A Haitian company returns its expertise to Africa

The Inter Press Service has a great story today about a green energy company that is based in Haiti. ENERSA makes solar powered street lamps using small solar panels to power each light. The company employs people that live in the biggest slum of Port-au-Prince.

IPS writer Peter Costantini tagged along with a couple of ENERSA's founders as they traveled to Senegal to cooperate with another green energy company. Click on the link to the full story to read more about how the Haitian entrepreneurs learned about their ancestry in Africa during the trip.

A Senegalese firm specialising in solar-power installations, KAYER, had invited Noël and technician Frantz Derosier to visit the westernmost nation of West Africa to teach their employees how to fabricate their own photovoltaic (PV) panels, which convert sunlight into electricity.

Noël is co-founder, along with his partner Alex Georges, of ENERSA - Énergies Renouvelables, S.A. (Renewable Energies, Inc.). Derosier is one of their 20-odd employees. ENERSA manufactures solar streetlamps and other solar-energy equipment using PV panels that they build from scratch. They count around a thousand such lights installed in over 50 municipalities all over Haiti.

After the catastrophic earthquake of Jan. 12, 2010, which knocked out electrical power across the Port-au-Prince area, these lamps were the only public light sources for some localities. The temblor also destroyed much of ENERSA's physical plant, but all the employees survived and the firm was able to restart production within a few months.

During the nine days Noël and Derosier were in Senegal, a former French colony like Haiti, they conducted a week of training sessions with KAYER in the headquarters of a peasant farmers' confederation in the town of Mekhe, about 100 kilometres inland from Dakar, the capital.

The sessions resulted in the first solar panels "made in Senegal". The ongoing collaboration, according to ENERSA, will cover the conception and manufacturing in Senegal of solar products, including solar streetlights.
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Derosier and nearly all the other ENERSA employees are young men from Cité Soleil, the biggest bidonville (shantytown) in Haiti's capital, Port-au-Prince, where jobs are prized rarities. ENERSA trained them for several weeks in electronics and metal fabrication skills, and pays them wages well above the going rate in Haiti, where the majority tries to survive on a dollar or two a day.

Opinion: Social business should not avoid politics

Social business tries to bring business solutions to fix socials ills such as poverty, climate change or poor education. People get into social business because they believe the free market can help to solve the world's biggest problems. Sometimes they believe in the free market so strongly that they avoid any involvement with government even when the state might help to cause the social ill.

An opinion piece in today's New York Times warns that social business should not avoid government and politics all together. Writer Anand Firidharadas says that social businesspeople will need to bring their results oriented approach to politics.

Many social entrepreneurs treat power as something to work around. They can be clearer in articulating what they are for than in stating what they oppose, and why. They often take the holes of the system as a given and do their best to plug the leaks.

When I put that notion to Rebecca Onie, the chief executive of Health Leads, a social enterprise that trains college students to operate as social workers in U.S. clinics and hospitals, she pushed back and offered an explanation: Ideally, the government would fund the kind of social work she provides. It does not. Rather than fight the government, her group is making the “business case” for the usefulness of social workers, by demonstrating what works and collecting data on it.

Likewise, in poorer countries like India, social entrepreneurs address real needs — bringing solar lamps to villages, teaching women to weave shawls and connecting them to big-city markets. But the elites attracted to such projects are often less interested in combating the underlying structural problems. The villages need solar lamps because the government fails to bring electricity. The women must weave from home because their husbands forbid them to leave.

These problems are not inefficiencies in need of smoothing. They are fights in need of picking. But picking fights is rarely the social entrepreneur’s way.

In the United States, social entrepreneurs have flocked to education, which they say is the key to sustaining American competitiveness. But they have tended to work from the outside, building charter schools beyond the public system rather than taking on the hard but unavoidable politics of improving schools while easing thousands of ineffective teachers out.

When a member of their spreadsheet-wielding tribe, Michelle A. Rhee, actually got involved with politics, by becoming schools chancellor in Washington, she arguably cost the mayor an election and was just as quickly out of a job. That is perhaps why people stay away.

Leslie Crutchfield, the author of “Do More Than Give” and an expert on the field, suggested that activism was part of the learning curve for social enterprises. “Sometimes it takes a while for social entrepreneurs to recognize that such activism is required,” she told me. However, she added, once they do, the best of them are “relentlessly focused on changing the underlying system while also trying to alleviate symptoms.”

Providing cheap houses for slums might be an expensive idea

One way that social business has been succeeding is by providing inexpensive solutions for those in poverty. Products and services such as cheap heat, cheap stoves, cheap toilets and cheap fertilizer are some examples.

But what about cheap houses? Since so many poor people live in slums that only consist of shacks or tents, selling cheap housing to them would seem like a great social business.

An op-ed piece in the New York Times today warns against such a venture. Writers Matias Echanove and Rahul Srivastava from the Institute of Urbanology say that providing cheap housing for the poor could wipe out many jobs.

To start with, space is scarce. There is almost no room for new construction or ready-made houses. Most residents are renters, paying $20 to $100 a month for small apartments.

Those who own houses have far more equity in them than $300 — a typical home is worth at least $3,000. Many families have owned their houses for two or three generations, upgrading them as their incomes increase. With additions, these homes become what we call “tool houses,” acting as workshops, manufacturing units, warehouses and shops. They facilitate trade and production, and allow homeowners to improve their living standards over time.

