The Blue Sweater


(Business Fights Poverty) #1

Post written for Business Fights Poverty by Jacqueline Novogratz, Founder and CEO of Acumen Fund, a non-profit venture capital fund investing patient capital in businesses that serve the poor. Her book, The Blue Sweater, is out in paperback on February 16th. For a preview of the book and sales information, visit www.thebluesweater.com.



The Blue Sweater chronicles my journey from starry-eyed young idealist to a more experienced seeker – someone who still wants to change the world, but now has a much keener sense of what works and what doesn’t.


In many ways, the book is a love letter written in starts and spurts. I first put pen to paper on a rainy Sunday afternoon in January 1996, sitting in my cozy one-bedroom apartment in New York City thinking about what I’d just experienced in Rwanda. Ten years before, in 1986, I’d traveled to there to help a small group of women establish the country’s first micro-finance bank. So you can imagine what it felt like in 1994 when the Rwandan genocide wiped out nearly 800,000 people. Among those murdered were friends of mine, people who believed in social justice and were willing to work toward building it. More shocking was the discovery that among the perpetrators were also people I knew and admired. I was haunted by the phrase “Never Again” and felt an obligation to share the stories I held inside of me.

I was also overseeing two programs within the Rockefeller Foundation and feeling growing unease with a world that turned to traditional charity or philanthropy to solve its problems. At the same time, I’d seen markets ignore low-income people altogether. I needed to put my ideas – and values – into action.

In 2001, with the help of great friends and supporters, I started Acumen Fund, a nonprofit venture fund that would try to turn development on its head with an instrument we now call Patient Capital. Patient Capital forges a third way between the markets and traditional charity, investing in individual businesses with the potential to serve millions of low-income consumers. These investments are high risk, with a long time horizon and expectations for outsized social impact and near-market financial returns. We accompany the investment with a significant amount of management support and a commitment to measuring both social and financial returns. To date Acumen Fund has invested more than $40 million in East Africa and South Asia bringing affordable, quality healthcare, water, energy, housing and agricultural inputs. Nine years in, I feel more convinced than ever of the power of the idea of Patient Capital – and in so many ways, we are just getting started.

I write often in The Blue Sweater that dignity is more important to the human spirit than wealth, and I continue to learn at a deeper level what this means. As a world, we need to find ways to give the two billion people who still live in poverty a fighting chance to follow their own dreams. Now is the time for big ideas, for innovation and for building companies, organizations and systems that help the world extend that fundamental principle that all men were created equal to every human being on the planet.

I hope you’ll join us in an ongoing conversation about these ideas here on Business Fights Poverty and on Acumen Fund’s online community.

Add your comments below. What do you see as the role of "patient capital" to invest in businesses that serve low-income consumers? What other big, innovative ideas are there for harnessing business to fight poverty?

(Julian Page) #2

I am looking forward to reading this book, than k you for bringing it to my attention.
I run the Livingstone Tanzania Trust, a UK registered not for profit. We are a grassroots poverty alleviation charity working only in Babati, Tanzania.
We work in one place because we do not want to focus on just one problem and move on but focus on the needs of the community and try and address many of the interlinked problems which mostly relate to poverty in one form or another.
Our biggest focus is on agriculture, teaching the students at primary schools and their parents, different ways of making their ever shrinking farms more profitable. We are told we bring light to the community, the fresh ideas are inspiring people who had previously lost the sense of “Yes we can”. Having ignited that flame we then provide what help we can to ensuring the learning process is continued and new problems not allowed to extinguish the flame.
To me, what you call Patient Capital, is a social investment, investing in those who have never been invested in before due to situations beyond their control. The Tanzanians, like many Africans, can turn a profit and exploit an opportunity no problem, ask them to write it down and the difficulties start.
The business culture is very different and to expect it to be the same is a mistake.

As an organisation we are supporting a few local income generation schemes run through local community groups so that the profits are returned in a way that maximises the social impact.

just wanted you to know!!

Julian


(Alan Ivor Mills) #3

great…I am interesting in establishing similar project within the carribbean


(Hennie Botes) #4

Jacqueline, we have developed moladi over the last 24 years and believe that we can spend another 24 in developing new product to reduce the cost of construction. Allowing the BoP decent shelter and homes is what drives us to design and expand our teritories with “out the box thinkers” as partners (Over 20 countries).

You are more than welcome to contact moladi to get an alternative costing on a home for the poor ensuring your aid monies/donated funds being spent wisely - more bang for the buck, creating employment for the enemployed.

