The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World

by Jacqueline Novogratz

  We met Tralance when, armed with these lessons, he decided to establish the business in India. Along with other early investors, Acumen Fund made an equity investment of $600,000 into the new company that now had a simple business model. WHI would sell a $50,000 filtration system to a local entrepreneur with the capability of running a small business serving around 5,000 people at village level. Individuals would buy the water at affordable prices, and the revenues would eventually cover the costs of running the company. Tralance had a vision of serving millions this way, and we bet that he could do it, though the odds were against him. Long distances, lack of bank credit, terrible roads, and a sense of fatalism among many villagers meant that only the most patient of investors would ultimately be rewarded.

  I and several Acumen partners went to visit WHI's first facility in 2005, when the company was establishing new operations in India. Our first stop was Vijayawada, a small city by Indian standards with a population of about a million people. We'd taken a long, hot, overnight train ride from Hyderabad to arrive just before dawn so we could drive another 3 hours to visit the company's first village operation. We were all eager to get a better sense of what it took to bring safe water to people who'd not previously had access-to underserved markets that had been for too long invisible.

  Despite the early hour, the city was teeming. Colorful trucks overflowing with baskets and fruits, furniture and people, rumbled along Vijayawada's crowded early morning streets. Women walked with pots of water tucked under arms covered with colorful bangles. Others carried metal containers on their heads. Morning is the time for fetching water. Three-wheelers and bicycles competed audaciously in a dangerous game of chicken with the big bully vans and trucks that often carried signs on the back saying, "Please sound horn, please."

  As soon as the car reached the outskirts of Vijayawada, we found ourselves on a narrow road lined with palm trees and green fields as far as the eye could see. Thatched huts dotted the landscape, and every so often we would come across two women in saris of fuchsia or chartreuse fluttering against the blue sky. Potholes riddled the road, and we weaved carefully from side to side. Then the road was smooth again, though I doubt we ever exceeded 30 mph as we passed bicycles, people, and cows. Women laid just-washed brightly colored clothes on flat rocks to dry in the sun. A white Ambassador car whose hood was bedecked with yellow marigolds puttered along with its old men and women passengers nodding to the past.

  Flowers for celebration, for mourning, for making life more beautiful: India is filled with flowers jasmine and gardenia, marigold and bird-ofparadise. An ox stood alongside a cart painted with folkloric landscapes: Life was beautiful.

  After a 2-hour drive, we entered a village area called a panchavat and moved along a single road toward clusters of houses. In the distance, we could see the WHI structure, an alien-looking, diamond-shaped dome colored electric blue. People had come to the site using all sorts of forms of transport. Boys walked forward with plastic containers and filled them from one of the three taps. Young men drove up on motorbikes and bicycles, rickshaws and three-wheelers. One man pushed a huge cart that carried 9 or 10 of the 15-liter containers. On average, the center was already selling 300 containers a day at their first facility-an early sign of success.

  I was struck most of all by the fact that not a single woman approached the plant to buy water. I remember standing next to a man years ago as we watched a woman carrying not one but two pots on her head still walking gracefully. As I marveled at her expertise, the man had said, "Well, you know, women are built for that. They have stronger necks relative to men."

  "I see," I had hummed, not wanting to get into this particular conversation with a stranger on the street. I remembered the same sentiment voiced so many years ago by Chowdury, the man who drove me through the desert on a motorcycle. For 20 years, I've seen attempts made to reduce women's labor based on the assumption that the more time women have free from daily chores, the more they can increase their income, care for their families, even have some leisure. But most attempts failed. Now, with no focus on gender, for some reason this new plant was enticing men to carry water. Of course, they weren't carrying the water themselves, but hiring boys with bikes, rickshaws, and taxis. But what mattered was the change itself.

  A poultry farmer with a handlebar mustache and a big, intelligent smile explained that he purchased, on average, 10 containers a day. He fed the water to his chickens-about 7,000 of them, a big jump from the 5,000 he'd been raising before he had clean water, which, he said, made medicines unnecessary and enabled his chickens to grow about 20 percent more quickly.

  He was there to ask WHI to allow him to pipe water to his farm, but they refused, explaining that it would be too easy for people to steal water by drilling into the pipes. The farmer wasn't convinced. He said he would pay for it, protect it, and take care of it. The group asked him to think about purchasing a water storage unit instead, at least as an intermediate step. This would allow him to control flow and reduce time spent carrying water. I was struck by his entrepreneurial spirit and sophistication. He knew he was the company's most important customer, and he was bent on changing his life.

  We wondered aloud why not every villager was rushing to buy safe drinking water. After all, the farmers' chickens were visibly healthier, and families drinking safe water would likely see much lower health care bills. But technical changes are easier to effect than behavioral ones. To reach out to the rural villagers, WHI thus decided to partner with Naandi Foundation, a local NGO that understood the communities where the company hoped to work and had great experience in helping villages adapt new technologies, build distribution systems, and work effectively with local governments. This kind of partnership between for-profit companies having skill in delivering goods and services and nonprofits with an understanding of poor communities and a will to ensure they are protected is an important model for the future, one that depends on the blurring of lines dividing private and public sectors.

