Nobel Prize goes to nonprofit Grameen, but for-profit firms are seen increasingly as key to struggle against world poverty
October 1, 2006
For more information, contact: Benjamin Haimowitz, HHaimowitz@aol.com
The awarding last week of the 2006 Nobel Peace Prize to Grameen Bank, a nonprofit enterprise founded three decades ago, highlights a striking change that has occurred in the global struggle against poverty within only the past few years: increasingly, profit-making enterprises, as distinct from governmental and nonprofit agencies, are being seen as central to this effort.
Thus, it is not surprising that the role of business as an anti-poverty agent is a major theme of the United Nations - Academy of Management Global Forum, hosted Oct. 22-25 by the Case Weatherhead School of Management in Cleveland.
Keynote speaker C. K. Prahalad of the University of Michigan puts it this way: "By stimulating commerce and development at the bottom of the economic pyramid, multinational corporations could radically improve the lives of billions of people and help bring into being a more stable, less dangerous world. Achieving this goal does not require multinationals to spearhead global social development initiatives for charitable purposes. They need only act in their own self-interest, for there are enormous business benefits to be gained by entering developing markets."
Prahalad is the author of the groundbreaking book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, which in the two years since its publication has been translated into 15 languages.
Beyond presenting Prahalad's assessment of the corporate world's' upsurge in activity at the bottom of the economic pyramid, the three-day meeting (called "Business as an Agent of World Benefit") will feature many reports on companies active in impoverished areas, some on their own and others in conjunction with governments and nonprofit organizations. Some enterprises to be reported on:
Mexico: Feeding a family for $1.48 a day
Almita, a privately held corporation in the city of Leon, Mexico, was founded last year by entrepreneur Jose Castro, who says he was inspired by C.K. Prahalad's ideas. Reports Castro, "I sold some land, and started selling the product in an old borrowed truck," the product being "a portable sack containing six basic food provisions for five adults for one meal, all for $1.48 U.S. dollars." To date, Castro says, more than 36,000 Almitas have been sold and his 20-employee firm has already attracted the attention of academics and a leading Mexican business magazine. "Almita is not social welfare -- I call it alimentary democracy," Castro explains. "It is my belief that every family should have daily access to a decent meal for less than two Mexican coins."
Bangladesh: Turning a profit on a city's waste
Despite spending half of its total annual budget on waste removal, Bangladesh's capital city, Dhaka, with over 11 million people, found that it could not even remove half the waste, which was not only causing terrible odors but creating serious threats to public health. Twelve years ago, entrepreneurs Maqsood Sinha and Iftekhar Enayetullah launched Waste Concern based on the idea of turning waste into compost and selling it as a valuable substitute for chemical fertilizers. Initially Waste Concern sold its product to gardeners and small organic farmers, but getting the better of the waste problem required access to much larger markets, so that, after repeated efforts, the firm managed to team up with the country's largest fertilizer company, Map Agro. As a result, the city has been able to deal with what once seemed an impossible problem, and profits have been such that Waste Concern is currently evaluating offers from three other companies to bring its product to market.
Kenya: Enlisting business savvy to help farmers
Although the charity CARE was able to increase the incomes of hundreds of poor Kenyan farmers through its REAP project, the project never broke even and, in CARE's view, was at risk of being shut down once donors' preferences shifted. Realizing that it lacked the expertise to operate a business, last year CARE spun off REAP as a joint venture with a company called Vegpro Kenya Ltd. for the dual purpose of increasing the incomes of its clients while returning a profit to its owners. CARE lent its expertise in organizing and mobilizing the community, while Vegpro extended agronomic and managerial advice. This year the joint venture is close to the break-even point and CARE is optimistic that it will be viable for years to come.
India: Investing to improve the lives of the rural poor
infraSys was founded in 2003 as a profit-making enterprise with a difference. A vehicle for investing in rural India, it gauges its success by four criteria besides profit
-- number of livelihoods created, threshold income achieved, invest-to-income ratio, and community benefits. One project seeks to overcome farmers' dependence on large seed producers, who often hike prices when demand is high and unload surplus seeds of substandard quality. In a joint project between infraSys and 100 farmers in scattered villages, the farmers grow seeds, which are tested, assessed for quality, bagged, and certified for local sale at affordable prices. In other projects, 45 individuals in different villages create compost from organic waste and cow dung with the help of earthworms; 15 women grow flowers on a quarter acre of land each and collectively market them in the nearest city; and individuals who own carts but no bullocks are paired with others who own bullocks but no carts, enabling the pairs to offer cart-rental service.
Asia: Learning the realities of poverty
A major obstacle to success for multinationals in impoverished areas is simply that many company managers are largely ignorant of the realities of life among the poor. In Unilever Asia some 250 executives join together for annual learning journeys of up to a week to locales throughout the region. In rural China they worked alongside villagers making less than $125 per year as they swept streets, herded buffaloes, formed cement building blocks, built roads, and cooked noodles. Said one of the managers, an Indonesian: "I am Asian, 40 years old, living in a country that is 80- percent rural, but I have never planted a tree nor talked to rural people who buy our products every day. This is critical when we aim to improve their nutrition, their health, their happiness, life, and future."
The three-day Cleveland meeting will witness a marked increase in participation by management scholars in the UN Global Compact, the initiative that Kofi Annan launched six years ago to promote increased social and environmental commitment among the world's businesses. The Academy of Management, the world's largest scholarly organization devoted to management research and teaching, is cosponsoring the forum in cooperation with the UN and Case Western Reserve University. Marking its 70th birthday this year, the Academy of Management is the largest organization in the world devoted to management research and teaching, with close to 17,000 members, most of them business-school faculty, in 92 countries, including about 10,000 in the United States. It publishes four peer-reviewed journals, the Academy of Management Journal, Academy of Management Review, Academy of Management Learning and Education, and Academy of Management Perspectives.
- Media Coverage:
- Cleveland Public Radio. Sound of Ideas. (Friday, October 20, 2006).
- The Observer. The Shaky Marriage of Capitalism and Virtue. (Sunday, October 29, 2006).