None of this would be possible with a $300 house, which would have to be as standardized as possible to keep costs low. No number of add-ons would be able to match the flexibility of need-based construction.

In addition, construction is an important industry in neighborhoods like Dharavi. Much of the economy consists of hardware shops, carpenters, plumbers, concrete makers, masons, even real-estate agents. Importing pre-fabricated homes would put many people out of business, undercutting the very population the $300 house is intended to help.

Worst of all, companies involved in producing the house may end up supporting the clearance and demolition of well-established neighborhoods to make room for it. The resulting resettlement colonies, which are multiplying at the edges of cities like Delhi and Bangalore, may at first glance look like ideal markets for the new houses, but the dislocation destroys businesses and communities.

Sanitary energy thru toilets

2.5 billion people throughout the world don't have access to their own toilet. This leaves 2.5 billion people vulnerable to diseases such as cholera, diarrhea. These diseases are spread thru contaminated water as people are forced to use the outdoors instead of toilets to relive themselves.

Some non-profits and some social entrepreneurs have looked at ways of solving the problem by providing sanitation solutions to the poor. A team of engineers at the Massachusetts Institute of Technology have found a way make a business venture out of the human waste. Instead of selling inexpensive toilets to the poor, they have found away to convert the waste into energy that can be sold back into the grid.

From Forbes Magazine blogs, writer Elmira Bayrasli introduces us to Sanergy founded by MIT grads David Auerbach and Ani Vallabhaneni.

Auerbach and Vallabhaneni knew what they didn’t know. What they didn’t know was that they couldn’t draft up a sanitation solution in Boston – without the insights and input of those in the developing world. Committed to launching a start-up that would truly work for the poor, the two, along with a team of MIT classmates traveled to Kenya for the answers. Kenya, with eight million without access to proper sanitation but a university filled with bright and eager minds to help solve the problem, was an ideal testing ground. In January 2010 the team, in collaboration with the University of Nairobi, conducted a user survey among Kenya’s urban poor, inquiring about their lives. “It was important to us that we found a solution that fit into their lives, not our imagination of their lives,” Auerbach says.

What they found was that Kenya’s poor were interested in having compact stalls that could fit into the tight spaces of their usually one-room homes, rather than large community outhouses. They wanted a “permanent” feel to the stalls rather than the flimsy feel of a porta-potty. As a result, Auerbach, Vallabhaneni and their Sanergy team that includes engineers, architects and designers drew up plans for a 3×5 toilet made out of thin shell cement that is locally produced for $200 per unit. Each toilet is designed for a 100 uses per day. They are units, which also collect waste in double-sealed 30L containers, rather than pits, or septic tanks “that are then drained into waterways.” It is this waste collection that is key.

More than where to go to the bathroom, how to dispose of human waste is, as Auerbach points out, a primary reason that no one touches the issue of toilets. That was Sanergy’s opportunity. Recognizing that, though “messy,” human waste can be converted through anaerobic digestion to produce fertilizer or electricity. It is also where the Sanergy team recognized that it could generate revenue.

Sanergy produces toilets that are franchised to local operators who charge around $0.06 per use. Currently the company has two toilets serving approximately 150 each day. One is at Bridge International school (a for-profit school supported by the Omidyar Network), the other in Kibera, Kenya’s largest slum. These local operators keep all revenues. That, Auerbach says, is an incentive for them to clean, maintain and “market” the toilets. The operators then work with groups who collect the waste daily and bring it to facilities where it is converted to energy. “The waste from each toilet generates Sanergy revenues of $1250 per year.” The waste from 10 million creates a potential market of $178 million per year. Brown gold.

An Eco-toilet provides an entrepreneurial opportunity for one Kenyan

For those making only a couple of dollars a day, any little opportunity to make a earn a few pennies here and there can make a big difference. Often the work can be something that others don't want to do, a task that many feel is beneath them.

From the Next Billion blog, Jonathan Kalan writes about one women in the Kiberia slum of Kenya that does one task that others don't want to do.

Despite raising five children, four grandchildren, and now accommodating up to six people in one small bedroom, Angela fills as many hats as her head can hold to make ends meet and improve her community. Among her several positions in community committees and local NGO projects, she actively serves as a Community Health Promoter, is a member of the Riverside Silanga Garbage Collection group, tends to a small garden on the fringe of the village, sells bags of charcoal on the street to make a small income. And, since the end of last year, she earns 50-60 Kenyans shillings per day performing a task few would care to discuss let alone do: collecting poo.

That's right. Feces. Little, specially treated, white and green bags of human excreta, to be exact. Angelina is one of a few locals empowered by Peepoople AB, a Swedish social enterprise that launched a pilot project in Silanga in October. She's marketing and selling The Peepoo, a personal, single use toilet which sanitizes human excreta shortly after defecation, preventing the feces from contaminating the surrounding environment. After just a few weeks, the bags turn the waste into a nutrient rich fertilizer.

The Peepoo bags, which sell at a subsidized (by Peepoople) cost of 3 Kenyan Shillings each, are used at home, then returned to one of two "drop off" points where customers get a 1 Ksh refund for returning the bags.

It's in this simple, 1 Ksh refund, that Angelina saw an opportunity to develop a little venture for herself. Some residents either feel uncomfortable, or don't have the time, to drop off the bags, which are designed to both eliminate odors and ensure the safety of the handler. Angelina collects bags from her neighbors, and returns them in bulk, pocketing the 1 Ksh refund.

