Bankable Frontier Weblog

Last weekend, I heard CK Prahalad speak again—this time at a conference on Turning the Tide against Poverty at Harvard’s Kennedy School of Government.

At the conference, he was billed to be engaged in a debate with Nobel prize winning economist Amarta Sen, but due to family illness, Sen had to pull out at the last minute. This was a great pity as a debate between the proponent of “Development as Opportunity for Innovation” and “Development as Freedom” would have been worth hearing.

However, I found it worthwhile to hear again (see earlier blog on the San Francisco Poverty and Profit conference in Dec 04) some of the by-now familiar Bottom of the Pyramid arguments, by now extended from the original version in the book published last year.

Two aspects of this were particularly noteworthy to me. First, I heard more clearly this time from CK an emphasis on the need for a healthy ‘ecosystem’ in which pro-poor innovation is embedded. This goes some way to allaying my earlier concerns (expressed originally in this hyperlinked paper on Making Financial Markets Work for the Poor) that cases or anecdotes about companies which have been innovative, worthy though these examples may be, ‘do not a market make’. It is when market systems become robust, with competition which ensures that even the best ideas are given a ‘run for their money’, that the real positive impact of such innovations is felt on scale. The AHI website has further information on the concept of a healthy ecosystem, especially applied to housing.

Second, I heard again his assertion that ownership matters less for the poor than access. While he asserted this statement generally, to be fair, it was in the context of the benefits of pre-paid services such as cell telephony. In a services environment, this is true by definition—as a consumer, you cannot ‘own’ the service which you use. Someone, however, has to own the cellphone. Even in the case of the Grameenphone village phone ladies who do, there may be a risk that, as owners of scarce assets, they could price like local monopolists unless there is competition. Hence the need for a healthy ecosystem.

Ownership is also a requirement for being able to accumulate assets over time. Housing, for example, is often regarded as the cornerstone of asset building not only for the poor, but also the middle class of most countries. In the absence of routes to secure ownership, the climb out of financial vulnerability may be longer and steeper for poor people.

So, enhanced access to services for the poor is certainly a ‘good thing’ in most cases; but let this recognition not detract from serious efforts to develop the systems—legal and financial—which also enable ownership of real assets by the poor.