by Parag Khanna
These needy communities also need micro-insurance from the global marketplace. LeapFrog Investments, which Bill Clinton has recognized as the leading “insurer to the poor,” has a staff that combines veteran social entrepreneurs from Ashoka and senior executives from pharmaceutical giants such as GlaxoSmithKline, resulting in investor-adviser hybrids. It provides insurances for farmers against price shocks or crop failures, and its expertise and loans together help farmers buy better technology.
The billion people at the bottom of the world’s economic pyramid are as far from middle class as one can get, yet they represent a massive market that the smartest companies in the world would be wise to capture. As Muhammad Yunus, founder of the Grameen Bank in Bangladesh, argues, “The poor are as capable of doing their own business as anyone else. All Grameen has done is come in to release the existing energy.” Grameenphone, now in seventy-five thousand villages, has boosted the income of its “phone ladies” to about $1,000 per year, and now Grameen is putting people to work making a $1 pair of shoes for Adidas. Yunus’s micro-finance model no longer even captures the hunger for moving beyond loans in the poorest countries, which is why he has partnered with the Micro Equity Development Fund to cater to the many investors who want to buy stakes in the small enterprises that employ most of the world’s population.
Bangladesh’s 160 million people are part of the staggering South Asian population mass of 1.5 billion that increasingly defies meaningful central governance. Through persistent natural disasters, emergency rule, and military coups, Bangladeshi society effectively runs itself while its government perennially scrapes the bottom of Transparency International’s Corruption Perception Index. By contrast, the Bangladesh Rural Advancement Committee (BRAC) reaches three-quarters of the country’s population with its micro-finance and village school programs.2 Such groups reinforce good governance without being captured by corrupt governments. They emphasize common purpose over clientelism, society over bureaucracy, and tangible belonging over abstract citizenship.
Around the world, the community is taking center stage in development and politics. Israelis have long practiced the art of kibbutz living, and today Chinese and Japanese people are moving back to the land in droves in search of stable and sustainable community living. The Self-Employed Women’s Association (SEWA) in India has its own community-level banks, health clinics, child-care programs, legal services (such as sexual harassment and workers’ compensation), and retirement accounts. SEWA doesn’t just champion women’s rights; it provides those rights through its own quasi-economic and political communities across India. The so-called informal economies of community cooperatives often go unregistered in economic statistics, yet they are a legitimate mode of economic and social survival for hundreds of millions of people worldwide.
What is crucial to understand about Grameen, BRAC, SEWA, and other such organizations is that their primary unit of organization is not the town or village but the community. Community building is nation building done right.
Supporting such community-level entrepreneurialism was the founding vision of the micro-lending website Kiva.org. Kiva connects the local to the local: It’s not B2B, but P2P (person to person). It’s about more than just the first world helping the third world—it promotes what its name means: unity. Kiva has zero interest on capital—people lend for the emotional satisfaction, and they keep on lending, rarely pulling money out of the Kiva system as outstanding loans are repaid. Kiva employees work there for the same reason. Its headquarters in the Mission district of San Francisco resembles a dormitory common room. All but one world map are upside down—the symbol of solidarity with the global “South”—and rooms are named after third world capitals such as Kabul and Dili (of East Timor).
A digital ticker on the wall counts the number of loans disbursed through Kiva—more than one hundred thousand by mid-2009—to everyone from Afghan carpet weavers to Ugandan goat herders. The ticker flashes to another statistic, the loan repayment rate: over 97 percent, higher than Americans’ credit card debt payment rate. The global poor are a more credible investment, and enough Americans know this that they make up four out of every five lenders on Kiva. In fact, as of 2009, Americans now lend to one another through Kiva as well.
But what about the financial crisis? In February 2009, the same month that Deutsche Bank, a major shareholder in micro-finance institutions (MFI), froze new disbursements in the sector, Kiva had its biggest month to date. It continues to ramp up partnerships with new MFIs at a rate of three per month (though there are more than ten thousand in the world). And Kiva will work with many MFIs that Deutsche Bank doesn’t have the appetite for, ones that haven’t yet been operating for a few years and don’t offer the high rates of return that investment banks are looking for.