On a good day, Angelina told me, she'll collect and return 60-70 bags during her morning rounds (people leave them outside their houses for collection), making close to $0.85 for an hour's work.

"Bottom of the pyramid" marketing

Social Businesses that target people at the "bottom of the pyramid" with products and services have a very tricky path ahead of them. The examples of social businesses who have done it successfully are very few.

From the magazine Miller-McCune we are introduced to a University class that has the sole purpose of developing products for the poor. Writer Vince Beiser says the students at this Stanford class conduct a very unique method of market research.

The class, dubbed “Entrepreneurial Design for Extreme Affordability,” is premised on a counterintuitive idea: You can enrich the poor by selling them stuff. It brings together teams of graduate students from business, design, engineering and other disciplines to research a specific problem in developing-world communities, design a product to address it, and then, with the help of local and international organizations, sell that product as cheaply as possible to as many people as possible. The course has yielded some impressive results. Students have designed low-cost solar-powered lanterns, extra-efficient irrigation pumps and other useful products now being used by tens of thousands of people from India to East Africa.

“We are not treating the poor as recipients of charity, but as customers,” says Jim Patell, a professor at the Stanford Graduate School of Business who founded the program. “That means you need to figure out what they really want. That means treating them as equals. Charities don’t have to do that.”

For decades, the main model of Third World aid has been the obvious: Give stuff to poor people – be it hydroelectric dams, surplus food or medical equipment. But Western countries have poured some $1.5 trillion into such efforts over the last 60 years, and more than 1 billion people worldwide still live on less than a dollar a day.

The Extreme Affordability program is an experiment with a dramatically different approach to fighting poverty, one that in recent years has generated tremendous buzz among academics, development workers, entrepreneurs and corporate executives. It’s called “bottom of the pyramid” marketing. The idea is to harness capitalism to solve the problems of the world’s poorest — those at the bottom of the global economic pyramid. If you design a useful product for a market rather than for charity’s sake, the theory goes, the target population is more likely to actually want it and use it. If businesses can turn a profit making that product, it not only creates jobs but will keep getting made even if Western donors lose interest. And there should be colossal profits to be made: The world’s poor don’t have much money individually, but there are billions of them.

Get rich by helping the poor. It’s a powerfully alluring idea. A surge of books, symposia, blogs and corporate annual reports champion it. Major organizations, including the World Bank and the United Nations Development Program, have set up programs that support it. Venture capital funds are giving millions to startup firms trying to implement it. MIT, Penn State, Cornell and other top universities in the U.S. and other countries are teaching MBA students about it. “It’s picking up, big time,” says Luiz Ros, manager of a $250 million Inter-American Development Bank fund dedicated to supporting bottom-of-the-pyramid ventures.
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But all of that reasoning holds true only if one major condition is met: The business must actually be profitable. For several reasons, profit is where the bottom-of-the-pyramid principle runs into trouble in practice.

First, it’s hard to make a quality product that’s cheap enough for poor people in the developing world to buy. D.light’s lanterns, for instance, cost from $10 to $45 – a major outlay for someone living on $2 a day. “It’s not yet at a price where most of the people we’re targeting can afford it,” Estrada admits.

Distribution is also a massive challenge. “Companies here can just assume that FedEx or a trucking company will carry their products to wherever they need to go,” Coulson says. But in the developing world, there’s no guarantee that there will be trucks to move your goods — or even roads for the trucks to drive on. Coulson once visited a village in Indonesia that wanted to install a micro-hydropower station to generate electricity from a nearby river. “It was an eight-hour jeep ride from the nearest town and then another mile from the asphalt, and then you had to cross a rope bridge over the river to get to the village,” he says. The generator had to be designed in pieces small enough to be carried by hand over the bridge.

Market research, a key component of any business plan for the Western world, is another hurdle. Bottom-of-the-pyramid consumers often lack the education to answer written surveys, and the marketplace has few comparable products from which to extrapolate potential sales. “Solar technology is a brand-new concept for most of our customers,” says Dorcas Cheng-Tozun, a D.light spokesperson. “Some have never even seen electric light before. Our marketing efforts have to incorporate an extra level of information that helps our customers understand what the product is, how it is used and how it can benefit them.”

As a result, so far, there are precious few major success stories for bottom-of-the-pyramid products. “Only a handful of enterprises in low-income markets are commercially viable and operate at scale,” note the authors of a 2009 study by the Monitor Group, a Cambridge, Mass., corporate consulting outfit. With all that in mind, Aneel Karnani, a professor at the University of Michigan’s Steven M. Ross School of Business, concluded in a 2010 paper that “there is no fortune at the bottom of the pyramid. Marketing socially useful products to the poor offers only limited business opportunities.”

Hart draws a different conclusion: Businesses have been doing it wrong. Most corporations that have tried selling to the bottom of the pyramid have done so simply by making cheaper versions of their existing products, he says. “That doesn’t work well,” he says. “What we’re discovering is we need to move from a mentality of finding the fortune at the bottom of the pyramid to creating the fortune with the bottom of the pyramid.”

To create products the developing world will buy, Hart says, companies must more or less do what Patell does: send their people into urban shantytowns and rural villages so they can connect with locals and figure out what they really want and how it can be made and sold to them — with the help of local entrepreneurs. He has even developed a research protocol to guide companies through this process.

