Grameen China & Alibaba’s True Ambition

Grameen Trust of Bangladesh and Alibaba Group just announced the launch of the Grameen China initiative, that will be run by the Grameen Trust, with an initial charitable gift of $5 million from Alibaba Group.  The New York Times highlighted this gift as a sign of a shift by Chinese corporations toward charitable giving:

“Money and wealth are two different concepts,” he wrote his workers, some of whom have accumulated stock worth millions of dollars.
“If you have money, but have not turned this money into an experience to elevate your own or other people’s level of happiness, then you may very well only possess a lot of symbols and a mountain of very colorful pieces of paper.”
Mr. Ma is backing up his words with action. On Wednesday at the Clinton Global Initiative in New York, Mr. Ma and Muhammad Yunus, the Nobel-winning founder of Grameen Bank, a pioneer in the field of microfinance, unveiled plans for Grameen China.

Here’s Jack in Sichuan Province donating supplies to schoolchildren:

photo: courtesy Alibaba Group (via NYT)

While altruism may be a motivating factor, Alibaba also stands to gain unique insights into serving the very poor by partnering with the Grameen Trust.  I believe that this announcement represents an important strategic thrust–not just corporate philanthropy–that reveals Alibaba’s intention to be the dominant B2B trading platform serving small and medium sized businesses (SMB/SMEs) globally.  Jack Ma wore the demeanor of a crazy Chinese entrepreneur in his presentation to the Clinton Global Initiative audience, but to his credit, clearly outlined his intent to serve over 100 million businesses in the next 10 years (see our earlier post).

Serving the Bottom of the Pyramid can be a smart flanking strategy

Alibaba, by dominating the Chinese market in payments, consumer marketplace and E-commerce, and business-to-business marketplace services, already has tremendous advantages vs. potential competitors like Ebay in serving the developing world.  By partnering with Grameen Trust, Alibaba will learn to serve the very poor who are not yet served by their current marketplace platforms like Alibaba and Taobao.  A buzzword that was repeatedly used at the Clinton Global Initiative 2009 Annual Meeting was the “Bottom of the Pyramid,” which refers to 4-5 billion poor people and the developing countries that they live in (concept by C.K. Prahalad, see executive summary,book).  If Grameen China is successful, Alibaba will be poised to be uniquely capable of providing IT services, online marketing, E-commerce, B2B trading services, and software to the Bottom of the Pyramid.

Alibaba highlights several key points in their press release that reinforce this framing:

1. Alibaba Group will advise in “technology-based support” to help recipients build online businesses
2. Alibaba Group will help Grameen find other donors and get regulatory approval.
3. The approved quote from Muhammad Yunus, founder of the Grameen Bank, speaks directly about recipients potentially “even sell their products internationally.”
4. Jack Ma points to a “Internet-driven revolution where small businesses around the world will be able to compete with larger companies for customers like never before.”
5. All of these points explicitly link Grameen China to the overall Alibaba strategy, and are designed to “embrace” the poor and “extend” their products and services to serve them.

Debate: Should “social enterprises” be raised up as a separate form of business, or should it be integrated into for-profit businesses?

The esteemed Nobel laureate and Grameen founder Muhammad Yunus emphasized his belief that “social businesses” (meaning enterprises that have a double bottom line, including social benefit) is in need of more recognition and legitimacy as a separate form of business, so that students read about social business, prepare for a career in it, and potential raise funds from social venture funds and a social stock market.

But his partner in China couldn’t be taking a more opposite approach.  Their social venture efforts, such as Grameen China, are tightly integrated into their corporate strategy.  In some ways, this is encouragement that the effort will be sustainable and supported by the company, which is still closely held (Alibaba.com is a publicly listed subsidiary of Alibaba Group).  Perhaps that is why this “philanthropy” came from the corporate coffers at Alibaba Group rather than Jack Ma’s substantial personal wealth.

Are Chinese companies better equipped to serve the Bottom of the Pyramid than Western multinationals?

A more important point is that this visionary move to support Grameen China is further extending Alibaba Group’s lead in its ability to serve the Bottom of the Pyramid.  Its hard to imagine Silicon Valley based companies like Google and Ebay having the ability to serve the very poor when they have been incapable of winning in the middle-income market segment of China!

Perhaps Alibaba is a sign of things to come.  Chinese companies, having competed in a home market with extremely poor people, are far more qualified to serve the developing world than American and European companies used to serving developed markets.  On the other hand, perhaps Alibaba is uniquely capable in vision and abilities to “Go Global”.   What do you think?  Should this be a wake up call for American and European companies to actively seek to serve the Bottom of the Pyramid so they are not locked out of those markets in the future?