If NGOs such as CARE represent a significant gain in efficiency over the World Bank and USAID, then Kiva is a quantum leap. Its leverage ratio—meaning the amount it loans out versus its costs—is approaching ten to one. One reason for this is that Kiva is a model public-private partnership: Google gives it free ads, PayPal allows free usage, and law firms do its legal work pro bono. Kiva not only has a real-time feedback loop to provide transparency on projects—like an eBay for development finance—but Ernst & Young performs due diligence on almost all Kiva projects worldwide at reduced cost. Additionally, at any given time, up to one hundred Kiva fellows are embedded with field partners from Sierra Leone to Sudan to Afghanistan, snapping photos and filing reports on project status to verify their credibility. Hundreds of volunteers who work as translators and editors for Kiva’s website wind up also spotting inconsistencies and raising flags, accelerating the correction rate on errors even further. Today Kiva literally comes closest to the cliché of not wasting a single cent.
No organization has a monopoly on putting together people, ideas, and investment. Like Kiva, GlobalGiving.org has enabled over one hundred thousand people from American students to Fortune 500 companies to directly lend to worthy projects across the world. USAID and other inefficient aid agencies act indifferently toward the Grameen and Kiva models despite their success in places such as Afghanistan, where USAID struggles the most. “We’ve bumped up against Washington bureaucrats so many times. They treat us like mosquitoes,” recalls Kiva cofounder Premal Shah. And yet loans to American-occupied Iraq are the most popular on Kiva.
Entrenched habits and inertia may prevent the establishment from embracing Kiva, but time is on Kiva’s side. For decades graduate students have sought internships and jobs with the World Bank as a stepping-stone to a career in international development. Now they flood Kiva’s in-box with their CVs—they want to commit “sweat equity,” not just reap financial equity. Seeking greater authenticity in their lives, even ex-investment bankers, tired of the uncertainty and moral void of Wall Street, are willing to volunteer for months to be Kiva fellows. Kiva alumni quickly join the boards of MFIs and go on to work for the World Bank and traditional donors, gradually reshaping their policies from the inside out.
There is nothing wrong with aid being handled like a business marketplace. To the contrary, that is precisely what will bring it greater transparency and efficiency. Devex—a firm whose motto is “Do Good. Do It Well.”—calls itself the “Bloomberg of foreign aid” because it provides an online clearinghouse for development tenders beyond the usual cliques of donors and their pet projects. But more than just providing data, Devex now also actively consults for companies. In countries from Angola to Kazakhstan, oil giant Chevron knows its operational stability may depend on building quasi-cities of schools and clinics for local villages. Devex helps them do it well.
Today’s new social entrepreneurship universe embodies an economic culture that is radically different from what the developing world is used to seeing. So-called philanthropreneurs, or impact investors, bridge pride and profit and take bold risks on innovative projects. Bill Gates, Bill Clinton, Warren Buffett, George Soros, Richard Branson, and foundations including Ashok
a, Schwab, Skoll, and the Omidyar Network (the latter two named for eBay’s founders) all provide a steady flow of capital to ventures that aim to level the economic playing field. Led by Gates and Buffett, forty billionaires have pledged half their net wealth to charity during their lifetimes. Synergos, the Global Philanthropy Forum, and other groups turn high-net-worth individuals and dot-com billionaires into social entrepreneurs with portfolios of progressive activities. Today’s students of the Skoll Center for Social Entrepreneurship at Oxford’s Saïd Business School learn to be social intrapreneurs as well: going inside large corporations and changing their psychology and mission from within.