There are at least a few clear-cut cases of corporations doing very well with, while also doing good for, the bottom of the pyramid. The astonishing proliferation of cell phones throughout the developing world is the standout example. Eight million new users sign up for mobile service in India alone every month; more than 60 percent of the population already has one. China’s biggest mobile carrier boasts more than half a billion subscribers.

Using business to prevent deforestation

The blog Next Million has introduced us to a business that tries to provide an income from the Amazon rain forest. Ouro Verde attempts to prevent deforestation of the Amazon by selling products made from Brazilian Nuts that grow deep within the forest. Entrepreneur Luis Laranja believes this is the best way to save the rain forest and says his company has already protected 1.3 million hectors from being burned down.

From Next Million, writer Tracy Elsen profiles Ouro Verde.

Laranja believes that the Mato Grosso's Brazil nut trees, combined with the power of small business, can help stop deforestation. A longtime environmental activist, Laranja left his job as a professor eight years ago and moved to the Amazon rainforest to start Ouro Verde, a sustainable Brazil nut company. Ouro Verde buys, processes and sells high-quality Brazil nuts and products, including Brazil nut meal, extra virgin oil, and butter.

Laranja's company is transforming the living rainforest into a source of income for Mato Grosso's rural residents. "I really believe that what we have to use to preserve the forests is the market," he says. "If the forest does not provide money for the people, it will be impossible to save it." Ouro Verde creates special relationships with local indigenous and small-holder farmer communities that collect and supply Brazil nuts. By eliminating the high profit margin "middle man" between the company and local suppliers, Ouro Verde can pay its suppliers fair wages and thus make the living forest more valuable than lumber exploitation or landclearing.

Ouro Verde also provides training to those involved in Brazil nut collection to help improve collection, storage, and transportation, ensuring the company receives premium quality and suppliers receive a premium price. Thanks to its practices, the company earned organic certification for its entire product line from Ecocert Brasil, including certificates that address the specific requirements of the Brazilian, European and American markets.

The economic value provided by Brazil nut trees also protects the surrounding trees. Brazil nut trees produce at their highest levels when they live in healthy, primary forests. Therefore, nut collectors are incentivized to protect entire forests surrounding Brazil nut trees in order to access the largest, best-quality crops.

Social business could play a big role in the Middle East and North Africa

With the political change sweeping through the Middle East, people are beginning to ask "now what?" If the protests stem from a lack of an economic opportunity and a lack of a political voice, what is the best way to give to those things to the masses.

Suzi Sosa of the RGK Center for Philanthropy and Community Service at the University of Texas at Austin says that social business could be one of the answers. The dual aims of profit and social benefit that these type of businesses bring can help give the people of the Middle East what they need. Soza's latest op-ed piece was found at INC Magazine.

Social entrepreneurship can be a powerful solution for the MENA (Middle East and North Africa) region. By blending both financial sustainability (profits) with a prioritization of social impact, social enterprises will contribute to both economic revitalization and social reconstruction. Social entrepreneurship is also particularly well suited to youth. It not only taps into the desire for independence and self-actualization, but it is also relevant for a generation whose worldview incorporates a sense of responsibility that goes significantly beyond immediate family and self.

Social entrepreneurship provides a "third way" that can productively balance the desire for greater social equity with the need for rapid economic growth. At the macroeconomic level, social entrepreneurship deploys a stakeholder model that not only provides more robust checks-and-balances in the system but also more fairly distributes profits and benefits and adds greater emphasis to long-term planning. For example, in social entrepreneurship, instead of just focusing on shareholders, the enterprise governs itself by taking into account a network of stakeholders, including customers, employees, suppliers, investors, the community, and the environment. In the MENA region many states governed from a semi-socialist approach while informal economies practiced unregulated capitalism. Social entrepreneurship can balance wealth creation with equity and fairness and can provide greater accountability without the overbearing bureaucracy and regulation that inhibits growth.

Finally, social entrepreneurship is a powerful solution because it contributes to the reduction of social and environmental problems without having to rely on charity or public funding. For example, in Egypt there are virtually no public resources to fund social programs. Currently, Egypt's public debt is more than 80 percent of GDP and government spending on education is less than 4 percent of GDP. The national GDP per capita is a meager $6,000 per year, leaving more than 20 percent of the country living in poverty. The only hope of achieving sustainable, scalable solutions to pressing social and environmental problems is to create enterprises that can provide for the public good while being financially sustainable and scalable on their own.

The MENA region is already home to some impressive social entrepreneurs. Synergos recently recognized 22 Arab World Social Innovators, including Kamal Mouzawak, a Lebanese social entrepreneur who founded two enterprises, Souk el Tayeb and Tawlet—both focused on the economic empowerment of rural farmers by providing profitable opportunities for them to sell their goods. In the Palestinian territories, Mohammed Kilany and Lana Hijazi founded Souktel, a social enterprise that leverages mobile networks and SMS messaging to connect unemployed Palestinians to job opportunities for an affordable monthly fee.

The many designs of green stoves

Many engineers and social businesses are working on clean burning stoves for the under-developed world. The designs run the gamut from stoves that run on solar power to burning animal waste.

The green-stoves can help the poor in many ways. The clean burning stoves can help their health, as they no longer have to breathe in fumes from kerosene or wood. They also help with safety as people in war zones no longer have to expose themselves in gathering gather fuel for cooking.

