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Can Business Solve Poverty?

If you ask the influential members of the Aspen Network of Development Entrepreneurs, the answer is unequivocally yes.

"Can business solve poverty? If you think it can, raise your hand."

When I asked that question from the podium earlier this week at the Aspen Network of Development Entrepreneurs' (ANDE) annual meeting, nearly every one of the 200 members packed into the room raised a hand.

ANDE members head up organizations that provide vital financial, educational, and business support services to small and growing businesses (SGBs) in emerging markets. Through rigorous tracking, ANDE—led by executive director Randall Kempner—is demonstrating that SGBs create jobs. It also seeks to show that SGBs catalyze long-term economic growth, and yield social and environmental benefits.

The focus of that evening’s panel was Paul Polak, whose comments and new book, The Business Solution to Poverty, provoked great excitement among his fellow panelists, who included Jacqueline Novogratz, CEO of Acumen, and Paul Basil, founder and CEO of Villgro. The solution that Polak recommends—together with his co-author Mal Warwick—is to "tap the mainstream capital markets to fund large-scale, global enterprises that address the basic needs of these 2.7 billion people: needs for clean water, renewable energy, affordable housing, accessible health care and education, and, above all, jobs." Polak recommends a systematic approach including "zero-based design" to address the needs of the poor—rather than simply tweaking the designs of existing products. He urges listening to the customer, the importance of scale, ruthless affordability, and a plan for generous profits to attract vital private capital, among other things.

Novogratz stressed that partnerships among NGOs, global corporations, and governments are essential to solving poverty. Based on Acumen’s success in attracting and investing $83 million in seventy-five companies in South Asia and Africa, Novogratz emphasized that multinational corporations provide vital access to financial and human capital. The businesses in which Acumen invests focus on delivering affordable healthcare, water, housing, agriculture, education, and energy to the poor, and have succeeded in creating 58,000 jobs and impacting 100 million people.

As described by Novogratz, one of Acumen’s most successful partnerships has been with The Dow Chemical Company to scale innovative business enterprises in East and West Africa. Novogratz talked about the win-win. Acumen’s portfolio companies, averaging between $1 million and $2 million in revenues annually, need help scaling their business models to deliver critical goods and services to low-income people in the areas of energy, water, sanitation, and agriculture. Acumen gains from Dow problem-solving expertise and general capacity-building consulting, including market expansion in new geographies. Acumen’s interests align with Dow’s, as it expands its presence in the region and continually seeks to understand the regional economy in which it invests. Together, noted Novogratz, Acumen and Dow are providing Acumen’s companies with the investment funds and technical assistance they needed in order to scale.

"How many of you or your investees and clients engage in partnerships with multinational corporations?" I asked from the podium. The vast majority of hands answered "yes."

Paul Basil’s organization, Villgro, has incubated 60, early stage, rural businesses that serve the poor in India, impacting five million people. Basil stressed the importance of offering products that will enhance incomes. The example he gave was Sproxil—founded by Ashifi Gogo—which provides mobile-based solutions for businesses in emerging markets.

While the evening’s discussion was quite animated, there was agreement on market-based solutions to poverty, the fundamental importance of job creation, and rigorous measurement—with appreciation for resources like the Impact Reporting and Investment Standards and the Global Impact Investing Rating System. There was also great respect for the panelists and members of the audience, many of whom have a strong commitment and dedication to moving people out of poverty.

[Hands: Bikeriderlondon via Shutterstock]

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  • PeterBurgess

    The answer is Yes and No. There are bits of the poverty problem that business can be of assistance in solving, there are other bits of the poverty problem that cannot be solved by a business that is going to be profitable. 

    But the question misses a bigger point. A bigger economy makes it easier to make profit, and business thinks this is good. A bigger economy helps to move more people out of poverty. But issues of people and planet at really more important than profit. It is possible for people to have improved quality of life and for the stress on the planet to be reduced but this will never happen while the dominant metrics are business profit, stock price increases and GDP growth. 

    I am doing work on developing Multi Dimension Impact Accounting to address this metrics conundrum ... it can be found at : http://www.truevaluemetrics.or...

    Peter Burgess TrueValueMetrics
    Multi Dimension Impact Accounting

  • Marcu

    Business is what people do naturally, when their nature tells them to compete with eachother. Competition is the basic of human evolution, this is how we are built and it will not change soon. Thus business does not help the poor, since the poor are not strong enought to compete in a business environment (lack of education, lack of capital to invest, etc...). On the contrary, it supports a system which creates poverty by making the ritch ritcher. It is the State who should fight poverty by collecting taxes and fighting poverty with tools like education, access to information, ensuring basic needs are satisfied for those in need (sick, old, children, etc...). Unfortunatelly most of the times the state is a slave to business environment because of the way the elections are organized (if you ask me, sponsorships from business environment to political campaigns should be illegal, because of the conflict of interests).

    To argue that business has any role in fighting poverty seems like you are trying to convince people that the fire does not burn. Orwell would be proud.

  • Yes

    Entrepreneurs: maybe

    Big business: NO,
    they are more likely to create poverty. Dow Chemical is responsible for the Bhopal disaster in India, which resulted in 16,000 dead and 58,125 injured. Many of these people have never been fully compensated for what happened. Rebranding the chemistry industry is more marketing than anything else; this company has had a profound negative impact on our natural environment by much of its wrong doing.