By Dr Shai Vyakarnam, Director, AcceleratorIndia.
In her article, Dr. Tara Thiagarajan, Chairperson, Madura Microfinance Ltd. Has put forward a thought provoker that poverty and income distribution is shaped much more like FREE VORTEX, rather than as a pyramid. With only 4% of India’s population paying taxes, she argues, that expecting them to find solutions and trickle down effects is almost impossible. So, the use of the term “bottom of the pyramid” is somehow anaesthetising.
If we agree with the thesis of the vortex rather than the Pyramid as the basis of thinking about entrepreneurship – what might be the impact? Companies like Tata with the Nano might need to recognise that their innovation is not actually for the bottom of the pyramid, simply at the lower end of the income distribution of the 4% that pay taxes? A very different marketing strategy begins to emerge for such “high end” innovations.
Microfinance has been heralded as a solution to empower bottom-up development, but more recently we have seen that rapid and rampant growth of microfinance has lead to some of the poor being buried under the pyramids – bit like the slaves that built them 4,000 years ago.
So where and how can we find solutions? Perhaps we need to find ways to join some dots!
Microfinance, is now quite sophisticated and overall has been able to reach out to the poor and in some cases the very poor. But what will people do with the borrowing? We need to think about how best to stimulate ideas and opportunities and it is here that the National Innovation Foundation (Delhi) has made an excellent start and can well provide the source of ideas and opportunities.
However it is probably better called the national grass roots invention foundation, because there is very little evidence that anything of substance has been commercialised and hit the markets. The NIF is a worthy institution and blessed by the great and the good, but it is in urgent need of connection with the “real world” of commerce.
Meanwhile the entrepreneurs of India, the business families and corporates are progressing well – rising to the very apex of the vortex. Buildings like the Ambani towers are almost shaped to remind people that there is a vortex and not a pyramid! They are gaining the experience and the expertise of how to grow in a poor country. They have learnt about supply chains, quality control, markets, marketing and sales. They are growing ever more sophisticated with finance and accounting.
The dots may well be the sources of microfinance, the opportunities of agencies such as the NIF and the market access and scalability provided by large Indian companies. Perhaps we can think about how best to leverage these connections in order to generate further wealth and income potential at the flat end of the vortex?
There is money, there is invention and there is industry – but the three components are not yet linked to each other in any way that can make a difference. Perhaps we can find ways in a vortex of activity to join them together. Seeing the article by Dr Thiagarajan gives me an idea that the oversimplification of the Pyramid model may have distracted us and thinking about the vortex as a picture of what it is like on the ground may be a better starting place to find solutions for connecting inventions, funding and markets as a mechanism for bottom up development.
---------------------------------A version of this blog was originally published at India Incorporated, the social media platform for news, views and information on India.
Published on 10 March 2011