From NPR series on Social Entrepreneurs, reporter by Martin Kaste talks about the competition and cooperation between clean stove designers.

"Impact Investing" investments to ease social and environmental ills... and to make money

The next big segment in investing could be what is called "impact investing." These investments try to make an impact on social and environmental improvements as well as financial returns. A new study from JP Morgan and Rockefeller Foundation says this "impact investing" could bring in 667 billion dollars over the next 10 years. A majority of the investment on will go to businesses serving low to middle income countries.

From the East African, writer Cosmas Butunyi gives us more information on the study.

This will see impact investment, as this trend is known, rake in up to $667 billion in profits over the period and achieve the billing of the newest emerging asset class of the next decade, according to the report prepared by JP Morgan and Rockefeller Foundation.

It indicates that market opportunity for investment is vast, including among the poor population, who earn less than $3,000 a year.

In this category of the population, the potential for invested capital is estimated at between $400 billion and $1 trillion over the next 10 years, realising profits of between $183 billion and $667 billion.

These estimates are based on analyse conducted on selected businesses in the housing, rural water delivery, maternal health, primary education and financial services sectors for this portion of the global population.
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“Though it is still at a nascent stage of development in Africa, in the past few years, there has been a robust uptake of the idea and practice of impact investment and there is clear evidence that it is taking root in key markets across the continent,” says Margot Brandenburg, an associate director at the Rockefeller Foundation.

This includes Standard Bank’s $100 million investment in 2009, in support of smallholder agricultural development in Ghana, Tanzania, Mozambique and Uganda.

This was an expanded form of a programme implemented in Kenya, in which the Alliance for a Green Revolution in Africa (Agra) and the International Fund for Agricultural Development provided $2.5 million each as a loan guarantee that leveraged $50 million from Equity Bank to support investments in smallholder agriculture.

Other impact investors in the region include, Root Capital that focuses on rural small and medium enterprises in Africa and Latin America, and recently made a $100,000 loan of working capital to Tanseed, a Tanzanian seed breeding company; and E+Co which supports businesses providing clean energy in developing countries and has invested in Zara Solar, a company that sells solar home systems to rural homes in Mwanza, Tanzania.

Video: Proctor and Gamble developing products for people at the "bottom of the pyramid"

From CNN Money, a video on Proctor and Gamble's efforts to make more products at a cheap price for people at the "bottom of the pyramid."

Social business becoming a bigger part of the academic world

Young people have a greater interest in doing good and changing the world than ever before, so the educational system is trying to adapt by making social enterprise a bigger part of business schools.

Leaders of business schools and Universities says it's relatively easy to get grant money for a social enterprise school, but it's harder to get good professors with a knowledge of this new field or partnerships in the under-developed world for hands-on learning.

From MSNBC, writer Roland Jones examines the growth in social enterprise schooling.

Business schools are racing to meet the demand for such “social entrepreneurship” programs. Observers say a growing number of schools are offering stand-alone social enterprise programs, or as part of a business school degree program.

There are several possible reasons for the growing interest in social enterprise programs, including the economic meltdown that eliminated tens of thousands of jobs from the financial sector and darkened the reputation of the banking industry.

But the current generation of young people also has a strong sense of social responsibility, said Thomas Moore, dean of the College of Business Administration at Northeastern, which has some 200 students enrolled in social enterprise programs.

“There’s a lot of interest in social enterprise at the business school, and I think it’s partly generational,” Moore said.

“These days students don’t want to wait; they want to make a difference now,” he said. “This is the curriculum that prospective students expect, and if you don’t give them the opportunity to get involved in it they will do it for themselves anyway.”

Scott Shrum, director of MBA admissions research at Veritas Prep, a test prep and MBA admissions consulting firm, agrees. He’s seeing more prospective students looking for schools with social entrepreneurship programs, and more business schools expanding their programs.

“It used to be that a business school’s social entrepreneurship program was just an office, but now it’s often a whole department,” said Shrum, co-author of “Your MBA Game Plan: Proven Strategies for Getting into the Top Business Schools.”

“The programs have become more robust and sophisticated, and they’re attracting big naming gifts, or endowed chairs,” he said. “So if you aspire to spending a semester abroad helping a coffee farmer in Africa get his or her business off the ground, you can. That kind of opportunity didn’t exist much before.”

Developing the private sector for developing the world

More and more people involved in international development are realizing that the private sector and business should play a big role. Governments and donor aid agencies have avoided working with business in the past, but it is jobs that the poor need and always ask for.

From this essay that we found in the Guardian, writer Zahid Torres-Rahman from Business Action for Africa talks about the need for busineeses to be involved in development.

And it is when we think about what will drive development in a truly long-term way, that it becomes clearly important to focus on enterprise, jobs and economic opportunity. Ask a poor person what they see as their exit strategy from poverty, and they reply growing their business or getting a job. Two successive surveys of over 60,000 poor people by the World Bank have clearly demonstrated that.

As a result, DFID – and many other donor agencies around the world, 11 of which have released a statement (PDF) – are starting to think more constructively and creatively about how they can harness the private sector for development impact, and to generate the millions of jobs needed in developing countries. The same goes for a growing number of civil society organisations, such as Oxfam and Care, both of which have dedicated teams looking at how to partner with business.

This includes helping small businesses to grow and small-holder farmers to earn a more stable living. But it also includes engaging with large corporates – both international and national – from which much of the development community have instinctively shied. Yet it is in this area of big business engagement that much of the most innovative and promising solutions are emerging.

