Thoughts on Alleviating Poverty

Giving via Microcredit — does it work?

Monday was one of those ‘breakthrough’ days.

I was asked to sit in on a closed door meeting with Professor Aneel Karnani. He was speaking on “Fighting Poverty Together”, the subject of his forthcoming book. Prof Karnani is currently the Professor of Strategy at the University of Michigan.

His talk was one of the most refreshingly candid I’ve heard.

And he pulled no punches. Consider this as an example: “I’m very negative on organisations like Kiva — the ‘darling’ of microcredit in lots of ways — I think all that Kiva does is make a few rich people in the US feel good about themselves. Now I’ve no problem with you feeling good about yourself but you shouldn’t fool yourself that this is the way to eliminate poverty.”

And whilst the focus of his talk was not about Microcredit, you can imagine that some (make that ‘many’) of the people in the room wanted to take issue with him.

So he delved deeper and told how the studies show that 80% of the loans are used for consumption, NOT to build businesses.  He told of the now widely known point that interest rates range up to 50% and even beyond on microloans.

He referred to the recent (this month) release of a major research project by DFiD in the UK which concludes “Overall, it is widely acknowledged that no well-known study robustly shows any strong impacts of microfinance.”

He pointed out that MicroSAVINGS is perhaps a better way to go (something we saw in action recently on our trip into Kenya).

But Microcredit aside, the good professor pointed out something fundamentally important — the key role of SMEs in alleviating poverty. One really interesting study showed that in high-income countries, the SME sector represented 60-70 % of the total enterprises in those countries; in low-income countries, that percentage shrinks to around 15%.

So for him, the strategy is to create more SMS to fuel employment AND to transfer skills, not just money (again, we saw that in Kenya firsthand with the goat breeding).

And there’s a huge role for government too. “It’s not just about the free market economy. In Uganda for example, alcohol consumption is 19 litres a year — way ahead of the USA. So the poor’s money goes on stuff that does no good.”

So Prof Karnani sees Government, NGOs and SMEs working together to alleviate poverty. But maybe, just maybe, it’s more than that. Maybe there’s another ‘sector’ to look at.

Before we discover what that might be, consider famed Entrepreneur Sir Richard Branson. He has a great view on ‘doing good’. Here’s a clip from a recent interview with him —  watch the video from 2:37 point:

I love that bit about 'If every single business could find their niche in the world where they want to make a difference, then we can get on top of most of the problems in the world.'

True perhaps. But for that to happen, business needs to realise what its purpose really is. And 3 days before I heard Prof Karnani, I was just a few hundred metres away listening to Tex Gunning of Akzo Nobel (think Dulux). He put the responsibility businesses have this way:

"Feed the Global world

Fight malnutrition and disease

Food + water + energy sustainability

Fight inconvenient truth"

Tex’s presentation and commitment to making a difference was obvious, heartfelt, authentic and stunning.

And then Akzo Nobel MD, Jeremy Rowe, put it like this:

"The purpose of a business is to fulfil a human need, profitably"

And he went on to show some marvellous stuff about Dulux’s work with Gawad Kalinga (GK) in the Philippines.

All good stuff. Indeed great stuff. But there is a but …..

It’s this: in a conversation after the meeting I asked Jeremy why it was that NONE of this great stuff — not any of the wonderful ‘give back’ videos Tex had shown nor anything at all about the wonderful work Dulux is doing with GK in the Philippines —  none of it — not one mention — was anywhere to be found on the expansive (and presumably expEnsive) Akzo Nobel website.

“Ah yes, we keep saying we’ll get around to that,” said Jeremy.

And that really is THE point  — I would add two words to the ‘togetherness’ that Prof. Karnani’s talking about — surely it’s more powerful when we say: Governments, NGO’s, (SME) Businesses AND CUSTOMERS (should be) working together to alleviate poverty.

All of us are customers. And even more importantly, all of us are ONE.

And maybe once we get that, we will understand what ‘together’ really means.

We’ll move from hackneyed ‘Corporate Social Responsibility’ and talk about ‘Shared Value’. And we’ll truly understand what ‘Share’ and ‘Together’ actually mean.

At B1G1, ‘together’ and ‘connecting’ are key words. And we’re learning more and more about them every day. Come join us. As one.