both the public policy debate onforeign assistance and mobilising commercialand philanthropic resources to developingcountries.This emerging private sector role has beendriven by a combination of factors. Thesefactors include direct business interests asUS companies expand and compete in theglobal economy, changing public expectationsof business and increased activism bothat home and abroad.Also contributing to the new role of theprivate sector is the growing recognitionwithin the development community of theimportance of private sector developmentand entrepreneurship as engines of growthin developing countries and as crucial toachieving the Millennium DevelopmentGoals (MDGs), and also a variety of incentives,directives and partnerships led by theUS government.All of these factors will continue to beimportant in ensuring continued US businessengagement in development, especiallyin the face of growing economic uncertaintyglobally and increasing protectionist pressuresdomestically.Over the past decade, the following typesof activity have been particularly importantin engaging the US business community ininternational development initiatives, andare likely to be of ongoing relevance in thefuture:• Voluntary business-led coalitions;• Government agencies focused on privatesector development;• Government-led corporate accountabilitymechanisms;Whoeverwins theWhiteHouse,thechallengeis to turnUncleSaminto aworldchamp• Public-Private Partnerships and Funds.Voluntary business-led coalitions haveserved to catalyse hundreds of major corporationsto support development goals. TheUS Chamber of Commerce, for example,has established a Business Civic LeadershipCenter, which has an active programmefocused on researching and promoting therole of business in emerging economies andin disaster response and rebuilding, drawingon and learning from American Chambersaround the world.The Initiative for Global Developmentwas launched in Seattle in 2003 and engagesbusiness and civic leaders around the UnitedStates to support advocacy and public policydialogue aimed at achieving more effectiveinternational development policies. The BusinessCouncil for Global Development, whichis supported by leading multinational companies,also focuses on public policy dialoguein Washington DC and on building capacityfor corporate social responsibility and tradenegotiation skills in developing countries.Business for Social Responsibility hasevolved from a US corporate responsibilitycoalition to a global network, with an officein China focused on promoting responsiblebusiness practices and labour standards.Trade associations in industries such as thepharmaceutical, chemical, energy and financialsectors have also established dedicatedprogrammes to promote and broker newmarket-led approaches to international development.The Committee Encouraging CorporatePhilanthropy is another relatively newCEO-led coalition that provides tools andresearch to increase the quantity, quality andstrategic impact of corporate giving, bothfinancial and product donations as well asemployee volunteering, with a programmeon international giving.The Brookings Institution has launchedan Initiative on International Volunteeringand Service, with over 150 participatinggroups, including corporations, all workingto encourage more global volunteering byAmericans, including the implementationof new public policies and programmes tofacilitate this.And the Clinton Global Initiative offers afinal private-led example which in less thanfive years has helped to catalyse an estimatedUS$10 billion, mainly for internationaldevelopment projects, through over 500commitments from corporations, foundations,development NGOs and individualphilanthropists.The US government has also played arole in promoting the global corporate socialOCTOBER 2008 19

Parliamentary Briefresponsibility (CSR) of American companies,especially in developing countries. There iscurrently no broad federal mandate for CSR,but a 2005 study by the US GovernmentAccountability Office (GAO) identified 12US agencies and over 50 federal programmes,policies and activities focused on mandating,facilitating, partnering and endorsingresponsible business practices abroad.Of particular note in terms of their scaleand impact are government-led initiativesto increase private sector investment andentrepreneurship in developing countries, toimprove corporate accountability and transparencyin sensitive industry sectors, and tojointly mobilise public and private funds forkey development objectives such as globalhealth and education.The Overseas Private Investment Corporation(OPIC), for example, has adopted anincreasingly strategic approach to workingwith US companies to fulfil its mandate tosupport market-led solutions to economicand social development in developing andtransition economies.Among other initiatives, it has launched anEnterprise Development Network in partnershipwith the private sector that is dedicatedto financing and insuring the expansion ofmicro-sized, small and medium-sized enterprises.Both OPIC and the Export-Import Bankof the United States also now require thecompanies they work with to meet certainsocial, environmental and transparencystandards.Likewise, the Millennium ChallengeCorporation, which has developed a rigorousprocess for encouraging good governanceand mutual accountability compacts withthe governments that it funds, is workingmore actively with the private sector to ensuredevelopment outcomes that are not onlymore accountable, but also pro-growth andpro-poor. The government-funded AfricanDevelopment Foundation and Inter-AmericanDevelopment Foundation are bothdoing likewise.The US government has also spearheadedseveral international corporate accountabilityinitiatives such as the VoluntaryPrinciples on Human Rights and Securityin the extractive sector, in co-operation withthe UK government, and a coalition with thetextile sector that has now evolved into theindependent Fair Labor Association.Finally, the US government has launchedseveral public-private resource mobilisationinitiatives. Examples