Best of all, these are not solutions being driven by "corporate social responsibility" or philanthropy, but by business sense and commercial opportunity – which makes them intrinsically sustainable and scalable.

The Business Call to Action, housed at the UN, provides some inspiring examples of companies having an impact through business models that create opportunities for poor people – as employees, suppliers, distributors or customers. To date, according to Helen Clark, head of the United Nations Development Programme, companies that have made commitments under the Business Call to Action will bring access to affordable IT, finance, healthcare and agricultural goods and services to over 10 million people, as well as jobs for nearly 40,000 people and better livelihoods for hundreds and thousands of farmers in Africa and India.

Getting out of a failing social business

Some creative entrepreneurs motivated to improve social ills are beginning to try out creating social businesses. This new hybrid business that has two goals, not only to make a profit and to ease societal problems.

A few prominent social businesses from the States have failed and that is beginning to make investors wary of them. An article in the New York Times cites the examples of World of Good which was bought by e-bay, and the microcredit lender Unitas.

Another problem being discovered is when entrepreneurs decide to end the failing social business. Laws in the US make if difficult to separate the profit and for-profit parts. The laws complicate things for the entrepreneur when they want to end the part giving them the most trouble.

From the New York Times, writer Stephanie Strom writes about the difficulty in getting out of social businesses that are bleeding money.

GlobalGiving is one of the most prominent examples of the hybrid model of social enterprise that married a profit-making business to a nonprofit organization. Such dual-mission companies have sprouted over the last decade as a means of addressing the financing difficulties faced by many nonprofit groups, particularly as they need capital to expand. “It is virtually impossible to grow a social enterprise in any significant way relying wholly on donated money, earned revenue and debt financing, which are the only sources of financing available to nonprofits,” said Allen Bromberger, a lawyer with extensive experience in nonprofit financing. “These hybrid structures allow social enterprises to tap conventional investors interested in making profits while continuing to pursue their social missions.”

But like Dr. Dolittle’s pushmi-pullyu, the animal that had trouble moving because its two heads could not agree on a single direction, the hybrid model for nonprofits is proving problematic. On occasion, the need to generate returns for investors overwhelms the social mission. In other cases, the business falters altogether and cannot support the nonprofit.

Within the last two years, several ventures have split up or been dissolved. For example, World of Good’s commercial unit was bought by eBay, and its nonprofit arm is now struggling to stand on its own. Another prominent hybrid, Pura Vida Coffee, almost collapsed. And some, like GlobalGiving, demonstrate how hard it is to “cash out” of a venture that is not purely commercial. It wound up using foundation grants to prop up its losing profit-making partner.

Mr. Whittle said two things drove their decision to create a hybrid. “We looked at the philanthropy and didn’t think we could raise the capital required to support the technology, and we wanted to impose a brutal bottom-line discipline on what we were doing,” he said.

Investors have increasingly voiced concerns about hybrid groups. “This conjoined structure really has problems,” said Kevin Doyle Jones, a partner at Good Capital, one such investment firm. “Embedded in it is an inherent risk that individuals are profiting from donations that were made for public benefit.”

These entities, he cautioned, should avoid engaging in “private inurement,” or providing excessive benefit to a person who is close to or has a controlling interest in a nonprofit — though tax law says nothing about how much is too much.

Even newer models are evolving. Several states have passed legislation that permits the creation of so-called LC3 companies, which can raise money from traditional capital markets but place social benefit ahead of profit, and B Corporations, which are certified based on their ability to demonstrate that their business produces certain social goods. But Will Rosenzweig, a founder of the specialty tea company Republic of Tea and now the managing director of Physic Ventures, another firm that looks to invest in companies that bring social benefit, expressed skepticism of the new models. “I think you really have to make a choice and be a business or be a nonprofit,” he said. “It’s hard to be both.”

New US Aid program to invest in science based social businesses

President Obama is rolling out some changes and new programs for US development aid. One of the new programs announced last week will invest in science and technology innovations that address the world's problems. The program is a sign that the government is willing to give some development responsibility to social business.

From Just Means, writer Harry Stevens introduces us to the US Aid program called "Development Innovation Ventures."

Last week the United States Agency for International Development (USAID) announced the official launch of "Development Innovation Ventures," a new department devoted exclusively to fostering innovation in the delivery of global aid. The department, to which the acronym "DIV" has been applied, is part of President Barrack Obama's comprehensive scheme to encourage innovative approaches to improve the delivery of social services.
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DIV, which will be led by Harvard Economist Michael Kremer, intends to seek out and invest in "high-risk, high-return projects" that offer inventive and scalable solutions to global social challenges. DIV has already chosen eight U.S.-based investees to receive between $99,000 and $230,000 of USAID's $21 billion budget. Among the investees are a mobile reporting platform for Afghanistan, a solar lighting framework for Uganda, and a rapid pregnancy-induced hypertension diagnosis test for Nepal developed at Johns Hopkins.

Using the SKS IPO money to begin more social bushiness

The initial public offering of stock for SKS Microfinance was one of the most controversial events we followed this year.

The India microcredit bank was accused by many as only being into microcredit to make themselves rich. Some including microcredit's founder Muhammad Yunus, believe that those who begin microcredit services should do so without seeking to gain much profit for it. The microcredit "purists" say that only those who receive the loans should reap the benefits.

