There has been much written in the past month about the impact of microfinance. A new CGAP book paints a very optomistic picture of the MF world. On the other hand, Thomas Dichter has argued that microfinance has done very little to promote economic development, or at least that we have not been able to measure the impacts with any reliability. At it’s heart, this is a debate about ideology, and also about big money. Donors have spent a lot to promote microfinance in recent years, and there are strong vested interests who would like to see it succeed. But it is interesting to see the debate begin to open up. There are few who would argue that microfinance has no role in development – even Dichter sees a postive role for financial services for the poor. On the other hand, it seems that the world is waking up to the fact that financial services are only one part of economic development, and that the legions of poor people starting small business cannot change the world on their own.
Nextbillion.net links to an interview with Harvard’s George Lodge on the topic of a potential World Development Corporation, which he had advocated for over the years.
Lodge feels that MNCs are not involved enough in issues of development, and that their participation will be key to sustained poverty reduction. He cites the examples of the Asian Tigers as proof that business, and small business in particular, will be the driver for poverty reduction in most developing countries.
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Many big companies are now spending substantial amounts of time and money on being “socially responsible.” I would ask them to think more imaginatively than they have about how this time and money could be more effectively spent. Philanthropy is not the answer. A way must be found to align the profit-making capabilities of MNCs more effectively to poverty reduction, especially in those countries that now have little if any MNC investment.
No company can act successfully alone. The risks are too high. I would ask them first to call a meeting of CEOs of major MNCs concerned with global poverty and explore the idea of establishing the World Development Corporation, proceeding experimentally and in collaboration with carefully selected NGOs and representatives from the UN and the World Bank. Trying a few projects and seeing how they worked would risk little.
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Lodge is calling for increased cooperation between MNCs, NGOs and governments (a good thing). But his examples of possible programs, inwhich multiple MNCs work with poor regions to deliver services and offer development programs seems a little far fetched. Corporate philanthropy can only go so far : letting the Nestles of the world into the centre of development programming as ‘partners’ may avert our gazes from the potential wolf in our midst. This is not to claim that they do not have a legitimate role – but rather that those who promote partnership approaches to development would do well to examine the incentives for all of those who participate, and especially those who may want to keep their motiviations less than clear.
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The IFC and Financial Times have launched a research paper competition on the topic of ‘Business and Development.’ I hope that they look kindly on submissions that deal with small enterprises and other poverty-oriented business at the base of the pyramid. Link below
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International Research Paper Competition
The International Finance Corporation, in collaboration with the Financial Times has announced its first annual research paper competition for a first prize of US$30,000. The competition, entitled “Business and Development: The Private Path to Prosperity,” seeks to attract high quality research papers in an attempt to inject fresh and innovative thinking into the ongoing dialogue about the role of private sector in development. The deadlinesubmissions is June 30, at midnight. Link
Can MBA programs be a tool for good? There is certainly a good case to be made that the best and brightest – if those are who indeed are drawn to business degrees – are not working on solving the most pressing problems of the world. NextBillion.net is reporting on the second annual Global Citizenship contest, which provides a platform for MBA students to partner with industry to devise socially responsible business practices. This is all well and good, but I would also hope to see spaces open for those studying management to begin with problems rather than with the solution (our business practices). It seems to me a rather backward way to approach social issues, but one that much of the progressive world is now enamored with.