include the President’sEmergency Plan for AIDS Relief (PEPFAR),which has leveraged millions of dollars andother resources in a public-private partnershipeffort aimed at bringing HIV/AIDSinterventions to scale. Another notable initiativehas been USAID’s Global DevelopmentAlliance (GDA).Established in 2001, GDA aims to significantlyexpand and deepen the impactof US development assistance by leveraginggovernment funds with the resources, skillsand innovation of private sector partners.Since 2001, it has worked with a wide varietyof corporations, corporate foundations andbusiness networks as well as NGOs andprivate foundations to form more than 680alliances and mobilise more than US$9bnin combined public and private resources.Projects have ranged from efforts tostrengthen agribusiness value chains to educationand health to harnessing remittancesand Diaspora funding.The above examples illustrate some of theinitiatives underway in the United States ledby both government and the private sectoritself to engage US business in internationaldevelopment. In many cases these initiativeshave been spurred and/or encouraged by civilsociety engagement and activism.While there has been progress, muchmore could be achieved. In particular, thereis a need for the US government to markedlyimprove the co-ordination, integration, efficiencyand effectiveness of its official aid andtrade assistance programmes and to morestrategically engage the business sector as wellas other non-governmental actors rangingfrom development NGOs, foundations anduniversities to individual philanthropists andvolunteers.In December 2007, the bipartisan,public-private HELP Commission releasedits report on US Foreign Assistance Reform.Entitled Beyond Assistance and based onnearly 22 months of extensive consultationsand research, the report stated, ‘Our foreignassistance system is broken. We ignore thisreality at our peril.’Among its seven recommendations werecalls to, ‘do more to help developing countriesbuild vibrant private sectors’, and to‘create a new business model and engage nongovernmentalpartners.’The commission stated, ‘We must activelyengage new non-governmental actors andleverage the resources from the explosionof growth in philanthropy and privateinvestment. We believe that new initiatives,increased funding, and most importantly,lasting results will occur if we more proactivelycollaborate with non-governmentalactors.’Regardless of the results of the US presidentialelection, such an imperative must bemet if the United States is to fulfil it immensepotential to be a champion of internationaldevelopment and the MDGs.Jane Nelson is a senior fellow and directorof the Corporate Responsibility Initiativeat Harvard’s Kennedy School,a non-resident senior fellow at the BrookingsInstitution, and a director at theInternational Business Leaders Forum.McCain orObama,the imperative isto ‘do moreto helpdevelopingcountries buildvibrantprivate sectors’20OCTOBER 2008

Parliamentary BriefLearning to live againIn its campaignto eradicatechild labourTelefónica O2has taken58,000 youngchildrenout of forcedwork andsent them backto school.Vikki Leachreports...According to the Organisation for InternationalLaw and Child Labour, there are morethan 5 million 5 to 14 year olds, workingacross Latin America. In many of these countries, achild is more likely to be forced into work in orderto contribute to their family income than completea basic education.At Telefónica O2, we believe that business has aresponsibility to make a positive difference. We areconvinced that our activities benefit the countriesin which we operate and result in greater economic,technological and social development. Nevertheless,we believe that our activity should be combinedwith other social and cultural projects wherever weoperate.We embrace this role through our commitmentto the United Nations Millennium DevelopmentGoals aiming to improve the quality of life foryoung people, across the globe, by 2015.Through Telefónica’s Proniño scholarshipprogramme, Telefónica are taking action in 13countries to help eradicate child labour, and getchildren reintegrated into schools. This not onlygives them a chance to get a basic education but toenjoy their childhood and learn through play. Todate, over 58,000 children have benefited fromProniño — giving them a chance for a good educationand a hope for a better future.Proniño works with nearly 20,000 volunteersacross South America supporting the work withchildren and their surrounding communities. Thevolunteers come from many different countries andthe diversity they bring gives the children an insightinto the wider world.Heidi Danaher was one volunteer working inEcuador. She was shocked by what she saw at onerefuse tip. ‘It was a horrible place to work and dangeroustoo — even hospital waste such as syringesis dumped along with all the other rubbish. Peoplewere scavenging amid rotting waste for items to sellor sometimes even to eat. This is daily life for thesepeople.‘The aim is to get children into school instead ofworking in dreadful conditions for a pittance. Asan incentive to go to school, children are given arucksack, boots, pens and pencils, a pair of shoesand some pumps to wear. Many children were inbare feet so they would certainly need the shoes togo to school.‘We went to one farming and fishing villagewhere all the families helped with the work. Onefather had five children, his wife had left and heOCTOBER 2008 21

