I just picked up a book called The Blue Sweater, by Jaqueline Novogratz, who founded and runs the Acumen Fund. I'm about a third of the way in so far, and it's really eye-opening. She's very candid about her early naivete and the mistakes she made along the way, but it's also clear that she's incredibly smart and hard-working, and most of all, persevering. Time and time again, she references "patient capital" - the ability to tweak investments, learn what really works, give it time - and she means it. It seems a much better approach than what we as Americans usually want to do -- throw some money at a problem to assuage our conscience, and then forget about how it's actually working.
I want to keep learning about these things, and to share good examples when I find them. Today I have one example of doing it wrong and one of doing it right.
The wrong way
Novogratz describes a snack shop in Kigali, Rwanda that emplyed 20 women, paying them 50 cents per day through $650 a month in donated funds. The prevailing wisdom was that employing the women was better than simply handing out the money. However, with poor quality, no effective distribution, and little motivation among the women, the project was a continual money-losing venture. As Novogratz observed:
"You could triple their incomes if you just gave them the money. It was a perfect illustration of why traditional charity too often fails: In this case, well-intentioned people gave poor women something "nice" to do, such as making cookies or crafts, and subsidized the project until there was no more money left, then moved on to a new idea. This is a no-fail way to keep already poor people mired in poverty."
If you want to know what she did to address the problem, maybe you should buy the book. ;-)
A better way
Mosquito-borne malaria infects hundreds of millions of people per year, and kills over a million, most of them in Africa. In additionto the death toll, it's a continual drain in worker productivity, it keeps kids out of school, and it taxes an already strapped health care system. Spraying with pesticides has been realtively ineffective.
Mosquitos have a hard time flying in moving air; they need you to be still to get to you. Naturally, most mosquito bites occur when people are sleeping. In Africa, people use bed nets to keep mosquitos away at night, and the if possible, they treat the nets with pesticides. However, the nets traditionally have to be re-treated about six months later. Most people don't do it.
The Japanese company Sumitomo had come up with a longer-lasting way to treat the nets, and a scientist at the World Health Organization worked with ExxonMobil and UNICEF to find a way to manufacture and distribute the nets on a large scale. The genius of Novogratz and the Acumen Fund was to pull in an African manufacturer. Acumen worked with A to Z Textile Mills, Ltd. in Tanzania to transfer the IP and provide startup costs to get them started making the nets.
In the old world, this would have been a one-time donation, or a even a way to help some Western companies sell the nets. Thanks to Acumen, the nets have been turned into a profit center. In just a few years, A to Z has found ways to make the nets more cheaply, is looking into other products (door covers and curtains), and is expanding into Ethiopia and Nigeria. Not only are the nets going out, bt the whole enterprise is heading towards being sustainable and locally-run. It already employs thousands in Tanzania. A to Z now makes over 6 million nets a year, and in just three years, child deaths due to malaria have been cut 62% in Ethiopia. These nets cost about $2 to make.
Stuff like this makes me really excited. I hope I can find a way to get an MBA and work on similar projects when the Bean heads off to college.