Category Archives: aid

Wondering How Aid Could Be Bad for Development?

This NY Times article on the effects of aid spending in Uganda is essential reading for those interested in aid and development.
“Maternal Deaths Focus Harsh Light On Uganda,” Celia Dugger, July 29, 2011

For every dollar of foreign aid given to the governments of developing nations for health, the governments decreased their own health spending by 43 cents to $1.14, the University of Washington’s Institute for Health Metrics and Evaluation found in a 2010 study. According to the institute’s updated estimates, Uganda put 57 cents less of its own money toward health for each foreign aid dollar it collected.

http://www.nytimes.com/2011/07/3…

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Three Startup Ideas for Africa


Africa has the opportunity to leapfrog the development paths pursued by the developed world – why bother with land line telephones when cell phone towers are easier to put up? If you can build local renewable energy networks, why build huge networks of power lines?The roadblocks to African development aren’t necessarily best-solved by new technology. For example, communications and health services are all adequately served with existing technologies (cell phones) or even low-tech solutions (bed nets to prevent malaria and condoms to prevent HIV transmission). The critical needs for innovation are in creating businesses that can effectively distribute needed goods and services.

If I had a million dollars to invest in a business in Africa that would meet financial and social goals (while providing jobs and job training), here are three things I would invest in developing and distributing.

  1. Better ways to charge mobile phones. Cell phones are already quite common throughout Africa – this articledescribes cellular penetration rates as high as 50%. Nokia makes models of cell phones designed for use in Africa, which have flashlights, low power demand and a rubber coating preventing dust from entering the keypad. Africans use phones not only for communication but for banking and access to local and global financial information.What’s needed to continue the growth of mobile communications technology is affordable and portable way to charge phones in the absence of electricity. People without electricity charge their phones with diesel generators or by taking their phone to be charged in the nearest town with electricity. This limits the utility of cell phones for commerce and slows the distribution of communication networks.

    Investment in portable solar chargers or battery-based chargers could enable micro-entrepreneurs to travel through small villages providing convenient and affordable charging services.

  1. Solar electricity kits. Electricity is essential for communications and extremely useful for educational and medical facilities. It’s hard for kids to study by a fire and it’s hard to deliver a baby with a flashlight. Electricity supports communication and information networks that are essential for developing economic markets.As sun is abundant, solar energy is a great option for Africa. Schools, hospitals and other institutions are already creating their own solar generation systems in off-grid areas. You need a few things: affordable energy panels to collect the energy, affordable energy storage, and affordable electrical equipment. Here again, existing technology meets the need, but more rugged, affordable and portable solar panels would be useful.
  2. Water wheels & dams. Small (even tiny) dams and water wheels are another viable source of off-grid electricity generation and sequestering water for irrigation systems. Creating mass-production water wheels, dam components and dam designs would enable the rapid creation of small electricity networks.Small businesses could evolve to distribute components and build small installations to serve irrigation and electricity needs.

Any technical co-founders out there?

Image Credit: PRI’s The World on Flickr

Why I Believe in Entrepreneurship

Africa is poorer now than it was 40 years ago, when the modern age of aid found its feet. There’s something wrong with aid, but no one is sure exactly what. That’s the trick, the hurdle and the nightmare, all rolled into one.
There’s more than one kind of “aid”:
  • Public development aid: This is government-to-government or quasi governmental org-to-government. This is the kind of aid that governments spend to reinforce humanitarian or policy goals in the developing world.
  • Private development aid: This is the kind of aid generally executed by organizations like Save the Children, CARE, Mercy Corps and thousands of other, smaller organizations. Whether they’re building schools or sending advisers to improve agricultural practices, this aid is defined by an organization pursuing humanitarian goals.
  • Emergency aid: This is the kind of aid that’s required in both the developed and developing world, as natural disasters and other unexpected events destabilize existing economies. Tsunamis, earthquakes, droughts, civil wars, etc.
In her book Dead Aid, economist Dambisa Moyo makes a case that government-to-government aid (let’s call it public aid, for short) is bad for Africa. Why? Aid flows prop up broken governments and institutions and discourage the development of capital markets. Big cash flows are susceptible to corruption and disincentivize entrepreneurial behavior.
While Moyo argues about the deleterious effects of public aid specifically, I believe the same dynamics apply in private development aid. This is not to say that no private aid is successful, but that giving things away – whether to governments, communities or individuals – is bad finance and bad practice. Aid of both the public and private variety reinforces old-fashioned relationships, with toxic results.When you give things away – buildings, money, equipment – you stifle the inspiration for people and communities to build systems and economies for themselves. (Nonetheless, I strongly believe that all people should be guaranteed a minimum level of subsistence, through health care, education, food and shelter.)