Parliamentary BriefA childhood lost working on the rubbish dumps of South America.A childhood restored and the hope for a better future...had to support his sick mother too. The sense ofgratitude and relief at the provision of a school placeand school kit for his eldest child was amazing. Testamentto the importance of this programme. Heunderstood that schooling could make a differenceto his son’s life.‘The village school had one teacher with 27 childrenin the class, all different agegroups. Facilities were basic yetthey had all the necessities —desks, chairs, pens and a whiteboard — and the keenness tolearn. School starts at 8.30amand finishes at 12, so childrencan still help their parents in theafternoon if they have to, or goto one of the Proniño centresif they need help with schoolwork.’Juan Camilo Carreras’s storyis just one of many. ‘I workedat the rubbish dump in PortoViejo in Ecuador, to help my mother. We collectedrubbish to earn money. The air was bad and it madeeveryone sick. My childhood was hard. One day atthe dump we met Diana, from Proniño. She told ushow important it was for me to go to school. Afterwe all talked, my mother agreed.‘Proniño gave me a scholarship which let me stopwork and start school. I was scared at first. I wasn’tused to playing with other children. Life got somuch better. Proniño gave me back my childhood.I went to special classes with Proniño. I learned howto play. My mother went to classes too. I wanted tocontinue studying, to do well and make somethingof myself. I have studied hard and now I’m at university.I’m saving for the future. Proniño has givenme a chance for a better life, a good education anda future.’Juan is just one of 58,000 children whomProniño have helped so far. Jonathan Arana isanother. He was born ten years ago in Managua,Nicaragua. When he was eight he had to give up his22The pictures on this pageare taken from a film aboutProniño that can be found atwww.o2.com/media/pronino‘Facilitieswere basicyet they hadall thenecessities— and thekeenness tolearn’passion, football, because he had to work. He hadto get up at four o’clock in the morning to deliverthe tortillas made by his mother, Carmen AguirrePonce. For Carmen, single and with another twochildren, that decision was not easy because she hadalways been clear about the principles and valuesof her family, but her financialsituation became so difficult thatin the end she chose to makeJonathan her assistant. Theyboth thought it would be temporary,but Jonathan worked fortwo years.During that time, he didn’tgive up school, but his educationsuffered. He was responsible forearning a living for his familywhile still a child and he hadno free time, so he was alwaystired. The arrival of Proniño atJosé de la Cruz Mena’s school inManagua changed the situation.‘I don’t deliver tortillas now and I’d like to become alawyer to help those in need. Now, when I go home,as well as doing my homework, I can play footballwith my brothers and friends’, says Jonathan.But this is not all we do. Another major programmeis Educared which is designed to introduceboth children and their local communities to internettechnology. It provides a vast array of onlineeducation resources that helps support the work ofProniño. Each year, Telefónica invests over €50meuros in social action programmes, and the businessis currently engaged in a range of activities topromote diversity, digital inclusion, environmentaland child protection.Vikki Leach is Head of Corporate Responsibility& Policy at Telefónica Europe plc.To find out more about these activities, please visit our recently publishedCorporate Responsibility Report or, access the Telefónica group website for furtherinformation about Proniño http://www.fundacion.telefonica.com/OCTOBER 2008

When thepoor don’tpay butthere isstilla profitJacqueline Novogratzments. It aims to be repaid its capital plusmodest interest; any returns are reinvestedinto other enterprises working to solve problemsin these areas.Acumen Fund sits at the center of the‘blended value’ discussion. It is a non-profitfund seeking charitable donations that itinvests in private enterprises from which itexpects a reasonable but often below-marketfinancial return on the capital invested. Itpartners with corporations, foundations,individuals and government. In additionto capital, Acumen Fund provides investeeswith management assistance, strategic planningand on-the-ground support by AcumenFund Fellows.Acumen Fund also invests in sharing bestpractices and lessons around specific businessmodels, metrics, etc. It measures success byits social impact as well as its ability to berepaid on obligations outstanding. The financialreturns measured by the Acumen Fundes are meant to be indicators of the potentialfor these enterprises to attract private capital.This capital is ultimately more plentiful thanaid or philanthropic funding and perhapsbetter suited to addressing the needs of themajority of the global population.Mumbai is a city of 18 million, a crowdedParliamentary BriefThe past 20 years have seen an unprecedentedrise in wealth, along with newtechnologies and the growth of globalmarkets. But globalisation is also increasingthe divide between rich and poor, making itincreasingly urgent that we extend the benefitsof the global economy to the three billionpeople — half the world’s population — wholive on less than three dollars a day.This inequality is a concern not only forethical reasons, but because such an imbalanceimplies economic and security risksassociated with such an imbalance. Capitalismmust continue to fuel innovation andproductivity while ensuring opportunityfor those at the bottom of the economicpyramid.Aid and charity have been deployed toaddress global crises but have often failed todeliver lasting change. And while the developmentcommunity has begun to focus onenhancing livelihoods by providing greateraccess to jobs and credit, the poor also needaccess to affordable goods and services likesafe water, healthcare, housing and energy.Those in the lower two-thirds of the incomepyramid have traditionally been ‘invisible’— ignored by the private marketplace andaddressed by top-down government programmesthat lead to further dependence.Creating real access for the poor requires arange of investment and charitable approaches.But because flexible philanthropic capital canbe the most risk-seeking, a new class of socialinvestors is experimenting with innovativeways to bring goods and services to the poor.The use of ‘patient capital’ — capital targetedat investments with clear social impact andlowered expectations for the timing and sizeof financial returns — is leading to the developmentof enterprises