Innovations In Emerging Markets

The "Best of 2006" Innovations in Emerging Markets List

Have an outstanding example of the private sector contributing to poverty reduction in developing countries? Then add it to our "Best of 2006" Innovations in Emerging Markets list.

As 2007 approaches, many are drawing up "Best of" lists. So why not draw up a list of the best global examples of private sector-led initiatives that deserve recognition for the impact they have on furthering development goals? There are undoubtedly many initiatives and companies around the world that deserve the recognition and mention.

To get the ball rolling on a list, we're providing our pick. It's the global "Lighting the Bottom of the Pyramid" project in which IFC is involved. Read more about how IFC is participating in the "global initiative to develop a commercial solution to bring modern lighting services to the 1.6 billion people that lack access to electricity." Also read about the steps IFC is taking to begin implementation of the project in Africa.

What's your pick? Send us your choice for the "Best of 2006" Innovations in Emerging Markets and tell us why it should be added to our list.

Emerging Markets to Drive Future World Growth

By 2030, about half or more of the purchasing power of the global economy will stem from the developing world, says the World Bank's Global Economic Prospects 2007. This annual report on the future trends in the global economy also says that by then, emerging markets will be home to an estimated 1.15 billion middle class people.

Broad-based growth in developing countries sustained over the next 25 years would significantly affect global poverty. “The number of people living on less than $1 a day could be cut in half, from 1.1 billion now to 550 million in 2030,” the World Bank's Chief Economist Francois Bourguignon says.

“We expect developing economies’s share in world trade to rise to almost 50 percent by 2030,” says Richard Newfarmer, the report's lead author. “That’s a substantial increase from where we are today at about 30 percent."

The overall optimism expressed in the report about potential gains in the global economy from growth and globalization is somewhat tempered on two topics. Africa, the report cautions, needs to institute reforms to strengthen its investment climate and needs increased aid for infrastructure, or it risks missing out on benefiting from the gowth trend. The report also starkly warns that gains could also be undermined by a failure to properly manage environmental issues at a global level.

How Blogs Led WRI, IFC, Grameen and More to Go from Talk to Action

Every so often, something happens that makes the thousands of blog postings, discussions, links, questions, and counter-opinions come together and take a community from talk to action. That's precisely what happened last night over souvlaki sandwiches at Zorba's Cafe in northwest Washington DC .

About 25 individuals -- total strangers in real life but close friends through months spent trading the latest cutting-edge knowledge on the 'nexus of private enterprise and development' -- came together to do what everyone said blogs could do: bring a very diverse community together and tap their individual strengths for action on a common cause.

So there we were, 25 people brought together through blogging from DC-based organizations as diverse as the Grameen Bank, the World Resources Institute, the International Finance Corporation, the World Bank Group, the Emerging Markets Private Equity Association, and more. I'm sure I'm missing a few, but no worries --they'll track back and let me know.

Sure, our organizations already share a common interest and a lot of dedication to furthering the role of the private sector in development. Beyond that though, the NGOs, international public institutions and think tanks, and the associations of private investors represented at the table, usually work in parallel in terms of agendas, constituencies, resources or even, attention spans. Not last night. Last night, something happened and the blogosphere worked in exactly the way everyone said it could. It brought together a community of people who care about development, and care about the role the private sector can play to achieve it.

To be fair, kudos go to Rob Katz at WRI's Nextbillion.net for initiating the meeting and the idea of a network from its first incarnation in NY at Columbia University. But we did the rest together, moved to the next steps, and agreed to be part of WRI's International Private Enterprise Group's DC chapter. I've linked to the blogs and websites of most of the organizations I mentioned. They're all doing fantastic work on the same subject individually. Now we're hoping to bring our work closer together and maybe move it forward.

So that's the story. If you're ever in the Washington DC area on the third Wednesday of a given month, stop by Zorba's Cafe. Or blog any one of our community members -- we're all working together on the same thing.

Preparing Microfinance Institutions For Commercial Capital

A SEEP Network Progress Note says that microfinance institutions need to prepare for commercial investments through creativity, strong leadership, and technical finance skills.

This is especially true as all microfinance firms are considered equally attractive. Tier 1 MFIs are considered are considered a safe investment risk, with professional management and external supervision. Many MFIs in this category are being courted by the same suitors, and most investments are debt deals. Investors will need to widen the range of partnerships, financial instruments, and the kind of microfinance firms they support. Investors should also consider different investment opportunities for Tier 2 and Tier 3 MFIs. While there are always risks, they are ways in those risks can be minimized.

India And China First Among BRICs

In the past few years, the BRICs – Brazil, Russia, India, and China – have become the favorites of emerging market investors and politicians, notes a Financial Times op-ed. But out of the four, China and India have the competitive edge. Those two countries are competing with the West for “intellectual capital,” investing in education and technology, and using their expatriate citizens to generate business in the home country.

But Russia and Brazil – two nations propped up by high commodity prices – haven’t invested in long-term economic development in the same way. Russia’s natural resources are increasingly concentrated in state hands, which puts off foreign investors. Brazil is slow to make changes that would positively affect the economic outlook across a broad range of sectors. Both countries have poor infrastructure systems.

As emerging economies change the face of the global political and economic order, business leaders should concentrate on China and India.

The New Africa-China Trade Relationship

Manufacturing capacity has declined in some parts of Africa as trade barriers dip and global competition rises, especially from China, reports the Washington Post. That’s left African business leaders turning more and more to extractive industries, while at the same time trying to profit from the sea of finished Chinese goods that is washing across the continent.

That kind of relationship may conjure up memories of colonialism, but Africans say the Chinese, who are investing in key infrastructure projects, treat them as equals. In fact, both sides are so eager to do business that recently representatives from 48 African countries met with Chinese officials at a trade summit in Beijing. The outcome? The Chinese promised to double Africa’s aid and offered $5 billion in new loans. One Chinese company will build an $8.3 billion railroad project in Nigeria, to be paid for with the country’s oil revenue.

China’s trade with Africa, which reached $40 billion in 2005, is expected to hit $100 billion by 2010.

Emerging Market Philanthropreneurs Alive and Well, and Wanted!

We've gotten a lot of traffic and interest in our posting on Philanthropreneurs.

For more on such individuals and ventures in emerging markets, we'd like to pass on the recommendation of Derek Newberry of the World Resources Institute. He alerted us to the existence of a solid list of examples on the WRI blog. Check out their New Ventures program . Thanks Derek -- very helpful referral.

Another comment on our blog is also worth picking up on. A Colombian NGO writes that "the challenges for NGOs is access to financing beyond donations and grants," and asks: "How can we have access to social investors that are looking for a social return and not necessarily an economic return?".

Any social investor out there who'd like to tackle this question?