The best thing these new social investors can do is—like celebrity actors—inspire their counterparts in other parts of the world. Jack Ma, the founder of Alibaba.com (China’s version of eBay) has given millions to seed a Chinese version of Grameen Bank. He says, “When you have several hundred million or even several billion, then that money is no longer your money. Rather, it is a resource that belongs to society.” More and more Asian billionaires have started family foundations, especially as younger generations take the helm. The Chen family of Hong Kong not only builds community libraries across China but is also funding R & D investment into lowering the per-unit cost of adaptive eyeglasses that help young people learn better and older men and women work more productively, whether they are chopping vegetables in Ghana or sewing fishing nets in Thailand. Selling the glasses to rich Japanese helps cover the cost of donating them to the poor in Africa—but once the production cost comes down to two dollars a pair, they can be sold even to the poor, meaning the market, rather than charity, will sustain the innovation. James Chen has already sponsored the “Vision for a Nation” program in Rwanda, claiming, “If we succeed, Rwanda will have the best vision in the world—now that’s leapfrogging!”
Technological leapfrogging—from no phone to mobile phone, and no power to solar power—used to be a small niche of development strategy; now it is the dominant paradigm to advance social empowerment, job creation, and environmental sustainability at the same time. A study by the consulting firm Deloitte found that a 10 percent increase in mobile phone penetration raises GDP by 1.2 percent. Nokia has smartly targeted even areas with little or no electricity supply by creating cheap phones that power themselves simply by being spun around; now the World Bank follows Nokia’s lead in a partnership to support tele-banking across Africa. There are already five billion mobile phones in the world and about two billion computers. Worldwide, the number of people with access to cell phones now surpasses the number with safe drinking water. If anything shows the power of the market to deliver services, that is it.
Just like the IFC and MIGA can provide risk insurance to help build infrastructure in orphan states, the financial sector can embrace socially responsible investing (SRI), which already represents about one-tenth of funds professionally managed in the United States.3 Goldman Sachs and other major investment banks now integrate social and environmental factors into their equity research, pushing “triple bottom line” reporting up high on the agenda for many companies. Social investment funds such as Calvert and Underdog Ventures now provide an important alternative to the typical market psychology of running for the exits at the hint of risk. Instead, they lock in money, sometimes for ten years, precisely because such capital guarantees help to reduce risk. Such social funds have provided backing to African micro-credit operators including Nigeria’s Blue Financial Services, which has more than two hundred branches in a dozen sub-Saharan countries (excluding South Africa). Capitalism is creative enough without needing the “creative capitalism” Bill Gates has called for. What he really means is Kantian capitalism, which sees people as ends in themselves. Even in hard times, there is no better strategy than helping others help themselves.
Need-Based Design
Who owns Earth? The question has fresh relevance in the new Middle Ages. Largely under the radar, a vanguard of private equity firms backed by investment banks, pension funds, and university endowments is leading a speculative frenzy to buy up or lease millions of hectares of farmland to grow and export food for profit, underpaying already underfed locals in Kenya, Sudan, and Ethiopia. Rich Arab and eastern Asian states use their own state-backed firms to do the same thing. They not only want fertile cropland but also access to the water underneath it—which can be pumped out and shipped overseas while locals die of thirst. Corporate farmers are becoming the new feudal overlords.
Political will and a wave of the pen aren’t enough to redesign a global food system precariously based on abundant water and cheap energy—both of which are gone for good. Eighty percent of Africa’s hungry live on small farms, as do two-thirds of southern Asia’s and China’s populations—in other words, about half the world’s population continues to live in agricultural medievalism. Agricultural policy is development policy, yet for years the two have worked at cross purposes. American and European Depression-era subsidies to big farmers and biofuel industries have not only raised food prices by diminishing food production, but continue to block access for the world’s poorest farmers, forcing them to depend on food aid rather than feeding themselves—but just-in-time food assistance often comes too late. America’s $2 billion in annual food aid long carried the odious caveat of spending on American grain, which meant most of the funds went to shipping and overhead costs rather than food itself.*
Partnerships among lean international agencies, food companies, and NGOs have become a powerful axis in improving global food policy, spreading food wider and earlier to where it’s needed, and helping the rural impoverished grow more food themselves. UNICEF and the World Food Program, which shun top-heavy bureaucracies, devote most of their resources to delivering food to hungry women, children, and orphans in neglected pockets of the world such as central Africa—and they partner with major logistics companies such as Dutch TNT to build a network of emergency food banks and depots. The WFP now helps peanut farmers generate revenue by producing and selling vitamin-fortified peanut butter that nourishes children during food crises. When U.S. policy finally changed in 2009 to allow aid groups to purchase food from local suppliers, International Relief and Development (IRD) partnered with Indonesian food companies to boost their production of rice, egg noodles, and wheat biscuits and to improve their logistics network to distribute the food nationwide, a program being replicated in Cambodia, Niger, and Sri Lanka. IRD even builds small feeder roads in Iraq and Afghanistan to help restart agricultural businesses. With smart assistance from the United Kingdom’s Department for International Development to subsidize one-hundred-pound sacks of fertilizer for one-third the market price, Malawi went from bad harvests and starvation in 2005 to producing more than three million metric tons of corn in 2007 and selling the surplus to the WFP.