that can address theneeds of low-income consumers in challengingmarkets.Acumen Fund, a non-profit venturecapital fund established in 2001, reflects thegrowing interest in using markets to solvetough problems of poverty. Acumen Fundraises charitable funds which it then investsas equity and loans in enterprises that deliveraffordable healthcare, water, housing andenergy to the poor. Acumen Fund is active inPakistan, India, Kenya, Tanzania and SouthAfrica, managing more than $30m in investandunruly maze of streets with few ambulancesfitted to serve emergency needs.Emergency medical services are in the earlystages of development in India and ambulanceservice is extremely fragmented anddisorganised. Shaffi Mather, Ravi Krishna,Manish Sacheti and Naresh Jain, four wellheeledprofessionals, decided there had to bea better way to provide services than to relysolely on charities and government. Theyfound such institutions to offer well-intentionedbut ineffective services in an industrythat was growing increasingly corrupt.So in 2002, Shaffi and his partnersfounded ‘1298’ to become India’s firstworld-class ambulance company with anethos of ‘service for all’ and an emphasis onprofessionalism. The company focusses onprofitability but does not maximize profits asits paramount objective. Instead, it measuressuccess based on numbers served, quality ofservices and ability to turn a profit.The business applies a sliding-scale pricingmodel, based on the hospital to which one istaken. Those who go to public hospitals forthe poor do not pay. Those who are driven tomore expensive hospitals pay accordingly. Inother words, there is a cross-subsidy pricingmodel inherent in the business.The company covers its costs through acombination of premium payments made bywealthier clients and by reduced capital costsfor ambulances. (As city residents learnedof the for-profit model’s effectiveness, theybegan to donate new vehicles to 1298 ratherthan giving them to a standard charity.) Furthermorethe company is operated efficientlywith a constant push to lower costs whilemaintaining quality service.1298 originally intended to staff eachambulance with a driver and a doctor only.However, doctors are accorded high status inIndia and are expected to behave in a certainway. When customers saw doctors liftingpatients, they assumed them to be of lowquality. Until attitudes change, 1298 employsassistants to lift patients with the drivers andto support the doctors’ needs.There is no better listening device thanthe market. By holding itself accountableto reliability and profitability, 1298 mustunderstand its customers — even those whocan’t afford to pay. Customers provide feedbackand 1298 listens. Others are also takingnote: recently, the government of Maharastraadopted 1298 as the main call-in number forambulances.Not only have thousands of lives beensaved through its operations, but 1298has also created a blueprint for buildingan efficient public-oriented company thatcan effectively serve the needs of all peopleregardless of ability to pay.Jacqueline Novogratz is theCEO of Acumen Fund.OCTOBER 2008 23

Parliamentary Brief24For poorpeoplea mobilecan alsomeana bankSuzi Sosa& Marcela X EscobariPhoto: VodaphoneAs we strive to reach the MillenniumDevelopment Goals, our modestsuccess in the ambitious aim ofreducing global poverty has been overshadowedby an unsettling trend toward widerincome inequality. Without a doubt animportant factor in this trend is the increasingdisparity in access to markets.Why is access to markets important? Incountries where the competitive provision ofgoods and services is weak, not only is theirdelivery unpredictable, expensive, and oflower quality, but opportunities for wealthcreation through the provision of goods andservices by individuals and businesses arelimited as well.Moreover, future innovation in productsand services for a specific market is limitedby access to technology and infrastructure.Over time people excluded from thesemarkets are left further and further behindas innovations built on previous technologiespass them by. For example, the invention ofthe TV remote control becomes irrelevantto those without access to electricity, andonline banking is of no use to someonewithout internet access.One area where this is starkly apparent isin the market for financial services. Accessto financial services gives people the abilityto save for lean times, smooth consumption,provide better healthcare andeducation for their children,and allows entrepreneursto start and grow new businesses.Yet more than two billionpeople around the world areentirely without these servicesand lack even a basicsavings account. Even morepeople are under-servedand are faced with severelylimited services that do notmeet their needs.In some areas this is dueto a lack of infrastructure,but more often the meagreincomes and small transactionsizes of this populationdo not justify the high fixedsetup costs involved inmaking financial servicesavailable through physicalbranches. Thus traditionalbanking results in prohibitivelyhigh costs for customersto set up and use a bank account.For example, in Cameroon it takes anaverage of $700 to open a checking accountand banks require applicants to provide atleast four documents. Not surprisingly, only20 per cent of households in sub-SaharanAfrica have an account at a financial institution,and in some countries like Tanzaniaaccount ownership is as low as five per cent.This pattern persists not only betweencountries but within them. Rural communitiesare especially prone to being excludedfrom financial services. In India, 60 per centof the adult population has a bank account;however, in rural areas account ownership isless than 40 per cent.The solution to this problem will notcome from simply increasing the globalfootprint of mainstream banks whosestructures are often ill-designed to servethe needs and cost-constraints of the poor.Instead the most exciting opportunities arecoming from a combination of disruptivetechnologies and a deeper understanding ofthe needs of under-served