  As one of the first investors in WHI, Acumen Fund has been working with the company for more than 4 years. In that period of time, we've collaborated on a number of projects, including redesigning the original plant structure so that the existing outlets are streamlined, simple to build, unobtrusive, and easy to maintain. WHI deserves credit for experimenting with its design, recognizing shortfalls, and changing quickly to a better model.

  We also worked together to bring bank credit into rural areas so that villages could borrow the capital needed to install a plant in the first place. Acumen Fund used our patient capital to provide a 30 percent firstloss guarantee to ICICI, India's second largest commercial bank. We could have lent directly for village operations, but this approach would bring more money into underserved areas. Over time, we reasoned, if the business model worked, the banks would become more comfortable with lending and we could reduce our guarantee.

  As it turned out, in less than a year, because of WHI's track record, Acumen was able to provide a second guarantee with a 15 percent loss coverage. In other words, this time, a $1 million guarantee from Acumen released $8 million in commercial loans to build rural water systems.

  After spending a few hours at the water facility, we walked through the village. Most people lived in thatched huts or concrete houses, all of which were neat and clean. Women gathered at the wells, gossiping and laughing while they pulled the water from the ground. They still carried the well water to the river's edge for washing. All along the river, women were laundering their clothes: Water was at the center of life. Young schoolgirls in green skirts and white blouses carried their books, and white egrets sat atop haystacks and cattle. As both men and women worked in the surrounding fields, at least some of their children were being watched in a tiny day-care center next to one of several small temples: a clear source of community pride.

  Since that visit in 2005, WHI has grown to serve more than 200 villages with more than 350,000 customers. And it has raised more than $12 million in add
itional capital. Now the goal is to issue a large bond in order to reach millions of people with safe water.

  Recently, I visited another WHI plant, more urban but still seemingly in the middle of nowhere, at the edge of a beautiful lotus pond ringed by palm trees and little houses with thatched roofs. Like many of the WHI installations, the plant was situated close to the government water source that provided free but undrinkable water. This way, customers could pick up the free water for washing and then pay for what they needed for drinking and cooking.

  Most of the people in the village worked as laborers in the nearby rice mills or as farmers, earning between $1 and $3 a day. In the case of this WHI site, the Lions Club had donated the initial plant, which the community was responsible for running as a viable business. A cheerful village resident managed the plant on a daily basis and oversaw several employees while also talking incessantly to a stream of customers waiting to purchase their families' water supply for the following few days.

  A mustached customer wearing the uniform of an engineer, a checked shirt with a pair of reading glasses tucked in the pocket and a baseball cap, sauntered up to the plant. In fact, he turned out not to be an engineer, but a day laborer working on odd jobs. But you could sense his drive and ambition by the very way he walked and dressed. When I asked him when he had started buying water from WHI, he replied that he'd started on the first day of the plant's existence.

  Previously, he'd had to walk a fair distance to pay a high price for safe water. He liked the WHI price of about a rupee per liter, enjoyed the taste of this water more, and appreciated the plant's proximity to his family's home. I asked whether his life had changed. He nodded, saying that the family experienced less diarrhea and other common diseases. He thought the price was right and the service, satisfactory. As I watched the man place his filled container on his bicycle and pedal away, I thought about how smart he was, how much he would do for his family if only he had the opportunities.

  If Acumen Fund were a normal investment firm or even a socially responsible investment firm, we would be thrilled by the growing financial progress of WHI and leave it at that. But we started Acumen Fund because we believed the markets were the starting point and not the endgame for solving problems of poverty. Our team wants to understand what it takes to bring the greatest number of people safe water in a way that is affordable, reaches millions, and sustains itself over time.

  It was important to track what people did with the water once it arrived at their homes. WHI sells the water in 15-liter sanitary plastic containers, which is a great start. However, a problem arises when some customers pour the water into contaminated clay pitchers. People in rural Andhra Pradesh-from the poorest Rajput woman to a maharaja-all seem to prefer clay to plastic or glass for their water because it has evaporative qualities that make it serve as a natural cooler. This we discovered while collaborating with the design firm IDEO, which shares Acumen Fund's belief in systems that build customer-focused solutions. Though IDEO works with some of the world's largest companies, the framework for listening to people of any economic stratum is the same. IDEO preferred not to try and convince low-income people that they should switch to plastic water containers, but rather to see whether it was possible to design clay containers that could be sanitized regularly.

  We also have been working with the Gates Foundation and a global research organization to listen to the poor to try and understand what really happens when people start drinking safe water. We want to gain insights into how to get more people to do so. Changing any kind of behavior is not easy. And in places like rural India, most people think water comes from God, so there is a lot of pressure to accept whatever God decides to give you. Convincing people that they nonetheless have a choice about the kind of water they drink is neither easy nor free. It is why nonprofit groups like Naandi are so important to the larger solution.