The race continues between Malthusian predictions of a growing world population without enough food and promises of a global “green revolution” that can feed us all. India’s 1960s Green Revolution brought new strains of wheat, seed subsidies, and infrastructure to grow and distribute more food. But today, after decades as a food exporter, India is competing to buy food on the world market. It needs a second green revolution—this time aided by global genetically modified seed giants such as Monsanto and Syngenta, and food companies such as PepsiCo that fund contract farming ventures that boost output while paying good prices for potatoes. If Africa is to have its own green revolution, it, too, will have to be a commercial one that scales mass agriculture. The Gates Foundation, G-20, and World Bank have pledged billions of dollars for an African agriculture development fund, while the Rockefeller and Gates foundations subsidize Monsanto to invest in developing high-yield strains of the seeds Africans need most—cassava, sorghum, and millet—and give credits to ten thousand African agro-dealers to upgrade small-scale rural food storage centers. Proving Malthus wrong is still possible if global food production and policy are actively devolved to the world’s farmers themselves and to science ra
ther than special interests.
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We should think in terms of technology rather than technocracy to get the world’s poorest the basics they need. As freshwater supplies dwindle, rich Persian Gulf countries pay a steep price for energy-intensive desalination plants; but, for the poor, Seattle-based World Wide Water sells a solar-powered micro-desalinator that works even with brackish saltwater and can be deployed all over desertified Africa and central Asia. The American nonprofit KickStart has sold its low-tech and low-cost water pumps to more than eighty thousand small-scale irrigation businesses from Mali to Tanzania. Water authorities in the developing world can’t control growing consumption and dwindling supplies—it’s up to innovation and activism to promote efficiency and conservation.
The same is true for basic health care, which has become diplomacy’s most active arena of public-private partnerships. Alejandro Jadad of the University of Toronto uses cell phones to capture and share photos for analysis, to store medical data, and to relay guidance from doctors. Through such “point-of-care diagnostics,” Jadad can treat patients in Colombia, Nigeria, and Sri Lanka. He couriers prescription medications and bills them nothing. Similarly, delivering hand sanitizer and oral rehydration therapy to elementary schools around the world would cost almost nothing and prevent close to five million deaths per year from diarrhea, parasitic worms, and other infections.
Left to their own devices, governments are often obstacles to public health rather than enablers. Take the reaction of Indonesia and India to the outbreak of H5N1 avian flu in 2008: Indonesia’s health minister ordered a joint U.S.-Indonesian medical research laboratory NAMRU-2 shut down, while Indonesia, India, and Thailand convened the Non-Aligned Movement to declare “viral sovereignty” to protect against Western encroachment and Western ownership of disease strains for profit. International agencies aren’t much better, running programs “more like a lemonade stand than like Google.”4 For decades the World Bank actually insisted that poor people pay for medical services they simply couldn’t afford, perversely incentivizing them not to seek medical care at all. It’s hard to imagine any such bureaucracy operating like the Clinical Directors Network, which constantly tests models for community-based health centers and spreads best practices worldwide. With leaders such as former South African president Thabo Mbeki denying the existence of AIDS and its impact, it’s no wonder that foreign mining companies and other multinationals partner directly with labor unions and NGOs to offer workplace AIDS testing and treatment to keep South Africans alive and working.