customers. Forexample, several companies are deployinginnovative applications that take advantageof the ubiquity of mobile phones to createmore affordable, accessible and customercenteredfinancial services that leapfrogtraditional offerings.Companies like Globe Telecom andSmart Communications in the Philippines,WIZZIT in South Africa, and MTN,Celplay and Safaricom throughout Africaare providing users with the capability forSMS-based financial transactions that allowinstant person-to-person money transfers,including receiving remittancesfrom family membersabroad with a simple textmessage from one phone toanother.Going a step further, aservice from Rêv Worldwideand MPOWER Mobile providesnot only an SMS-basedmobile payments platformbut also links directly to auser’s reloadable debit card,giving users the ability tobuy and sell products andaccept debit and credit cardpayments using their mobilephone. In Kenya, Safaricom’sM-PESA has attracted threemillion users since its inceptiona year ago, showingthe latent demand for thesepayment services and therapid adoption of the technologyin developing countries.Innovations like mobilebanking will not only helpthe poor move away from cash transactions,but may open growth opportunities forsmall- and medium-sized companies. SMEsare an important engine of growth which isoften anemic in developing countries: fewSMEs exist, and even fewer actually growto become large companies. By reduc-OCTOBER 2008

Parliamentary Briefing the obstacles that stand in their way,innovations like mobile payments increasethe ease of doing business with companies,and thereby increase companies’ chances atsuccess.For example, a Rêv Worldwide programmein partnership with a national paintstore chain in Mexico will allow paintersto expand their customer base, reduce thecost of doing business, and document theirtransaction history to improve their accessto credit. Painters will be able to acceptdebit and credit card payments from theircustomers using their cell phones, expandingtheir customer base to those who preferto use credit.Once the painter receives his paymentsfor the job, the money is loaded onto hisprepaid debit card that he can use for bothbusiness and personal purchases. Now thepainter can request a documented cash flowstatement to be sent to a potential lenderand demonstrate his creditworthiness. Thepainter now is not only in a better positionto make more money but is also betterable to leverage his income-stream to buildwealth.These innovations show a new andrefreshing wave of entrepreneurs who arenot only tapping into a latent demandprofitably but tackling head on the self-reinforcingcycle of inequality. Governmentsand multilateral organisations have animportant role to play in stimulating thistype of private sector innovation.Certainly governments play a crucial rolein the prevention of money laundering andterrorist financing activities, all the whilemaintaining stability and averting financialcrises. However, in doing so they ofteninadvertently hinder the expansion of financialservices to the poor.For example, transaction taxes can keeppeople from moving away from an informaland inefficient cash economy. One-sizefits-all‘know your customer’ rules withantiquated identification requirementsmake it more difficult for virtual banking todevelop. Unless countries start to examinehow their existing policies hinder this typeof entrepreneurship, they will lose out on aneconomic revolution.Well-functioning markets are the fastestavenue for individual wealth creation andif this latent potential can be unlocked theMillennium Development Goals will bemore easily and quickly achieved.Suzi Sosa is the Chief of Staff ofMPOWER Labs Inc. Marcela X Escobariis the executive director of the Centerfor International Development at HarvardUniversity.THE WORLD BUSINESS ANDDEVELOPMENT AWARDSTEN OFTHEBESTThere are ten winners of the 2008 WorldBusiness and Development Awards(WBDA) which showcase innovativeprivate sector initiatives contributing to theMillennium Development Goals (MDGs).Announced on 24 September the winningcompanies represent inspiring examples fromall over the globe, together improving the livesof over 75 million people.Established by the International Chamberof Commerce in 2000, and later joined by TheInternational Business Leaders Forum and theUnited Nations Development Programme,the WBDA recognise the contribution of theprivate sector to achieve the MDGs throughtheir core business. The 2008 WBDA receivedan unprecedented 104 applications from 44countries.Four European companies, three African,two companies from Asia and one from SouthAmerica won awards in 2008.3K&A, a Ghanaian firm, developeda profitable soybean processing plant anddeveloped new soy products. It profited fromrapid growth in soybean production, madepossible through investment in farmingtechniques, commercial skills and planning.In consequence, 2,800 local farmers are nowearning over £530 per agricultural season.Nigeria is the second largest rice importerin the world. Olam Nigeria Limiteddecided to invest in local production of highquality rice for Nigeria’s domestic market. Inpartnership with USAID/Nigeria it developeda supply chain model that encouraged the useof improved technologies, farmer capacitybuilding and commercial linkages to marketoutlets, leading to on-farm productivityincreases of 260 per cent in 2006.M-PESA is the third African winner. Ithas brought mobile banking to millions ofKenyans, helping poorer communities buildincomes and work their way out of poverty.M-PESA is widely commented on in thismagazine (see pages 13-15, 24-25, and page26).Diageo joined a programme to developthe cultivation of a beer-friendly sorghum inNigeria and train farmers to grow the crop.Diageo breweries in Nigeria now source 95per cent of their grain from local farms andsustain around 27,000 jobs.Haygrove identified a willingness amongsthigh-value tourist hotels and restaurants inGambia to switch from imported to locallygrownproduce. The barrier was unreliabilityand poor quality of supply. Haygrove andpartners