You are welcome to see what and how we do it at www.moladi.net


(ROBERT MATSIKO) #5

Thank you so much for taking us through your experience, definitely there is no short cut to success. Eliminating poverty has remained a challenge in our society but what I think is to involve the affected people in decision making, for example, I gathered our community here and asked them why we were poor and what we can do. I received a lot of answers and selected few of them, one of them was lack of daily income and poor nutrition of which we started a backyard garden at every home stead of 57 homes, after 60 days we harvested a lot of vegetables for eating and the balance for sale, as a result today people have started saving small amount of money equivalent to $0.5 per day to buy seeds for other seasons and few necessities around their homes, I hope such a move can help to reduce poverty and eventually eliminate it. People will save, buy, and do many others things only when they have a source of income
www.numafeeds.com
418-ROBERTMATSIKO.doc (45.5 KB)


(Chiara Condi) #6

One of the most overlooked benefits that patient capital can bring to developing societies is its ability to patch the very gaps created a country’s transition to a market economy. In fact, in developing countries the potential of social enterprises to meet unmet needs and solve embedded social problems by promoting long-term sustainable growth, job creation, and mitigating social costs associated with restructuring remains largely underutilized. In developing countries around the world, social enterprises have the potential to support the most vulnerable sectors of society negatively affected by ongoing economic transition without fostering dependency on donor aid. Furthermore, by including the poor on the demand side (poor as consumers/clients) and supply side (poor as employees, suppliers and entrepreneurs), social enterprises are a valuable tool to promote the social and economic inclusion of the poor and vulnerable. As more individuals in these countries participate in market activities and take advantage of market opportunities, local income and productivity will expand. The investment capital generated through these activities also has the potential to open new opportunities for further investment through traditional financial instruments.

Not all parts of society have benefited equally from the promotion of market economies in developing countries. The social costs of the transformation have been borne disproportionately by the most vulnerable sectors of the population; structural change and severe economic shocks following such transformations furthermore have enhanced these effects. Policy-makers are now left with the challenging task of balancing unmet needs along with pressure to improve the quality and efficiency of public services in the face of budgetary constraints. Given these challenges, it is highly unlikely that in the near future economic growth and labor market reforms will enable the economic and social integration of disadvantaged groups in developing countries. Economic transformation, however, has also brought an opportunity for social enterprises to fill these newly created market niches, especially given the significant reforms that economic transformation has brought in the social service sector.

Social enterprises can complement the supply of communal services that public agencies and for profit enterprises fail to deliver following the large pushes towards privatization that have developing countries around the world continue to undergo. Public agencies previously entrusted with the provision of public goods are now increasingly limited in their activities because of budget constraints, their inability to understand new local needs that arise through economic transformation, and market failure. In many countries around the world rural settlements still lack access to basic services such as water, gas, electricity, schools, and health clinics. We have to not only recognize that markets alone are imperfect, but that through patient capital we can correct many of those imperfections through business models that operate on the same principles yet serve the millions of individuals around the world that traditional markets have thus far been unable to reach.

Successful examples of communities coming together to solve their needs through a market approach exist around the world and continue to demonstrate the economic viability of such models. Formerly deported Crimean Tartars returnees (260,000) living in rural settlements suffered during the economic transition due to the fact that they had been belatedly recognized as eligible for receiving land titles under the land reform program. These socially, economically and culturally marginalized communities inhabited isolated settlements in rural steppes: one third of their settlements had no electricity and half lacked safe drinking water. The communities were faced with 80% unemployment among the active population and lacked a reliable form of irrigation despite their dependency on agriculture for their livelihood. Despite the technically complex task, Crimean Tatar communities formed independent community enterprises that successfully and autonomously managed and operated gas, electricity, and water provision. Community savings funds were established to finance these initiatives and provide small credits for expanding the income generating activities. These activities were financially sustainable and profitable; the enterprises were soon able to run the services only through the revenue collected through fees for the services offered. Through self-organization and self-reliance citizen initiatives can successfully develop the necessary communal infrastructure that enables them to come together to solve their difficulties. Setting up these self-sustainable community initiatives also positively furthers the goals of economic development and poverty reduction by creating income opportunities that previously did not exist, and by providing an efficient framework through which a community can identify its needs and mobilize its own resources–thereby making the very goals of that a market economy seeks to promote become a reality.


(TANGEM ELVIS PAUL NFOR) #7

Dear Jacqueline Novogratz, thanks very much for sharing your experience, his book will sure make good reading , I will certainly be looking for means of reading the book. ‘Patient Capital’ the phrase is new to me, but its very much inline with the vision and work of TREE AID ( www.treeaid.org.uk) where I work as the Entreprise Support Manager in the West Africa Office.

TREEA AID’s current 15-year Community Forestry Livelihoods programme in West Africa - forestry, money, food and health - forms a vital piece of a jigsaw, each building on and reinforcing the other.

My department supports Our Village Tree Enterprise work which is aimed at helping villagers make money from the things that grow on trees.
Support is given to identify the most viable tree products to develop for urban and regional markets. TREE AID is helping village groups to produce business plans and link them up with further training, service suppliers, technical support and financing. In collaboration with the state of Ghana, Tree Aid is currently running the Entreprise Development Revolving Fund aimed at Support the setting up of viable and financially sustainable enterprises by village groups who have undergone intensive training. The fund is managed by a ‘Community Fund Management Committees’
The impact of funds such as the ’ Patient fund’ is long-term , but the social impact especially amongst the Women and children is more short term. Apart from the financial empowerment that enables them to start up small businesses, there is the psychological impact , the self esteem , social recognition and the ability to satisfy daily needs etc .

I will read the book to get an inside of Acumen Fund’s strategy and activities, I will certainly learn lessons that will be of help to my work.