Technology, entertainment, and design are underfoot, wherever we take the trouble to look

 

TedxKibera Speaker

Last weekend I had the opportunity to support an Acumen Fellow and friend named Suraj at an event he helped to organize called Tedx-Kibera, a syndication of the popular TED conference, except that this event took place in a small church in the center of one of the largest slums in the world, with an audience comprised of individuals for the area.  I thought the event was a great success, and a perfect manifestation of my previous post on meaningfully engaging communities, and working directly with our target consumer. Most of us in the social entrepreneurship space spend much of our time in an office and out in the field with entrepreneurs, folks who already have the opportunity and choice to build successful enterprises and give back, but what I’ve learned from this event is that there is immense potential that we as a community need to learn to tap into directly at the BoP.

 

Look out the window...

One of the poignant moments in the event for me was around a discussion on innovation.  The first speaker’s opinion was that innovation is looking at something that already exists for a specific purpose and stretching your mind to come up with a host of other things it can be used for. For example, an empty plastic coke bottle, can be…?  A flower pot! A musical instrument!  An ant farm!  The final speaker picked up this thread, and asked the audience to look out the window of the venue, across the vast expanse of crowded roofs of the ramshackle slum shacks, and conduct the same exercise — to look at the space, the materials, and to consider how to harness the inhabitants and their individual and collective potential to help them innovate and enhance their communities and others.   In order to succeed in our endeavors, we need to consistently push ourselves to not settle for what we already know, but to probe the depths of what the possibilities are, and look for innovations where we would least expect to find them.

Debt, and its discontents.

Debt can be toxic.  So toxic in fact that on a large enough scale it can spark a global financial meltdown, or a developing world debt crisis that has crippled nascent economies’ growth.  And relatively easy access to credit cards in the U.S., for example, can lead to a slippery slope of spiraling debt if consumers are not educated and risk is not managed.  In fact, one of the more interesting (and controversial) plans at last year’s GSVC was an organization named GoalSpring that was offering services to help individuals manage their spiraling debt through virtual counseling and debt management software tools.

Debt can also be empowering.  Microfinance, for example, is a leapfrog innovation to bring the economically marginalised into mainstream capital markets with small loans that help build micro-businesses.  Traditionally, the risk of lending to those who have no assets is managed through the group-lending model, pioneered by Grameen’s village banking initiatives.  And the financial success and social impact of micro-lending has led to a tremendous amount of investment, and a veritable explosion of a formalised banking sector focused on the poor.

But as credit becomes more ubiquitous among this segment of the population, wouldn’t it necessarily succumb to the same perils as unmanaged and uneducated credit card use in the U.S.?  According to a recent WSJ article, this is exactly what’s happening in India. The preponderance of microlenders hoping to take advantage of the strong financial returns in this sector have all but lost focus on the social impact element to microfinance and have consequently instigated the same type of (micro) credit bubble that we’ve now seen far too many times.  

This trend is disconcerting because hypothetically, as microlending institutions become formal banks, it’s a small step between lending and securitizing these loans for the capital markets, effectively amplifying the risk of lending to the poor. One large micro-financial meltdown and the flows of investment could drastically slow or even halt, switching off the prosperous tap of credit that is so vital to low-income communities.  And as microfinance as an industry continues to grow, it can be too easy to lose sight of the fact that it’s still not a fully mature marketplace, and the lending is still happening to enterprising individuals who nonetheless are naive to the notion of credit, and are not educated in credit management. Increasingly, in a hurry to disburse microloans and begin receiving revenue from interest payments, loan recipients are not properly screened by lenders for factual evidence of current or future assets of a micro-business.

I really hope the microfinance industry as a whole will take a step back and consider its rapid and successful growth in light of the many historical learnings regarding debt and its discontents, for the sake of the industry and the communities that it serves.

Who’s in the club?

First, the good news: These past two months of working in Kenya have made me realize that all of the theories and high-level discussion about poverty alleviation and social entrepreneurship really DO have applicability and relevance to the work happening on the ground.  The ubiquity of microfinance, the positive results of developing local enterprise, the visions of local entrepreneurs to uplift their communities are palpable, inspiring.  We ARE slowly moving away from the traditional foreign aid model that has created so much encumbering debt and dependence with forgone accountability.  

Now, the bad news: Our ‘club’ is still small, exclusive and somewhat esoteric.  Certainly the message and learnings about social entrepreneurship  are spreading like wildfire in certain geographies — there is now no shortage of conferences, websites, wikis, blogs, forums on the topic.  But where is the actual BoP in these conferences and discussions?  How do we include our brothers and sisters in developing countries in this intellectual discourse?  Even more than that, why is it mostly just U.S. MBAs that are savvy and desired as employees in many social enterprises and social investment firms?

These are the exact notions that Ashni Mohnot discusses in her recent blog post on Pop! Tech.  

For example, C.K. Prahalad, one of the first to coin the idea of business strategy at the bottom of the pyramid, is speaking in Nairobi next week.  The ticket price for the event is 65,000 Kenyan shillings = $850 USD.  Already the majority of the population is priced out of participating in the event.

I’ve met with entrepreneurs here who are interesting in serving low-income communities through private sector approaches, but have no notion that Acumen Fund and other social investment firms exist, and don’t have access to any of the frameworks, ideas and methodologies regarding BoP strategy and social enterprise.  Why is that?  How do we bring them into this club?  This intellectual debate cannot proceed without inclusion of the marginalised consumers, producers and entrepreneurs we are supposedly setting out to support.

And until we find a way to do so, I don’t think the idea of poverty alleviation through enterprise can really acheive critical mass and challenge the behemoth institutions that continue to implement status quo paternalistic charity and aid techniques.