Defeating Global Poverty

Those of you who are interested in applying your business skills to help the working poor might be interested in an upcoming conference called Business with Four Billion: Creating Mutual Value at the Base of the Pyramid on September 9-11, 2007 in Ann Arbor, MI.

This conference is aimed at the growing interest in enterprise-based strategies for serving the four billion poor at the base of the economic pyramid (BoP). One of the keynotes is C.K. Prahalad, author of the well-researched BoP book, The Fortune At The Bottom of The Pyramid. Here's Prahalad's summary of the opportunity.

One of the conference objectives is to develop the new organizational capabilities required to achieve both business growth and poverty alleviation. This should be a very interesting discussion as so often these are viewed as incompatible objectives.

Labels: events, poverty

I heard about 6 months ago about the ingenious idea of Muhammad Yunus, founder of Grameen Bank and recent Nobel Peace Prize winner, to build a new yogurt business in Bangladesh.

The first factory just opened near Dhaka as part of a new venture called Grameen Danone Foods. The mini-factory produces a yogurt called Shakti-da (which means "yogurt with strength") which is fortified with vitamins to address malnourishment. And each yogurt helping with be inexpensive ... about 7 cents per cup ... which affordable even for the poor.

The story I've heard goes something like this ... Danone (major yogurt maker) CEO Franck Riboud was sitting next to Yunus at a lunch in Paris in the fall of 2005 and had asked Yunus to explain to him about microfinance and the Grameen Bank. At the end of the conversation, Riboud asked Yunus, "how might I help you?" Now this is a very dangerous question to ask Yunus! Yunus responded, "I'd like you to send your chief yogurt factory designer to Bangladesh to meet with me." Riboud agreed. A short while later the Danone factory designer chief showed up at Yunus' office in Dkaha to find out how he could help. Yunus said, "I'd like you design and build the world's smallest yogurt factory to operate here in Bangladesh." The factory designer said, "But, I design the world's largest yogurt factories, not the smallest." Yunus responded, "I need you to design the world's smallest one. I'll be here if you want to go off and think about it and come back later." So, the factory designer left and went back to his hotel room. A little while later, he appeared back at Yunus' office with the sketchings for an idea. And the venture was born...

This is setup as a for-profit, social enterprise joint venture between Danone and Grameen Bank. Danone is contributing $500,000 of seed capital. The plan is to re-invest all profits with the exception of paying back Danone their initial seed capital. The factory will buy milk from Grameen Bank microvenders (who've been financed by Grameen Bank to buy cows) and microentrepreneurs will sell the yogurt door-to-door. Each factory will employ 15-20 women directly and up to 1,600 people in an area. And the enterprise is designed to environmentally friendly using biodegradable cups made from cornstarch, solar panels for electricity generation and rainwater collection vats. If the first factory is successful, they have plans to launch 50 more in Bangladesh and then who knows where.

There is a good write-up of the story in Fortune magazine called Saving the world with a cup of yogurt.

Please post comments about other social enterprises you have heard about.

Labels: danone, grameen, poverty, social enterprise, yogurt

Grameen Trust, the Bangladesh-based charitable arm of the Grameen Bank, is starting up a microfinance business in the USA called Grameen America. [I couldn't find a web site for this yet although there is a job posting for a CEO.] Grameen Bank has been a pioneer in microfinance and recently was awarded the Nobel Peace Prize along with its founder Muhammad Yunus.

Here are some of the highlights from a business plan overview I have seen:

• It will be a for-profit social enterprise business setup as a joint venture between Grameen Trust and a large financial institution [likely to be H&R Block] with Grameen Trust having a controlling interest. They expect positive cash flow in 4-5 years.
  
• A long-term Grameen executive, Prof. H. I. Latifee [see his recent whitepaper], the managing director of Grameen Trust will head up the initial "build, operate and transfer" team to setup and then hand-off operations to a USA team. The thinking is to transfer the know-how and DNA of Grameen Bank to seed this organization.
  
• The business plan references the Association for Enterprise Opportunity which estimates that there are more than 750 existing microfinance organizations/programs in the USA. Most of them are characterized as "social welfare programs" and none are financially self-sustaining [without donors] with the best running at only 70% cost recovery.
• Their initial focus will be on recent immigrants who have an entrepreneurial spirit. Micro-business loans will start at $500 and grow from there based on a positive repayment history. The borrowers will support one another in groups although they won't guarantee each others loans.
• It sounds like the focus is going to be on urban areas with the first test market of New York City. They are planning to take advantage of credit cards to simplify credit access and lower transaction processing costs (for borrower and themselves).
  
• They expect to later offer a number of membership benefits including networking, member discounts, visa and citizen information, credit establishment and more.
• They are hoping to ultimately create a lot of grief for the credit services for the working poor offered in the form of payday loans, loan sharks and other unscrupulous bottom feeders who prey on the vulnerable.
  

I am a big fan of introducing more competition and reasonable credit choices for the working poor in the USA. Grameen America has a lot of the right thinking on this including starting with a business (=sustainable) mindset, establishing a beach head with a likely-to-succeed client segment, partnering with a deep pocketed financial services company and taking advantage of technology to enable scale and cost containment. I think that the challenges of business licensing, regulations and tax reporting will likely require more of an incubator-type structure, but this is something that can evolve over time.

What do you think?

Reference: previous post on Microfinance in the USA

Update: Here is Grameen America's web site.

Labels: grameen, grameen america, microfinance, poverty, usa

Good article in Fortune magazine titled: India, The Superpower? Think Again by Cait Murphy.

She points out that India has done a marvelous job in building a revenue (and tax) generating IT sector employing 1 million people, but it has only 7 million employed in the formal manufacturing sector vs. 100 million people in China. The bottom line is that India is not generating enough jobs for the 10+ million Indians who enter the job market each year.

Other economies in Southeast Asia have successfully developed ahead of India "by being relatively open to trade; by investing in primary and secondary education; and by building pretty decent infrastructure (not only roads and ports, but health clinics and water supplies). India has begun to embrace one leg of this triangle - freer trade ... As for the other two legs of this development triangle - education and infrastructure - these are still badly broken. About a third of teachers fail to show up on any given day (and, of course, are unsackable); the supply of both water and power is expensive and unreliable."

Other key areas which India needs to focus on before boasting about being a superpower: an unreformed state banking sector; labor regulations that actively discourage hiring; abstruse land laws (and consequent lack of land titles); misshapen subsidies that hurt the poor; and corruption that is broad, deep and ubiquitous.

It is a very good thing to have a free press which publicly calls out these kind of issues.

Labels: india, poverty

The Trouble With Africa: Why Foreign Aid Isn't Working by Robert Calderisi is a very interesting read for anyone interested in getting more insight into the complexity of seeing a better future for Africa. Calderisi has 30+ years on the ground with international development and shares many stories about his personal experiences as well as behind-the-scenes issues of dealing with various Africa projects and leaders over the past 20 years. Even though he was a World Bank executive, he provides plenty of critique of the World Bank and the complexities of dealing with international politics.

Calderisi concludes with 10 bold and contraversial recommendations for re-directing African international aid towards the better governed countries in an attempt to deliver some helpful long-term beneficial results.

Read my full book review

Labels: africa, book reviews, poverty