September Issue 2009

“They say a journey of a thousand miles begins with a single step. I took mine and fell flat on my face.” Thus begins the prologue of Jacqueline Novogratz’s book, The Blue Sweater— the story of how Novogratz, as a fresh college graduate, decided she wanted to change the world. And change the world she did, through the unconventional practice of investing in social entrepreneurs rather than doling out charity.

The story behind the title is about an acutal blue sweater that Novogratz loved and wore throughout high school and finally donated to charity. Fast forward 25 years, Novogratz was jogging down a street in Kigali, Rwanda, when she saw a boy wearing her sweater. Her sweater had made it across the world from the US to the capital of Rwanda, and it was in this moment that Novogratz understood how everyone across the globe is interconnected in some way or the other.

Her first project landed her in Cote d’Ivoire, Africa, where she spent many years trying to understand, as well as change, the traditional ways of handing out charity. Eager to contribute and anxious to make a difference, Novogratz came up with solutions she thought would help the African Development Bank (ADB) get past the hurdles it was facing. What she didn’t realise then was that the most important aspect of implementing new ideas and introducing possible solutions in developing nations meant listening carefully to the grievances of the indigenous population or even involving them by taking their input.

A common misconception among governments and non-profit organisations is that the communities concerned do not know better. This attitude often ends up alienating the people whom the project is intended to serve. It was a steep learning curve for Novogratz — she was treated with contempt because the locals felt they didn’t need an outsider, who was white and American, to help them out — but she didn’t buckle under pressure. Instead, she focused on trying to understand why many Africans hate donor agencies and why development programmes implemented by these agencies failed to make an impact and, in turn, created dependency.

The fight against poverty is one of the toughest challenges that we face and it isn’t something that will change overnight. Says Novogratz, “My work in Africa also taught me about the extraordinary resilience of people for whom poverty is a reality not because they don’t work hard, but because there are too many obstacles in their way. One very sick child or the death of a husband can wipe out a family’s savings and throw them into a vicious cycle of debt that keeps those with the least in poverty forever.” As we continue to dole out charity in order to help out the Afghan or Darfur refugees, or others in need, we need to know how much of a difference our money actually makes. Has it helped a considerable number of people rise out of poverty?

One of the first major projects that Novogratz worked on was establishing Duterimbere — a microfinance bank that gave loans to women. One of the first organisations Duterimbere worked with was a bakery run by women in Rwanda. According to Rwandan law, women could not borrow money from banks. Unable to borrow money to run their business, the women were barely taking home $0.50 each day. After Novogratz took on the project, she faced many obstacles that weren’t necessarily financial. She had to train the women on how to be aggressive in their sales pitch and how to improve the quality of their products. Since it was the first major project that was successful — when Novogratz left Rwanda, the women were earning close to $2 a day — it was also closest to her heart. It was here and a few other projects around Africa that she realised that compassion was only the starting point and, that patience and the ability to listen to others were integral to this process. This was what led to the idea behind patient capital, and eventually the establishment of Acumen Fund in 2001.

There is a well-known proverb that if you give a man a fish, you feed him just for a day, but if you teach a man to fish, you feed him for a lifetime. Loosely based on that concept, Acumen Fund focuses on an entrepreneurial approach to help solve global poverty. The organisation invests in social entrepreneurs rather than donating money. These people or ventures dream big and have business ideas that will help improve the living conditions of those around them. Areas of investments include health, clean water, housing and energy. An example of this is Drishtree, a project that was started by Satyan, who envisioned setting up an information distribution system in the rural villages of India. By fall 2008, Drishtree was operating out of 4,000 villages and had created more than 5,300 jobs. The company has set up small kiosks across villages where people can make photocopies, get pictures taken and use the internet. It has also established a business processing outsourcing (BPO) where people from the rural areas can input data for companies in the city.

A year after its establishment, Acumen Fund began investing in Pakistan. The first organisation it worked with was the Kashf Foundation, a microfinance organisation which was making steady inroads in low-income areas by lending money to the underprivileged. Interested in providing low-cost housing that would be accessible to people with low income, Novogratz came across Tasneem Siddiqui who introduced her to his innovative approach of incremental housing. His highly successful organisation, Saiban, focuses on providing affordable housing to urban slum-dwellers. In a joint venture with Saiban in 2007, 50 houses were built and occupied in the Khuda Ki Basti project in Lahore by those who had previously been slum-dwellers.

One of Acumen’s major success stories in Pakistan is that of Dr Sono Khangharani, a Hindu who lives in Thar — a desert region that faces such acute water shortage that people are unable to grow any crops. They have to move around constantly in search of water for their daily needs. Acumen Fund had invested in drip irrigation in India — a project that was hugely successful. And the person behind the venture, Amitabha Sadangi, an Indian, was kind enough to share his experience with Dr Khangharani.

Fast forward to a year later, and Dr Khangharani had set up drip irrigation in the Nagar Parkar region, and sold around 100 drip irrigation systems to farmers. When Novogratz visited the farmers in 2008, “an enormous field of sunflowers, bright yellow and green against the blue sky,” greeted her in a region where farming was impossible.

The Blue Sweater: Bridging the Gap between the Rich and Poor in an Interconnected World is extremely inspiring. It makes one stop and think about the choices we have and how each one of us can make a difference. In this day and age, when everyone is interconnected and our decisions — especially those made in the developed nations, resonate across the globe — it seems like the logical step to lend a helping hand by getting involved in our communities. To quote Novogratz, “The time has come to extend to every person on the planet the fundamental principle that we hold so dear: All human beings have lives of equal value. Rather than seeing the world as divided among different civilisations or classes, our collective future rests upon our embracing a vision of a single world in which we are all connected. Indeed, maybe this notion of human connection is the most important — and complex — challenge of our time.”

Read Newsline‘s interview with Jacqueline Novogratz here.