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

Monday, April 13, 2015

The worlds of business and charity are increasingly merging. Social enterprises engage in activities that don’t perfectly fit in either of these worlds. Blending the two is a powerful tool: the solutions are often more effective, more innovative, and above all more sustainable.

Yet the overwhelming majority of people at the “Bottom of the Pyramid,” living on less than $2 a day, are still being served by charities and NGOs. These non-profit entities depend on donations and grants to serve their beneficiaries, because the beneficiary is usually not able to afford their products or services. When applying rules of economies of scale—mass markets will reduce costs—charities miss out, because grants and donations only grow an organization to a certain extent. Furthermore, this “free” capital is often quite restrictive, can often not be used for capacity-building or innovation, and aims to just cover costs, rather than invest in growth. Meanwhile, an under-resourced charity spends significant amounts of time on fundraising.

The Bottom of the Pyramid consists of the poorest 4 billion people on planet earth. In order to reach a larger proportion more effectively, charities should explore less obvious stakeholders. This journey starts with a simple concept: if the beneficiary is not the paying customer, who else is aligned with the social impact goals that can play this role?

For Andrea Coleman, CEO of award-winning organization Riders for Health, Government Health Ministries were identified as the most suitable paying customer. Riders for Health manages fleets of ambulances and motorbikes used by healthcare workers to reach remote rural populations across sub-Saharan Africa. This traditionally charitable target group is now served sustainably, while the Ministries of Health are delivering on their objectives of providing health care to the entire population.