breach this barrier through ‘Gambiais Good’, a project that dramatically improvedlocal horticultural production’s yield, qualityand diversification.Endesa, Spain’s largest utilities company,set out to make electricity accessible to thepoorest Brazilians. It created a system of creditsin return for recyclable waste, thus improvingrecycling and helping low-income customersto pay for their electricity or to get connectedfor the first time.Syngenta helps farmers increase theiryields sustainably through innovative toolsand technologies. It developed a tropical sugarbeet yielding the same quantity of sugar perhectare as cane, in half the time. This directlyimproves the livelihoods of smallholderfarmers and their communities in developingcountries, helps increase food production andgenerates employment, protects and improvessoils, and ensures more efficient use of preciousresources, especially water.ZMQ Software Systems develops ICTproducts for new markets at the base ofthe economic pyramid by reaching out tograssroot and under-privileged, marginalisedcommunities. ZMQ released four mobilegames on HIV/AIDS awareness and in just15 months the four games reached 42 millionpeople in India with a download of 10.3million game sessions.Sistema Ser (SSer) improves the livesof those at the bottom of the pyramid byincreasing their access to healthcare in poorregions in Argentina. It has a self-financedsystem that provides primary care at low prices.Purchasing a card for about $4 per year allowspeople to buy a variety of medical services andprescription drugs at rates significantly belowthe market. It currently has 20,000 members.Before SMART Communicationsintroduced low-cost mobile phonesubscriptions in the Philippines in 1994,the country had only one million landlinesubscribers and 102,400 mobile phoneowners, all of whom belonged to the moreaffluent social classes. By end of March2008, there were 58.9 million mobile phoneowners, of which 31.6 million subscribed tothe SMART network, giving the poor accessto communication and micro-enterpriseopportunities (see also pages 9-10, pages 13-15and page 26).OCTOBER 2008 25

Parliamentary BriefFinancial services are critical toeconomic growth and human development.Banking, savings, investment,insurance, debt and equity financing all helppeople to build assets, guard against uncertainty,generate income and create optionsfor their futures. But the world’s poor — thefour billion or so living at the so-called ‘baseof the economic pyramid’ (BOP) — aretoday largely excluded from the market forformal financial services.There are many interconnected reasonsfor this including informality, insufficientinformation, inadequate infrastructure,inappropriate regulation, and cultural biasamong financial services firms and the poorthemselves.As a result, workers in Nairobi must taketime off work to bring money back hometo the Kenyan countryside, enduring thephysical risk of carrying cash. Owners offamily-run stores in the Philippines mustpay for inventory deliveries in cash, puttingthemselves and delivery drivers at risk.It takes Bangladeshis three or four hoursto travel and queue at designated banksto pay their gas bills. Employers in SouthAfrica often direct-deposit their employees’paychecks into bank accounts, forcing thoseamong them with lower incomes to queue atthe ATM on payday because ‘bank money’ isnot accepted at the places they do business.Fewer than one billion out of 6.5 billionpeople worldwide have bank accounts at all.In contrast, nearly four billion have mobilephones. The ubiquity and convenience of themobile phone has given the mobile channelgreat potential to open up the market forformal financial services of all kinds — fromsimple payments to insurance, savings andcredit — to poor people who are currentlyexcluded.In Kenya, M-PESA offers migrantworkers the ability to send money home viatheir mobile phones. The service gained 2.37million subscribers in little over a year. In thePhilippines, Smart Communications enablessmall shop owners to pay for deliveries withmobile money, allowing them to reduce risk,aggregate orders and receive discounts forbuying in bulk with the equivalent of cash.In Bangladesh, GrameenPhone’s gasbill payment pilot has proven a resoundingsuccess, even though customers must stilltravel and queue at the banks to pay theirelectricity bills.In South Africa, Wizzit enables employersto deposit employees’ paychecks directly intotheir mobile money accounts, which theycan use to purchase airtime and other goodsand services.Today’s examples do not yet add up tofinancial sector inclusion but they point towhat is possible. It is not too early to start26Beth JenkinsPhoto: IDRC/Sy, DjibrilThe fielddaybeckoningthe moneymarketsthinking longer-term about laying the foundationsfor growth on a global scale.I recently had the opportunity to interview15 CEOs and other leaders in themobile money sector in connection withthe inaugural Mobile Money Summit inCairo, co-hosted by the GSM Association,International Finance Corporation, ConsultativeGroup to Assist the Poor, and theUK Department for International Development.They identified three keys necessaryfor global growth: utility, capacity and anenabling environment.UtilityMobile money cannot enable financialsector inclusion without much greaterintegration into customers’ economic lives.Remittances and remote payments are thecurrent ‘killer apps’, but they must catalyse anorder of magnitude increase in the number ofways and places it is possible to use mobilemoney. A greater diversity of applicationsmust be developed, including savings, credit,and insurance. Mobile money must eventuallybe accepted wherever money is accepted.CapacityThe end goal of ubiquity requires a wholeecosystem of players to become involved,developing mobile money applications,accepting mobile money, and using mobilemoney, from the biggest, slowest-movingbanks down to the smallest, grassroots kioskowners and individual consumers. They willall require capacity-building. Big developingcountry banks might need to increase theircultural