Using the market to deliver services to people has been a facet of economic development since the advent of capitalism and industrialization. Only in recent times, companies have decoded the advantage of using the same market to help lift people out of poverty, and provide services to the poor.
In “Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits,” C.K. Prahalad outlines the massive market that is waiting to be tapped in the world’s poorest 4 billion people, albeit with radical innovation and technology improvements. Highlighting the innovative approach that Hindustan Lever Limited (HLL), applied in selling detergents to this bottom of the pyramid, Prahalad makes the point that the market can be leveraged to help the poor. The changes that HLL introduced in pricing points and packaging weights helped them deliver much needed products like detergents, soaps, shampoos, and other hygiene products, to a market that was unable to afford larger packets for the long term.
Access to poor markets
HLL is one of many examples of how innovation through market forces has transformed the way companies provide services to the poor. Grameen Bank, Mohammad Yunus’ brainchild, was a structural shift in how financial services perceive the poor. Grameen was successful in pioneering lending and credit services for the poorest strata of Bangladesh, who were traditionally shunned from formal formal financial services. In his book, “Banker to the Poor,” Yunus describes how Bangladeshi banks incorporated so many elements of Western banking system such as forms and collateral, for a society that was largely illiterate and poor. It required a fundamental shift in the banking industry.
Through a pilot inspired by field visits, Yunus substantially changed the perception of the poor as a market for financial services. The microfinance movement then saw replication in some of the world’s poorest communities, inspiring similar and improved versions in places as far as South America and West Africa. Emboldened by their success, Grameen then also branched out to other industries such as Grameen Telecom (village phone services), and Grameen Shakti (renewable energy), recognizing that true economic development cannot be exclusive, or only for the top tier of consumers. The divide of the rich being serviced by corporations and the poor being serviced by NGOs and charities, doesn’t encompass the myriad problems faced by the poor, and the complicated nature of economic development.
Local Entrepreneurs and the Market: The Case of Ashoka
But perhaps the most innovative way of the market based approaches to development, came in the form of a humble attempt to streamline social entrepreneurship through “Ashoka: Innovators for the Public.” Since its inception 35 years ago, it has found, selected, and supported more than 3,000 social entrepreneurs by inducting them as Ashoka Fellows. By mobilizing the entrepreneurial, and often youthful sections, of developing societies, Ashoka ensures that development problems can have local, organic solutions, and that social entrepreneurship emerges as a viable career option for people who wish to do good.
Ashoka motivates its movement by working on three key components which they believe creates effective “change-makers”: empowerment, empathy, and leadership. Bill Drayton, founder of Ashoka, truly believes that a combination of these three skills are crucial to creating an organic movement in communities with endemic problems. These are the kind of skills which are inherent to children of the elite, as they are rewarded for taking initiative from a young age. The confidence to navigate complex situations, empathize with someone different, and taking charge to solve problems, can be cultivated he believes. Cultivating these skills for a larger mass of people ensures that a small group of people at the top do not continue to retain control of innovation and entrepreneurship.
Rather than a top-down approach tattered with bureaucracy, seniority titles and red tape, these social entrepreneurs may or may not be society’s classic definition of the powerful. But through active engagement on the ground, they are able to solve problems for the communities they are in – mobilizing and investing in the citizens.
From the remote villages of the Himalayas to the urban slums of Kenya, Ashoka’s reach is fantastic in its scope. It signifies a shift from aid which focuses on infrastructure projects through public spending, to a belief that the people (through the market forces, and the private-sector) are essential to poverty alleviation. Additionally, it creates an eco-system that is inherently sustainable. It is not a dependent form of giving, but a truly empowering one, which truly divorces such programs from traditional aid.
Who is the ideal “Social Entrepreneur”?
Bill Gates has been contributing to society for far longer than the official launch of his foundation. Through his work at Microsoft, he pioneered the personal computers revolution, putting them in the hands of people worldwide, some who would have never had a chance to explore the benefits that the computer could bring. These very computers, through a domino effect, have transformed every industry, including aid. Gates’ work through Microsoft was incredibly entrepreneurial, even before he and Melinda Gates launched their foundation. He offered a cutting-edge technology at an affordable price point. Elon Musk, is another such entrepreneur who through his multiple ventures like PayPal, Tesla, and SpaceX, is furthering research and innovation that takes humanity leaps ahead. Commercial electric vehicles and energy storage was unthinkable a few decades ago, but now promises to be a crucial pillar of combatting climate change.
Social entrepreneurs needn’t be defined by one particular organization’s model. There is a legacy of innovation some impoverished societies have practiced by virtue of having no other option. Secondly, indigenous schooling systems, and other value and faith based educational avenues have strived to create a similar type of citizen – one who can be creative in finding solutions for their society’s problems, and is truly empathic.
The Social Entrepreneurship Bloom
The line between pure non-profit work and socially-minded business is blurring. Acumen Fund, a non-profit venture fund that invests in entrepreneurial solutions to address poverty, endorses what it calls a new kind of financial investment mechanism called patient capital. Patient capital are investments that don’t expect immediate financial returns on investment, and have a higher risk tolerance, as markets in many post-conflict and developing societies tend to present. Acumen uses charitable donations to invest in social enterprises across Kenya, Ghana, Colombia, India, and Pakistan to scale up commercially viable ventures that address a specific need in developing countries – performing a hybrid role of incubator and venture fund.
Through their Fellowship, they provide incubation support to local social entrepreneurs in their communities. One such example, is MasterG, founded by a Delhi based Parsons educated, ex-Armani fashion designer, who seeks to bring dignity to the forefront of India’s notoriously exploitative garment industry which forms the back supply chain of many of the most profitable, fast fashion companies.
Today, you can buy a trendy pair of shoes, and the company will promise to donate a pair of shoes on your behalf to someone in Haiti (TOMS); you can buy a pair of glasses, and the company promises a portion of your payment to an eye clinic in India (Warby Parker). It is easy to get carried away by the solutions that “social entrepreneurship” in the Ashoka way, offers. We must be mindful that while revolutionary in many ways, they cannot solve all the problems of poverty, war, and famine. But a complementary approach of mobilizing market forces to address the issues of poverty, in addition to a more traditional form of government-to-government aid which addresses some widespread problems such as a lack of public infrastructure, may be a more sustainable form of providing economic development to all stakeholders.
Wow, what a deli ghtful cheerleader article for the introduction of predatory lending to poor people. Has the author actually followed up how so-called microlenders extracted usurious interest payments from these "empowered" people?
Also of particular note is the stress on "social" – Social enablement appears to be primarily the build out of behavioral profiles for advertising purposes – also "national security" aka social control.
Hardly the basis for the betterment of society.
great i ll save this for future reference.