  In this case, Acumen Fund works with WHI, a for-profit company that partners with Naandi, a local NGO. We guarantee loans for and have a working relationship with a commercial bank, ICICI. We work closely with the Gates Foundation and with the nonprofit Research Triangle Institute and have embarked on a joint venture with a for-profit design firm. Most villages that want to install a plant are required to get the blessing of the local panchayat, or government official. And the communication and negotiation, the learning, failing, succeeding, and learning all over again require real and long-term commitments from the different players involved. It isn't a simple solution, but the problem isn't simple, either, though each part of the answer is pretty straightforward.

  It is this commitment across sectors, disciplines, geography, and profit status, as well as a focus on a common goal that enables WHI to thrive and increasingly become a symbol of what is possible in using markets as part of a solution. WHI is bringing one of the most precious resources on earth to the world's very poor and doing so in a way that makes sense, creates jobs, and respects the integrity and needs of all people. Doing this well requires a certain kind of leadership, one that starts with listening, knows how to collaborate, is not satisfied with easy but incomplete answers, and is driven by finding solutions for those with the least in a single world community. What is exciting is that we're starting to find such leaders and can see many more coming along the long row we need to hoe together.

  CHAPTER 16

  THE WORLD WE DREAM,

  THE FUTURE WE CREATE

  TOGETHER

  "Few will have the greatness to bend history itselfbut each of us can work to change a small portion of events, and in the total of all those acts will be written the history of this generation."

  -ROBERT F. KENNEDY

  hirty summers have passed since I gave away the blue sweater that ended up on a little Rwandan boy. Since then, the world has greatly changed. The boy I encountered had never seen a television show, made a telephone call, or taken a photograph, whereas his counterpart today, an urban youth wearing secondhand clothes in Kigali, is likely to have access to a cell phone and the Internet. As for my counterpart, today's 20-something professional working in Kigali won't feel the isolation I did; she is likely to e-mail and call her friends on Skype at least once a day and check her local newspaper on the Internet to learn about the goings-on at home. We have the tools to know one another and the resources to create a future in which every human being, rich or poor, has a real chance to pursue a life of greater purpose.

  I have changed, too. After more than 20 years of working in Africa, India, and Pakistan, I've learned that solutions to poverty must be driven by discipline, accountability, and market strength, not easy sentimentality. I've learned that many of the answers to poverty lie in the space between the market and charity and that what is needed most of all is moral leadership willing to build solutions from the perspectives of poor people themselves rather than imposing grand theories and plans upon them.

  I've learned that people usually tell you the truth if you listen hard enough. If you don't, you'll hear what they think you want to hear.

  I've learned that there is no currency like trust and no catalyst like hope. There is nothing worse for building relationships than pandering, on one hand, or preaching, on the other. And the most important quality we must all strengthen in ourselves is that of deep human empathy, for that will provide the most hope of all-and the foundation for our collective survival.

  I've learned that generosity is far easier than justice and that, in the highly distorted markets of the poor, it is all too easy to veer only toward the charitable, to have low-or no-expectations for low-income people. This does nothing but reaffirm prejudices on all sides.

  I've learned how profoundly the world is interconnected in a single economy linking all parts of the globe. Extraordinary wealth has been generated by this global economy, and millions of people have been lifted out of poverty. Yet it brings as much danger as hope unless and until every single one of us gets a fair chance to participate.

  I have learned all of thi
s through the extraordinary people I have had the privilege to know, the colleagues with whom I have worked, my fellow travelers, and the family and friends I have loved. One of my favorite lines from Tennyson's "Ulysses" is "I am a part of all that I have met." And they-every one of them, good and bad-are a part of me.

  A grandmother and a little girl, one from Kenya, the other, Pakistan, stand out as reminders of the extraordinary capacity of the human spirit. I met Beatrice, a member of Jamii Bora, a nonprofit organization started with the savings of 50 beggar families in Nairobi that has grown to more than 200,000 slum dwellers. Acumen Fund has been supporting the organization's efforts to build and sell 2,000 houses in a new, ecologically sound development.

  A woman with a wide, square face, her hair pinned neatly in a bun, Beatrice had rodlike posture and looked at me directly when she spoke. She bore and raised eight children in Mathare Valley, one of Kenya's poorest and toughest slums, where I danced with the women on that rainy night so long ago. She worked constantly, never resting, earning little but still ensuring that all of her children were raised properly and given a good education; this was one of her proudest accomplishments.

  No one could have prepared her for the shock of learning that her eldest son and his wife were dying of AIDS, leaving her to care for their four children. A year later, another child passed away, and then another. By 2000, every single one of her children had died, leaving her with a dozen grandchildren to raise, though she had neither a husband nor a real source of income.