NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Guest blogger Grace Augustine is a Research Associate with the William Davidson Institute in Ann Arbor, Michigan. Prior to joining WDI, she worked in strategy & operations consulting for Deloitte Consulting. Grace completed her undergraduate education at the University of Michigan where she obtained a degree in Organizational Studies with a focus on Business Responsibility.

By Grace AugustineWhile completing Professor Ted London?s Strategies for the Base of the Pyramid class at Michigan’s Ross School of Business, an Atlantic Monthly article highlighting a BoP-as producer venture caught my eye. The organization was the Arghand Cooperative, an Afghanistan-based business that was co-created by former NPR correspondent Sarah Chayes and members of the Kandahar community.

The article, Scents & Sensibility, was published in the December 2007 issue of Atlantic Monthly.

The cooperative uses locally-grown herbs, fruits, and spices to make soaps, then sell them at boutiques in the U.S. Chayes has gone into what some would consider to be one of the most bleak areas on the planet, overcome frustrating roadblocks in dealing with development agencies, and has still been able to focus on what is right while providing a link between BoP producers and viable markets.

Afghanistan, considered by many to be barren, hopeless, poverty-stricken, and a breeding ground for drug lords and terrorists, seems like an unlikely location for a thriving business. But to Chayes, Kandahar pushed her into action, or in her own words, “Stop talking about it already?do something.”

When Chayes arrived in Afghanistan in 2001, she did not bring a product or a business model; she went in with an open mind and a commitment to help. Through her blossoming friendships there, she discovered Afghanistan’s plethora of indigenous vegetation that was unique to the area and virtually unknown to the rest of the world. Co-creating with the Kandahari villagers, she leveraged their local knowledge of rare fruits and oils, while mutually creating value for the start-up enterprise and community.

The people with whom Chayes has partnered enjoy few alternatives. One of the few well-paying options is opium poppy farming, which pays about $25/day compared to the average $4-5/day for a conventional crop. In 2006, an estimated four hundred thousand acres of opium poppies were planted in Afghanistan, a 59% increase over the previous year. Afghanistan now supplies more than ninety-two per cent of the world’s opium.

Startled by this substantial increase, the U.S. government has funneled billions of dollars into an eradication strategy including complete crop and field destruction. For more information on the opium war in Afghanistan, see the New Yorker article The Taliban’s Opium War. This eradication strategy has frustrated Afghanis who are desperate to provide for their families, and there has been little to show for it except a more extremist anti-American ideology brewing in the country’s mountainous region.

While seeking funding for the Arghand Cooperative, Chayes approached the USAID Alternative Livelihoods Program (ALP). The ALP was established to support economic activity that would give Afghans secure alternatives to opium farming.? However, Chayes quickly discovered what many entrepreneurs in the developing world eventually come to realize–that it is much more efficient to raise startup capital through the private donor world than through sluggish and bureaucratic development organizations. To quote her directly, “the Alternative Livelihoods Program exemplifies the disturbing evolution of the international development industry.”

This criticism echoes many before it, but still strikes me as extremely disheartening, since programs such as the ALP should be actively seeking domestically-rooted sustainable market-based ventures such as the Arghand Cooperative. After two frustrating years of attempting to get funding from the ALP, and despite receiving one contract along the way, Chayes has frustratingly withdrawn all of her proposals to the organization and has determined to survive on patient private capital and revenue from the fledgling business.

The message of hope that comes from this story is that despite her challenges with the ALP, Chayes has still managed to tap into the growing pool of private funding that has become available for BoP ventures. She has successfully launched a truly market-based alternative for this desperate region. According to Stu Hart, the Samuel C. Johnson Chair in Sustainable Global Enterprise at Cornell University’s Johnson School of Management, the stability provided by these types of enterprises may prove to be a weapon in the clich’d “war against terror.” Hart says that “terrorism is a symptom: the underlying problem is unsustainable development.”

Hart’s unique BoP-as a terrorism deterrent hypothesis has been turning heads at the U.S. Army War College and the National Intelligence Council. In the words of General Charles F. Wald, Deputy Commander, U.S. European Command, “The tools of businesses are often better suited to diminishing the causes of terrorism and influencing the democratization of key regions by providing investment and employment that lead to long-term improvement in quality of life.”? Afghanistan, with its decades of occupation and extremist faction rule, could be the ideal place for these types of solutions.

I praise Chayes and others like her who are listening to the BoP, truly focusing on what is right, and co-creating mutually-beneficial enterprises that result in lasting opportunities.? Unfortunately, many development agencies, despite their best intentions, have been unable to provide for Chayes and others like her.? Hopefully, the Atlantic Monthly article and others like it will catalyze some change within the development establishment.