Focusing on the Next Generation: An exploration of enterprise impacts on child poverty
UNICEF refers to early childhood (pre-natal to eight years old) as the “years of wonder.” In no other period in human life is the brain so responsive to changes in the environment and so able to learn, grow, and develop. Billions of highly integrated neural circuits in the brain are established through the interaction of biology, experience, and environment.[i] What happens in this period of development determines later life-outcomes related to cognitive ability, productivity, and socialization.[ii] Lessons and behaviors not learned in early childhood, like reading and language, require added work later in life to develop.[iii]
Given this evidence, many economists make the compelling case that money spent on early childhood is the most powerful investment a country can make. Such early investments lead to large long-term savings in other sectors such as health and public services.[iv] With such great opportunity for large positive effects comes even greater vulnerability to damage from poverty. This damage can transcend into adulthood and then onto the next generation. Poor nutrition, inadequate education, low-quality health care, and lack of opportunities affect young children raised in poor households in detrimental ways, and increase the likelihood that they will remain poor in adulthood and have children who are poor themselves.
The issues associated with early childhood development are large and complex. Traditional interventions to reduce poverty during early childhood are not enough. Given the magnitude of the challenge and the limitations of existing approaches, BoP enterprises have the potential to positively affect early childhood development. However, our understanding of the impact BoP ventures actually have on the lives of children remains vague, and ultimately limits their ability to improve the lives of at-risk children.
With support from the Bernard van Leer Foundation, the William Davidson Institute created the Focusing on the Next Generation: Child Impact Series which includes six research case studies, a teaching case study and summary article to assess the role BoP ventures can play in alleviating poverty on children age eight years and younger. These ventures studied range across geography and include the following sectors: housing, renewable energy, sanitation, health care, as well as export-based and locally based agribusinesses. The business models of the ventures analyzed also vary and include two businesses that sell a product to the BoP (Patrimonio Hoy and SunnyMoney), two businesses that sell a service to the BoP (Sanergy and Penda Health), and two businesses that source from the BoP (Villa Andina and Honey Care Africa).
Given that children experience poverty both first-hand and through their caregivers, we studied how impacts on children vary across their caregivers’ (stakeholder) role in the venture. We assessed these impacts on children of customers, producers, distributors, employees, as well as children in the broader community who did not interact with the businesses. Using the Base of the Pyramid Impact Assessment Framework (BoP IAF) we assessed these changes in impact across different dimensions of poverty. Specifically, categorized as economic, capability, and relationship well-being. Within economic well-being, we explored impacts that result from changes in a caregiver’s income, financial stability, savings, and risk that can create changes in assets and resources provided to children. For capability well-being, we explored changes in the child’s physical health, psychological health, knowledge, aspirations, and expectation for the future. For relationship well-being, we assessed changes in the types of interactions and support children receive from adults and other children in the community, and changes in their adaptability at school, to their social networks, and to those in their home and local environment. (*For more on the research methodology, please see below).
Our findings examine a range of enterprise impacts on child poverty. Not surprisingly, when ventures provide an opportunity for workers to remain close to home to earn a livelihood instead of traveling for weeks or months at a time, children of those workers have a stronger support system. We also explored changes in psychological health and found that solar lamps provide children with a sense of security from reduced threat of fire compared to kerosene lamps. As a result, caregivers reported improved grades, as their children were able to study for longer hours.
In the case of Patrimonio Hoy, a construction firm that provides homeowners with a savings and payment program as well as building materials to add rooms onto existing homes, caregivers reported several clear benefits to children. With added space in the home, youngsters literally have more room to develop their own interests. When day-to-day activities (eating, sleeping, studying) are no longer relegated in a single room, but take place in multiple areas of the home, children have more structure to help them develop.
But not all impacts were positive. For instance, in all six cases we found negative impacts, particularly when considering the short-term costs incurred by caregivers related to interacting with the venture. Fixed costs, such as paying off a loan to become a franchisee with a social enterprise, might take away resources dedicated to children’s basic needs.
We also compared enterprise impacts on children in poverty across the different ventures. We found that children of caregivers who engage with a venture as distributors, employees, and/or producers experience additional capability and relationship well-being, as a result. This is due to the knowledge, skills, and support children absorb through their caregivers’ training and expanded networks, compared to children whose parents are customers of BoP ventures or children in the broader community. When parents are employed or otherwise engaged with BoP ventures, children learn business, leadership, and communication skills by observing their caregivers on the job or through their caregivers’ use of these skills at home. They also gain knowledge and interest in the sector their caregivers work, such as renewable energy, or environmental conservation which can influence their future aspirations. Communication skills caregivers learn such as how to actively listen and respect others’ opinions, can result in better interactions at home both with their spouse as well as their children. Increases in their caregivers’ social networks can also result in increased social capital which can benefit children in the short and long term through their caregiver’s increased awareness of opportunities and resources.
Although the children of employees, distributors, and producers experience such additional impacts, their total number is much smaller than that of customers’ children and children in the broader community. Thus, if investors want to deepen impacts across all types of well-being, they may want to invest in business models with BoP stakeholders who directly work with the venture. However, if investors are more interested in breadth, or creating impact across the largest number of children, they should identify ventures that sell products and services to the BoP. In particular our analysis suggests that the ventures that sell services to the BoP benefit children in the broader community even more so than those that sell products.
Children in the broader community learn new information when a venture that provides a service to the BoP enters the community. Children gain information directly from the venture’s marketing campaigns and through other children and caregivers who use the service. Furthermore, ventures that positively alter a public good such as the local environment such as through improved sanitation affect the related well-being of all children living in that environment. This new information and improvement in the environment can improve the physical health of children in the broader community and their family members, saving the families money from reduced medical expenditures and increasing income from caregivers’ increased ability to work. Such savings can be re-directed to children’s other needs such as improved quality or quantity of food or school fees. Additionally all children in the community can develop new aspirations from observing community members take on new roles in the marketplace, such as women running businesses. Thus investors with missions to target the largest number, rather than create the deepest, impacts may want to identify service-selling ventures.
While many of the above examples appear straight forward, the outcomes of social enterprises on children are rarely studied. But we believe they need to be considered by ventures and investors alike. Our findings demonstrate that BoP ventures have the potential to reduce the poverty faced by children. We hope that our work will influence development and impact investing leaders to increase their focus on children and in doing so reduce poverty’s harmful effects and associated costs for the next generation.
* We used well-recognized research methods in our data collection and analysis.[v],[vi] Our data collection, which included field visits with each venture, focused on developing a rich and holistic understanding of their impacts on children. Our data analysis consisted of triangulation across data sources to confirm findings, detailed coding, and comparisons of impacts on children of stakeholders within each venture as well as comparison of impacts across enterprises.
[i] UNICEF. “Inequities in Early Childhood Development.” February 2012.
[ii] Irwin, L., A. Siddiqi, and C. Hertzman. “Childhood Early Development: A Powerful Equalizer,” World Health Organization. June 2007.
[iv] Irwin et al.
[v] Eisenhardt, K.M. “Building theories from case study research.” Academy of Management Review. 1989. 14: 532-550.
[vi] Miles, M., and A. M. Huberman. Qualitative Data Analysis: An Expanded Sourcebook. Thousand Oaks: SAGE Publications.