Here is a look at how newer concepts in development, such as capacity‐building, microfinance and “bottom of the pyramid” are changing perspectives…
In a recent address to the world economic forum, Bill Gates proposed that if we are going to have a serious chance of changing the lives of the poor “we will need another level of innovation. Not just technology innovation—we need system innovation”. It is intriguing that one of the key players in today’s technology driven industry would be suggesting such an idea. In actuality, the system innovation he speaks of has somewhat been present for some time now, however it is finally creating ripples on a global scale and more people are taking notice of the newer concepts of international development through empowerment. Instead of simply extending money towards vague aid efforts and hoping that it will bring an end to the repetitive cycle of poverty, the new concepts aim to equip low-income individuals with the necessary tools and support to better their situation. Often referred to as efforts targeting the ‘bottom of the pyramid’, typically the poorest socio-economic group living on less than two dollars a day in developing nations, the concepts appear in efforts aimed at capacity building and specific services such as microfinance. With their growing success, these concepts are altering perspectives by way of benefiting not only the individuals in need, but also providing companies and foreign entities gains in varying forms.
Focusing first on the nature of these new concepts and services, they share common objectives and underlying principles. Capacity building from an international development standpoint involves entities such as NGOs working together with communities or local organizations and facilitating growth through providing crucial resources, training or simple yet effective technologies. Focusing on specific implements, microfinance is the offering of unique financial services geared particularly towards the poor such as Microcredit. The commonality in these two approaches is that they both attempt to empower those with low-income by providing them with a small, yet appropriate, amount of aid so that they can ideally support themselves in a way that is sustainable even after support is no longer available. In order to reduce poverty, these approaches aim to understand the system and the root causes of the infliction, such as a lack of education, and take the necessary steps to break the cycle. It is only logical that if a person lacks the basic necessities such as food and shelter, then essentials such as education are deemed unimportant. However, if you provide a person with small loan (i.e. microcredit) and help them develop a small yet sustainable profit generating venture, they will likely be able to support themselves and proceed to potentially provide their children with an education. Thus, these new concepts shatter age-old barriers. The poor are not perceived as recipients of charity but instead as potential entrepreneurs, customers, partners, leaders and contributing members of the global society.
The benefits of these initiatives have been better than expected. There are countless ongoing success stories. For instance, WaterHealth International is a for-profit founded over a decade ago and operates a successful for-profit business. They sell water purifying technology at a reduced cost and on affordable plans so that clients in the third-world who buy the devices can generate small yet helpful revenues from selling clean water. Within a few months of purchase the third-world customers can typically pay off the technology and then fully keep the profit. In this situation the company earns profit, establishes the customer to earn profit, and also helps provide well needed clean water to many more. This may come as a surprise to some. For-profits benefiting countless individuals while at the same time generating returns. It is important to realize this fact since typically foreign aid efforts have resulted in little to no growth in recipient nations and at the same time have still drawn on large resources from the contributing nations. In stark contrast, the success of organizations such as Grameen Bank, an early adopter and purveyor of microcredit, is inspiring. “More than 2.3 million Bangladeshis, spread over 37,000 villages, have borrowed from Grameen Bank. Cumulatively, the bank, a financially sustainable, profit-making venture with 12,000 employees, has loaned $2 billion, and virtually every cent has been repaid”. This represents only the beginning of a shift towards socially responsible and mutual benefit.
Considering the unarguable success of the efforts, corporations and global entities are taking notice. Partnerships are actually emerging among multinationals. Danone is currently working with Grameen to establish a food company in Bangladesh that provides low-cost baby formula and processed milk products. The benefit to third-world consumers will be significant and benefit to the supplying organization comes in various forms and if not anything, it will at least help them in their public relation efforts as being a socially responsible brand. In addition to partnerships, Social Venture Capitalists are also emerging such as North American based Acumen Fund. Such VC’s are unique in the sense that they devise models built on a triple bottom line and gauge results using metrics such as the Social Return on Investment. It is such an approach that is likely to catch on and bolster development in the third world during the near future.
Perspectives in international development are slowly yet nonetheless shifting as foreign entities are coming to understand that there is a benefit to both parties involved in considering citizens of developing nations as clients and partners. Regardless, going forward important advances are necessary. As suggested by Mohammad Yunis, Noble Peace Prize recipient and Microcredit pioneer, “helping the poor involves more than simply providing technology. They must be owners of that technology, not just its passive consumers”. Thus feasible business models must be created such that products can be made ‘for the people, by the people’ and on a much larger scale than what is seen today. Foreign entities must invest more thought behind their aid and actually approach third-world nations as equal partners in order to invest in their growth.
Contributed by: Saksham Uppal
Saksham Uppal is the Executive Director of the Take Action! Organization. Still completing his studies in Engineering at the University of Toronto, he is passionate about helping those in need and empowering youth to be effective and socially conscious leaders. Connect with him on twitter at @SakshamUppal.