However, the man who helped to start SKS Microfinance is going to use the money he gained from the stock IPO to begin more social businesses. Further, SKS investor Vinod Khosa says that for-profit microcredit banks work better than the non-profit banks.

From the New York Times, writer Vicas Bajaj profiles Khosa and his plans to help more of those on the bottom of the pyramid.

An Indian transplant to Silicon Valley, Mr. Khosla plans to start a venture capital fund to invest in companies that focus on the poor in India, Africa and elsewhere by providing services like health, energy and education.

By backing businesses that provide education loans or distribute solar panels in villages, he says, he wants to show that commercial entities can better help people in poverty than most nonprofit charitable organizations.

“There needs to be more experiments in building sustainable businesses going after the market for the poor,” he said in a telephone interview from his office in Menlo Park, Calif. “It has to be done in a sustainable way. There is not enough money to be given away in the world to make the poor well off.”

Mr. Khosla’s advocacy of the bootstrap powers of capitalism is part of an increasingly popular school of thought: businesses, not governments or nonprofit groups, should lead the effort to eradicate global poverty.

Some nonprofit experts say commercial social enterprises have significant limitations and pose conflicts of interest. But proponents like Mr. Khosla draw inspiration from the astounding global growth of microfinance — the business of giving small loans to poor entrepreneurs, of which SKS Microfinance is a notable practitioner.

Advocates also find intellectual support for the idea from the work of business management professors like the late C. K. Prahalad, who have argued that large corporations can do well and do good by aiming at people at the so-called bottom of the pyramid.

Besides Mr. Khosla, entrepreneurs like Pierre Omidyar, a co-founder of eBay, and Stephen M. Case, a co-founder of America Online, have started funds with similar aims.

But Mr. Khosla, 55, who moved to the United States from India as a graduate student in 1976, has another motive, too. He wants to goad other rich Indians into giving away more of their wealth.

India’s torrid growth over the last decade has helped enrich many here — Forbes estimates that India now has 69 billionaires, up from seven in 2000 — but only a few have set up large charities, endowments or venture capital funds.

“It surprises me that in India there is not a tradition of large-scale giving and helping to solve social problems and set a social model,” Mr. Khosla said.

Wharton University's Societal Wealth Program

A program from Wharton University of Pennsylvania tries to create businesses that can build wealth for the poor and ease societal ills. Wharton's Societal Wealth Program not only tries to build businesses in the under-developed world but in the United States as well.

A new paper released by the SWP outlines 12 different projects the program has tried to start and the degrees of success each has achieved. The professors behind the project say that there are more failures than successes.

From Knowledge@Wharton section of Forbes magazine we find out more about the program

The WSWP initiatives are designed to move beyond a charitable aid model for combating poverty by creating economic enterprises that lead to self-sufficiency rather than dependency and that will have a major and lasting impact. "There are plenty of charities doing things for free. What we are attempting to do is create poverty reducing businesses," says James D. Thompson, director of the WSWP, who co-authored the paper with Wharton management professor Ian C. MacMillan.
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Since its launch in 2001 WSWP has been involved in 10 projects and is in the early stages of evaluating two others. The four cases highlighted in the paper represent a range of outcomes from success to termination. Many of the other six projects were disengaged or significantly altered--a rate Thompson says is comparable to findings on typical entrepreneurial startups. "You're likely, if you follow this approach, to encounter more failures than successes," he notes.

MacMillan adds that the principles that apply to building societal wealth should not be limited to use only in poor nations or developing economies. "We have misery in the United States," he says. "There are many areas of high unemployment in appalling ghettos, where single mothers are trapped in environments where the best they can do is eke out a living. It's no joke that we can apply the same principles here."

The four projects detailed in the paper range from a highly successful animal feed effort in Zambia to a proposal to improve nutrition through better peanut processing that was never put into practice. The feed project used linear programming to calculate optimal feed mixes resulting in high-quality, lower-cost feed for farmers who were able to expand chicken production. Starting with six men mixing feed on a cement floor, the effort is based on a network of small producers, rather than a conventional high-volume model.

In South Africa, WSWP backed a project to train uneducated single mothers to work in bakeries making high-end healthy cookies for sale to tourist hotels. The authors call this program "marginally successful" and note that it is now directing sales toward exports to developed countries. The authors write that the "jury is still out" on a project in Botswana designed to use electronic medical records to improve care for HIV/AIDS patients by allowing nurses to make more diagnostic and prescriptive decisions, which in turn frees up doctors for administering higher-level services.

The WSWP ultimately dropped a plan to improve nutrition with more effective peanut processing. The idea was appealing because peanuts could provide high nutritional value to the diets of people throughout sub-Saharan Africa and in Latin America. However, an early analysis revealed that high transportation costs and the likelihood of losses through theft at various points in the logistics system made it impossible for the project to sustain itself financially. "This is a great example of one of those ideas that was initially put to us that we thought had enormous potential," Thompson says. "But during our due diligence and modeling process, we just couldn't find a way of getting the business model to make financial sense."

eBay founder to invest in more Indian social businesses

A non-profit venture fund set up by eBay founder Pierre Omidyar plans on spending more money in India. Pierre Omidyar and his Omidyar Network invests in companies that provide solutions or products that can improve the lives of the poor.

Similar to the Acumen Fund, Omidyar invests in the companies but doesn't demand a return on the investment. If the investment is successful and the money paid back, the money just gets invested again elsewhere.