openness to serving the poor. Microfinanceinstitutions might need to improvetheir tech-readiness. Small businesses andindividual consumers might need to buildfinancial literacy and basic business skills.Enabling EnvironmentMobile money is real money. It is theresponsibility of the regulator to protect consumersand ensure financial sector stability.At the same time, to achieve financial sectorinclusion, regulators must permit innovation— indeed, they must encourage and facilitateit. The right regulatory approach willbe proportional, weighing the potential gainagainst the potential damage. It will also beincremental, allowing the channel to emergeand adding regulation as risks manifest thusenabling mobile money to blossom in waysthat might not be predictable.Cross-sector partnership and public policydialogue will be critical to building all threefoundations. Mobile network operators andtechnology providers must collaborate toensure that services move toward interoperability.While mobile network operators havebeen the primary drivers so far, now banks,microfinance institutions, insurers and manyothers must take some initiative in developingnew applications and services.To meet the capacity-building challenge,international financial institutions, developmentdonors, government agencies, NGOsand corporate CSR departments can contributeresources and expertise, particularlywith regard to small businesses and BOPconsumers. And business and governmentmust engage in ongoing, open dialogue toachieve the delicate balance that regulatingthis emerging channel requires.As UNDP reminds us, human developmentis about expanding people’sopportunities to live the kinds of lives theyhave reason to value. Financial sector inclusionis a necessary step. Using the powerof business and technology, mobile moneypromises to accelerate our progress in thiscritical direction.Beth Jenkins is Learning Director of the FullEconomic Citizenship Initiative at Ashokaand a non-resident Fellow of the CSRInitiative at the Harvard Kennedy School.OCTOBER 2008

Parliamentary BriefOver the past year, rising food prices haveplaced basic foodstuffs out of the reachof the poor and threatened to drive 100million more people into poverty. As families andnational and global leaders struggle to address thecomplex factors behind the crisis, it is increasinglyclear that all sectors will need to work together tomeet the challenge of global food sustainability.Nowhere is the situation more urgent than inAfrica, where per-capita food production has stagnatedfor the past three decades. Leaders such asformer UN Secretary-General Kofi Annan havecalled for a ‘uniquely African’ revolution in foodproduction to drive economic growth and bringlasting solutions to poverty and hunger on the continent.Realising such a revolution will require the commitmentof all sectors, not least business. The marketpower of the private sector together with its capacityfor innovation, execution and efficiency represent apowerful force for improving agricultural productionand marketing.However, the private sector faces substantial challengeswhen applying these capabilities in Africa,due to both the complexity of food value chains andalso obstacles in the business enabling environmentsuch as poor infrastructure or governance. Overcomingthese challenges requires cross-industrycollaboration as well as partnership between business,government and civil society. It also requiresnew and effective business strategies and models.The Business Alliance Against Chronic Hunger wasformed in 2006 by member companies and partnerorganisations of the World Economic Forum to catalysethe implementation of scalable business solutionsto hunger. Led by a group of 30 global and local Lisa Dreierpartners including NGOs, and with strong supportfrom the government of Kenya, the Alliance initiatedpilot work in Siaya District, a community with highlevels of poverty and hunger, but strong potential forincreasing food production. The aim was to increaselocal food production and income levels.The lessons learnt from this pilot project shouldHelping thehungry poorto feedthemselvesOCTOBER 2008 27

Parliamentary BriefPhoto: UNDPhelp companies to galvanise commercial and economicgrowth in regions previously seen as toodifficult and unprofitable to be attractive to business.Such business ventures must necessarily focus onmeeting the needs of poor customers and doing businesswith small-scale producers and entrepreneursin those regions. The result of this is that they canprovide better quality, more affordable and morewidely available essential goods and services in poorregions, and new opportunities for local producersand entrepreneurs to increase income levels. This,in turn, can help empower communities to reducehunger and poverty.A second goal of the work in Kenya is tostrengthen private sector engagement in shaping andcontributing to broader regional goals for sustainabledevelopment. Placing its work within a framework oflocally driven efforts to meet the Millennium DevelopmentGoals (MDGs) has enabled the Alliance toengage the commitment and partnership of a broadarray of stakeholders and to ensure complementaritywith their efforts.There will be 14 initiatives during 2008 to testbusiness-led approaches along the food value chain.Pilot initiatives are undertaken by corporate ‘champions’and relevant partners, with the Alliance playinga facilitating and monitoring role. The MillenniumVillage Project, which works with approximately11,000 farming households in the Siaya district, is akey partner in a number of the initiatives.The Kenya pilot work has informed a set of businessmodels that strengthen food value chains andis defining strategies for scaling them more broadly.These include:• Expanding retail distribution networks for agriculturalinputs and food products. This includestraining, equipping and supplying small retailers,including agri-dealers, enabling diversification ofretailers’ products and services and improving accessto finance for customers, particularly farmers.