How do we bring the worldâ€™s poorest people into the global economy? Jacqueline Novogratz has spent much of her career investigating that question, and the work sheâ€™s doing now, as the founder and CEO of the Acumen Fund, reflects what she has learned. Acumen appears to be making a real difference.
Last week, I interviewed Novogratz for Net Impact, a group of MBA students and business people who want to use business to solve the worldâ€™s big problems. Members of the group (and itâ€™s worth joining) soon will be able to download the interview here.
Some background on Novogratz: Sheâ€™s got a Stanford MBA. She worked as a banker for Chase Manhattan in Latin America in the 1980s and learned, among other things, that big banks arenâ€™t equipped to lend to the poor. (At least they werenâ€™t then.) She helped start a microfinance institution in Rwanda. (Getting it to grow big was a challenge.) Sheâ€™s seen foreign aid up close, and came away a skeptic. (â€œI saw how destructive aid could be, and there was very little accountability in the development sector.â€) So if markets alone wouldnâ€™t fight poverty, and aid by itself wasnâ€™t the answer either, what was? Perhaps a bridge between the two.
Thatâ€™s what Acumenâ€™s about. Founded in 2001 with seed money from the Rockefeller Foundation, Ciscoâ€™s foundation and private donors, Acumen is a â€œnon-profit global venture fund.â€ That sounds odd but the idea is pretty simple: Raise money from well-to-do institutions and people, and then lend it to companies that provide affordable, vital goods and servicesâ€”like health, water and housingâ€”to the worldâ€™s poorest people. Then help those businesses to grow, get your loans or equity back, and start all over again. The methods are similar to other venture funds; the mission is to fight poverty.
One example: A water company in India, called Water Health International, got a $600,000 equity investment from Acumen that helped it build small-scale water filtration plants in Indian villages. Like many venture funds, Acumen also lent its technical expertise. WHI raised more money from other donors, and it now operates in 50 villages in India. â€œWeâ€™re looking at a viable company with 100,000 lives that have been directly changed,â€ Novogratz said. Among the obstacles that WHI had to overcome was the Indian governmentâ€™s belief that clean, safe drinking water is a human right that no one should have to pay for. â€œWe agree, philosophically,â€ Novogratz said, â€œBut 700 million people in India donâ€™t have it.â€
Another example: In East Africa, a company called A to Z Textile Mills produces durable, anti-malarial bednets made out of plastic fibers that are impregnated with an organic insecticide. The company, which has received close to $1 million in loans from Acumen, now has about 5,000 employees who manufacture about 7 million nets a year, Novogratz told me. The trouble is, the bednets cost about $6 each to make, and while they save lives (obviously), many people in Africa canâ€™t afford them. Right now, A to Zâ€™s biggest customer is the UN which gives the nets away for free. Nice but not a long-term business plan. Acumen wants to help A to Z secure new loans or grants to lower the cost of the bednets and create a more sustainable model.
Altogether, Acumen has about $20 million in loans or equity outstanding and about 20 employees. It is funding a nonprofit company that sells low-cost eyeglasses in India, an Internet kiosk company, also in India, and a company that wants to provide home financing to squatters in Pakistan, among others. Acumenâ€™s major supporters include the Gates Foundation, the Skoll Foundation, Google.org and Nikeâ€™s foundation, as well as many others. You can look at Acumen’s other investments, see who else has donated and check out the staff at the fund’s website. I’m impressed by Novogratz and the work she is doing.