In a recent address to the world economic forum, Bill Gates proposed that if we are going to have a serious chance of changing the lives of the poor “we will need another level of innovation. Not just technology innovation—we need system innovation”. It is intriguing that one of the key players in today’s technology driven industry would be suggesting such an idea. In actuality, the system innovation he speaks of has somewhat been present for some time now, however it is finally creating ripples on a global scale and more people are taking notice of the newer concepts of international development through empowerment. Instead of simply extending money towards vague aid efforts and hoping that it will bring an end to the repetitive cycle of poverty, the new concepts aim to equip low-income individuals with the necessary tools and support to better their situation. Often referred to as efforts targeting the ‘bottom of the pyramid’, typically the poorest socio-economic group living on less than two dollars a day in developing nations, the concepts appear in efforts aimed at capacity building and specific services such as microfinance. With their growing success, these concepts are altering perspectives by way of benefiting not only the individuals in need, but also providing companies and foreign entities gains in varying forms.
Focusing first on the nature of these new concepts and services, they share common objectives and underlying principles. Capacity building from an international development standpoint involves entities such as NGOs working together with communities or local organizations and facilitating growth through providing crucial resources, training or simple yet effective technologies. Focusing on specific implements, microfinance is the offering of unique financial services geared particularly towards the poor such as Microcredit. The commonality in these two approaches is that they both attempt to empower those with low-income by providing them with a small, yet appropriate, amount of aid so that they can ideally support themselves in a way that is sustainable even after support is no longer available. In order to reduce poverty, these approaches aim to understand the system and the root causes of the infliction, such as a lack of education, and take the necessary steps to break the cycle. It is only logical that if a person lacks the basic necessities such as food and shelter, then essentials such as education are deemed unimportant. However, if you provide a person with small loan (i.e. microcredit) and help them develop a small yet sustainable profit generating venture, they will likely be able to support themselves and proceed to potentially provide their children with an education. Thus, these new concepts shatter age-old barriers. The poor are not perceived as recipients of charity but instead as potential entrepreneurs, customers, partners, leaders and contributing members of the global society.
The benefits of these initiatives have been better than expected. There are countless ongoing success stories. For instance, WaterHealth International is a for-profit founded over a decade ago and operates a successful for-profit business. They sell water purifying technology at a reduced cost and on affordable plans so that clients in the third-world who buy the devices can generate small yet helpful revenues from selling clean water. Within a few months of purchase the third-world customers can typically pay off the technology and then fully keep the profit. In this situation the company earns profit, establishes the customer to earn profit, and also helps provide well needed clean water to many more. This may come as a surprise to some. For-profits benefiting countless individuals while at the same time generating returns. It is important to realize this fact since typically foreign aid efforts have resulted in little to no growth in recipient nations and at the same time have still drawn on large resources from the contributing nations. In stark contrast, the success of organizations such as Grameen Bank, an early adopter and purveyor of microcredit, is inspiring. “More than 2.3 million Bangladeshis, spread over 37,000 villages, have borrowed from Grameen Bank. Cumulatively, the bank, a financially sustainable, profit-making venture with 12,000 employees, has loaned $2 billion, and virtually every cent has been repaid”. This represents only the beginning of a shift towards socially responsible and mutual benefit.
Considering the unarguable success of the efforts, corporations and global entities are taking notice. Partnerships are actually emerging among multinationals. Danone is currently working with Grameen to establish a food company in Bangladesh that provides low-cost baby formula and processed milk products. The benefit to third-world consumers will be significant and benefit to the supplying organization comes in various forms and if not anything, it will at least help them in their public relation efforts as being a socially responsible brand. In addition to partnerships, Social Venture Capitalists are also emerging such as North American based Acumen Fund. Such VC’s are unique in the sense that they devise models built on a triple bottom line and gauge results using metrics such as the Social Return on Investment. It is such an approach that is likely to catch on and bolster development in the third world during the near future.
Perspectives in international development are slowly yet nonetheless shifting as foreign entities are coming to understand that there is a benefit to both parties involved in considering citizens of developing nations as clients and partners. Regardless, going forward important advances are necessary. As suggested by Mohammad Yunis, Noble Peace Prize recipient and Microcredit pioneer, “helping the poor involves more than simply providing technology. They must be owners of that technology, not just its passive consumers”. Thus feasible business models must be created such that products can be made ‘for the people, by the people’ and on a much larger scale than what is seen today. Foreign entities must invest more thought behind their aid and actually approach third-world nations as equal partners in order to invest in their growth.
Contributed by: Saksham Uppal
Saksham Uppal is the Executive Director of the Take Action! Organization. Still completing his studies in Engineering at the University of Toronto, he is passionate about helping those in need and empowering youth to be effective and socially conscious leaders. Connect with him on twitter at @SakshamUppal.
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Hey Saksham, this was a really good topic to discuss. I think this notion of empowering the bottom of the pyramid is not only important, but essential for any initiative aiming to aid others. External aid can only go so far, and simply serves as a band-aid as opposed to a sustainable solution. If a certain community has the need for more schools, and a foreign group comes in and builds a couple of schools, this would be a great task, however, no sustainable solution will have been offered for the initial problem. Instead, if the community members are shown that the need for schools is great, and the community members themselves aid in the planning and construction of the schools, a more sustainable solution has been reached as the community will be able to function as a self-sufficient body, without the need for long-term external help. This is why grass-roots initiatives are an essential part of sustainable progress in any community. The change must be brought about by those who will be most affected by it.
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