• Sourcing high-value crops from small producersfor direct retailing through supermarkets or forprocessing into food and beverage products. Toachieve commercial-scale volumes, this requiresorganising producers into groups; training on productionand quality standards is often also needed.• Developing value-added processing and packagingopportunities for small producers. This includessmall-scale production of processed goods for retailsale, commercial-scale processing opportunities andthe development of new packaging technologies foruse in poor markets.• Expanding access to finance through innovativebanking, insurance and investment models, and newtechnologies (such as SMS-based financial transfers)that extend services to poor rural areas.As a complement to these commercial businessmodels, this partnership approach engages bothbusiness and government in dialogue and collaborationaround common priorities, including efforts toimprove the business enabling environment throughtargeted public investment in infrastructure, publicservices and capacity-building for farmers and entrepreneurs.The Alliance’s activities mirror a larger trend in theprivate sector toward seeking win-win solutions thatgenerate both social and commercial returns. Socialreturns relevant to hunger can include improvementsin household income; quantity, quality andaccessibility of food supply; nutritional and healthstatus; and capacity strengthening for food productionor entrepreneurship.Potential returns that are relevant to the businessand its bottom line — in the near or long term— include generating profit and increased marketshare, expanding distribution networks, increasingsupply chain efficiency, flexibility and quality,increasing innovation, securing brand-recognitionand reputational gains and strengthening regionaleconomic growth for the long term.The Business Alliance Against Chronic Hungeris the first business coalition in Africa to focus onreducing hunger by improving food value chains. Assuch, it serves as a unique vehicle and potential modelfor mobilising broader-scale private sector support foragricultural development.Its initial experience has demonstrated that a crossindustry,multi-stakeholder approach can facilitatebusiness engagement in chronically hungry regionsthat are largely unserved by the private sector. Establishingmarket linkages and providing needed goodsand services to producers and entrepreneurs can raiselocal food production and incomes.Securing and expanding these gains requires innovativeand collaborative approaches — and financing— to scale up commercially viable business models.When applied on a large scale they have the potentialto substantially accelerate sustainable food productionin Africa, while helping to reduce hunger andpoverty.Lisa Dreier is Director of Public-PrivatePartnerships at the World Economic Forum.28OCTOBER 2008

We cannotchange theworld.But we do ourvery best to helpthose who can.Parliamentary Brief’s international editionsbring expert opinion to bear on issues ofglobal significance — Climate Change, theWar on Terror, International Development,the Global Economy, the Future ofMultinational Companies — and provide indepth coverage on subjects of internationalimportance.With authoritative commentators from across the world,Parliamentary Brief makes an important contribution toinformed debate on a wide range of global issues.So if you want to change the worldfor the better, you might do even morethan you thought you could if you work withPARLIAMENTARY BRIEFContact the Editor on +44 (0)20 7381 1611 oremail him at roderick@parliamentarybrief.com

Parliamentary BriefTwelve million people are victims offorced labour worldwide.Human trafficking was responsible fortwo-and-a-half million of them **International Labour Organisation, 2005December 2006

Parliamentary BriefStop the Traffik is a global coalition working to stop people trafficking — the buying and selling of people around the world www.stopthetraffik.orgDecember 2006Registered charity number 1013587

It took us 125 years to usethe first trillion barrels of oil.We’ll use the next trillion in 30.So why should you care?CHEVRONEnergy will be one of the defining issues of this century. One thing is clear:the era of easy oil is over. What we all do next will determine how well wemeet the energy needs of the entire world in this century and beyond.Demand is soaring like never before. As populations grow and economiestake off, millions in the developing world are enjoying the benefits of a lifestylethat requires increasing amounts of energy. In fact, some say that in 25 years theworld will consume about 50% more oil than it does today. At the same time,many of the world’s oil and gas fields are maturing. And new energy discoveriesare mainly occurring in places where resources are difficult to extract, physically,economically and even politically. When growing demand meets tighter supplies,the result is more competition for the same resources.We can wait until a crisis forces us to do something. Or we can commit toworking together, and start by asking the tough questions: How do wemeet the energy needs of the developing world and those of industrializednations? What role will renewables and alternative energies play? What isthe best way to protect our environment? How do we accelerate our conservationefforts? Whatever actions we take, we must look not just to next year, but tothe next 50 years.At Chevron, we believe that innovation, collaboration and conservation arethe cornerstones on which to build this new world. We cannot do this alone.Corporations, governments and every citizen of this planet must be part ofthe solution as surely as they are part of the problem. We call upon scientistsand educators, politicians and policy-makers, environmentalists, leaders ofindustry and each one of you to be part of reshaping the next era of energy.CHEVRON and HUMAN ENERGY are registered trademarks of Chevron Intellectual Property LLC. The CHEVRON HALLMARKis a trademark of Chevron Intellectual Property LLC. ©2008 Chevron Corporation. All rights reserved.