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

Wednesday, October 9, 2013

By Alice Korngold

“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.