State Innovation Levers in the Third World

Once in a while, a political pundit or a social commentator berates government-funded business incubation programs like the Social Innovation Fund designed to help entrepreneurs and early-stage start-ups diffuse novel innovations. Often, these criticisms may be informed by ideological differences on what role the state should play in spurring innovation.  Sometimes, these misgivings are justified because of misallocation of public money, embezzlement or lack of accountability. Nonetheless, policy instruments and programs that stimulate private sector participation in rolling out solutions to societal shortfalls are immensely important, especially in less developed countries. This is because normally, many lower to middle income nations do not have thriving venture capital or angel investor communities that provide funding for entrepreneurs.

Innovation is essentially a luxury in the third world – many citizens may not have the discretionary income to concretize many brilliant ideas. Moreover, governments are still grappling with providing the basics: access to electricity and water, reducing illiteracy, improving rudimentary healthcare systems and taking steps towards achieving food security. Tried and tested poverty alleviation programs like Brazil’s Bolsa Familia or Mexico’s Opporutnidades are a good starting point and worthy of emulation from a human-centered design angle. On this premise, policy tools like public-private partnerships are ‘kindergartens’ for social entrepreneurs because they can pursue creative endeavours and experiment in close collaboration with state funding programs. An example is Bangladesh’s Grameen Bank which was incorporated as result of synergies from both government and private actors of innovation. In the early 80s, a wholly private solution to a public problem (lack of access to credit among the bottom of the pyramid (BoP)) may not have been feasible. Without the state, microfinance, as we know it today, might have resembled commercial banking and the project design would not have had the targeted impact.

The critical area of energy access leaves ample opportunity for joint ventures between governments and entrepreneurs. With regulatory restructuring, electricity access in many rural areas is being enhanced. Microgrid-based entreprises like the Berlin-based Inensus or Devergy headquartered in Amsterdam that builds alliances with municipalities in commercializing renewable energy home systems under a “a pay-as-you-go” for the BoP in East Africa, are already transforming the future of rural electrification. There countless noteworthy cases of similar approaches and applications in education and healthcare in sub-Saharan Africa, Latin America and Southeast Asia.

The uptake of participatory governance through higher connectivity and democratic reforms in many developing countries indicates that it is only a matter of time that regulatory frameworks become stronger; naturally leading to better accountability, legal protection mechanisms for new technologies and implementation of policy initiatives. The situation is multifaceted –sometimes cultural factors may even be incompatible with certain institutional arrangements. Together, these policy-backed entrepreneurial programs can pave the way for the formulation of formidable science and technology policy footprints to solve basic problems using low-tech solutions.

Can the holistic evolution of state levers eliminate poverty among the BoP?