From the Wall Street Journal's India Real Time, writer Amol Sharma talks about what Omidyar hopes will come from the investments.

Among the key areas the group plans to target in the future, Mr. Sinha said, are businesses that aim to bring poor people into the banking system, social media enterprises and technologies aimed at making government more transparent. He said the amount Omidyar Network commits will be “driven by opportunities,” but he expects deals worth $100 million to $200 million in five years.

“We’re looking for organizations that are going to have breakthrough impact, and are going to scale and touch millions of lives,” Mr. Sinha told India Real Time.

While in some ways it acts like a venture investor, Omidyar’s funding mechanism is purely philanthropic.

“Basically, we have access to Pierre’s checkbook,” Mr. Sinha said. “We have one source of permanent capital and that’s Pierre’s wealth. He’s very generous.”

That means there’s no time-horizon by which investments need to be made and no venture fund investors demanding a payoff. Profits from any investments—such as the sale of a portfolio company—are re-invested in philanthropic deals.

Mr. Omidyar, the French-born entrepreneur who founded eBay in 1995 and has a net worth estimated at over $5 billion, has become an active philanthropist along with this wife Pam in recent years.

The venture-meets-philanthropy model that Omidyar Network has followed is getting increasingly popular in developing markets. Acumen Fund, which calls itself “a non-profit global venture fund,” has more varied sources of funds than Omidyar’s organization but a similar approach to making investments. It targets sectors such as health, housing, water and energy.

A fair form of poverty tourism

There has been a lot of talk about poverty tourism on the internet lately. An article posted today at All Africa talks about a tourist stop that actually helps people in poverty by selling crafts that can give them a decent wage.

From this Namibian article that we found at All Africa, writer Sukaynah Alkatib tells us about the Namibia Crafts Centre.

THE Namibia Crafts Centre (NCC) in Windhoek is a vibrant tourist heaven packed with gifts and souvenirs such as baskets, printed fabrics, stationery, carved wooden animals and ostrich egg-shell jewellery, to name a few.

And although there is a lot to look at, there is even more to see behind the curtains.

Mark Holker, who has been volunteering as the centre's Business Development Manager for the past three years, says:

"We have a network of around 800 rural craft producers throughout Namibia.

But we don't just buy their goods, we pay them fair prices, support them through continuous artistic and business training and help them to keep ahead of the competition by developing new products."

These ideals have earned them a place as a member of the International Fair Trade Association - which promotes poverty alleviation and partnerships as core values alongside sound business principles for companies and social enterprises alike.

"The NCC is a charity so we are often criticised for selling at twice the cost of production, but what people don't understand is that we put a lot back into the communities that supply us and we have many overhead costs in terms of sales promotion, course training, marketing, rent and electricity" explains Holker.

"There is no point in starting a project if you cannot sustain yourself and continue to improve peoples' lives. Sustainability is the reason why we are still going strong 18 years after we were first established."

Kick starting African farmers

From the Voice of America, the story of an American business that sells water pumps to African farmers. The water pumps sold from the business KickStart can help small farmers increase their yields and make more money.

A California social entrepreneur is fighting poverty in Africa. Through a program called KickStart, he sells, rather then gives, small pumps to poor farmers in an effort to encourage entrepreneurship.

This water pump -- called the Super Money Maker -- is designed to make a big difference in the lives of rural Africans.

Martin Fisher -- a co-founder of the non-profit KickStart -- demonstrates the technology on the rooftop of his San Francisco office. "It's cheap, it's extremely robust, it won't break down, it's very lightweight," he says, "You can carry it to the field."

KickStart is part of a growing trend in the development community towards social entrepreneurship. KickStart sells its pumps to poor rural farmers, with the promise that they can make money with them. For a small farmer, replacing a bucket with a pump can lead to cultivating a wider variety of crops and creating work for family and neighbors.

And in sub-Saharan Africa, where only four percent of the land is irrigated, buying a small pump can make a big difference. Fisher says his experiences in Africa years ago showed him many people value the things they pay for more than the things they're given.

"I went over to Africa as a socialist, and after about five or six years of hitting my head against the wall, became a small "c" capitalist," Fisher said.

In towns and cities in Kenya, KickStart has set up 450 shops that sell pumps --made inexpensively in China -- and has set up demonstration stations. The foot-operated pumps are sold for a hundred dollars --a lot of money for an African subsistence farmer.

At the University of California at Davis, Mark Bell teaches international agricultural development. He agrees with Fisher that the tradition of non profits in developed countries giving tools and equipment to poor people in third world countries -- is a poor model.

"If you go in and say, 'Here's a freebie,' then people are going to say, 'Sure, give it to me.' And when you leave, you know, who knows what happens to it. But if a farmer is given the opportunity to access and then makes a decision to buy, I think that's the real proof that this is something that's beneficial to them," Bell said.

Daniel Karanja saved for months to come up with the money for one hip pump. It worked, and now he says he would like more. "I want to add for myself another pump," she says, "Now this time I get the super money maker because I want now to cultivate a large piece of area, where I can grow more crops, commercial crops."

The development community is divided over whether non-profits should give away or sell technology and services as diverse as solar lighting, water filtration, healthcare and education. KickStart says the sale of its pumps has helped to move nearly half a million people out of poverty in Kenya, Tanzania, Mali and Burkina Faso.