Moyo argues that the solutions lie in international capital markets: in African countries issuing debt in order to raise money for investment in their infrastructure and social programs.

She argues that the practice of issuing debt reinforces positive mechanisms within a democracy. Governments who must act responsibly in order to repay loans are better governors. And, in turn, people are motivated to vote for governors who exhibit responsible behavior.

Perhaps Moyo’s model about public aid applies to private aid as well. What’s the private equivalent of issuing bonds? Debt or equity investments in enterprise. This is why I believe in social entrepreneurship:

  • Ownership is empowering. It’s empowering for the investor and the invest-ee. It has powerful psychological effects.
  • Businesses are perpetual; not one-time infusions of activity or cash. Instead of building a single building or infrastructure project, investing in a business on a venture basis ensures that you’re investing in a future.
  • Businesses have knock-on effects. Funding the growth of a business creates self-sustaining jobs for the future. As a result, you’re funding the development of a whole class of entrepreneurs, the world over.
  • When an investor believes that his/her investment will produce a return, he or she believes in a future of growth for that country.

Organizations like the Acumen Fund, Grameen Bank, Kiva and Root Capital are making capital accessible to the poor in order to enable them to found and develop businesses.

I believe entrepreneurship is the future. This is why, this mother’s day, I gave my mom a Kiva card.

Three Cups of Tea Is What’s Wrong with Community Development

The scandal surrounding Greg Mortensen’s Central Asia Institute is fascinating because it’s entirely consistent with the broken practices and culture in community development organizations – not only in the developing world, but in the U.S. too. When you build a school that remains vacant and unused from a lack of adequate community engagement or planning, you’re not serving your targeted communities.

(In addition, it seems that Mortensen’s Central Asia Institute misused funds and focused inordinate amounts of attention on promoting the founder itself. A different problem!)

What’s broken? Both organizations that advertise on TV – Save the Children, Worldvision – and the organizations funded by government agencies like USAID, have grown focused on producing things that are easy to measure, like:

  • Number of schools, playgrounds, hospitals or other infrastructure items constructed
  • Amount of money spent
  • Number of children who would fit in school if it were full (similarly, number of patients who would be served by hospital, etc.)

But those things don’t matter. The things that matter are difficult to measure, like:

  • Building functioning education systems
  • Creating real opportunities for economic development
  • Earning “buy-in” for desired behaviors and practices, whether health, environment or culture-related

A Case Study from Mali

I was a Peace Corps Volunteer in Mali, in a small village called Sogola. My predecessor there worked with the village to build a women’s health clinic (just a concrete building, really) with the theory that the village would be responsible for staffing it. When I left, three years after the building was complete, there was no health worker staffing the clinic. This reveals the central problem: The government did not have the funds to provide one, and the village did not tax itself to provide the funds. Development organizations are focused on providing measurable infrastructure, but that infrastructure is pretty meaningless without the people to provide services.

My neighbors in Sogola were focused on big, landmark projects, like building new cement buildings, or maybe buying metal fencing to make gardens or chicken coops. These are one-time infusions of cash, and not self-sustaining or change-generating projects.  And who can blame them? Aid agencies have been only too happy to distribute funds for “stuff” – concrete buildings, metal fencing, solar panels, etc. – because distributing “stuff” is easy.

The problem is that all this distribution of “stuff” stands between Malians and their own ability to develop their economies. My village was no better off with an empty health clinic than it was without it. Money can build clinics, but it cannot produce good health care systems. It can provide equipment or materials, but not a society of businesspeople and entrepreneurs. The solution isn’t another building. The solution is investing in people by giving them the means to invest in themselves.

Image Credit: Save the Children on Flickr

Shea Yeleen Connects African Women to Global Markets

Note: I wrote this post for MakeSense, an international organization that promotes social entrepreneurship and connects volunteers worldwide with social businesses. I’m proud to be a MakeSense gangster.

Rahama Wright is a bundle of energy and kindness. She’s an entrepreneur, traveler and the founder of Shea Yeleen, a nonprofit social enterprise that imports shea butter from women’s cooperatives in West Africa to the United States.

West African women have created shea butter for centuries by harvesting shea nuts, cracking them by hand, grinding them and clarifying the resulting butter, which is traditionally used as a calorie-rich cooking oil in Africa. In Mali, doughnuts fried in shea butter are a cheap and popular snack, usually served with a little hot sauce. In the U.S., we use the rich oil (solid at room temperature) for soaps, lotions and lip balms.

As a Peace Corps Volunteer in Mali, Wright saw the traditional producers of shea butter – women – losing control of their product as global companies increasingly purchased raw shea nuts. “The women were just harvesters,” says Wright. “Without connections to global markets, they were missing the opportunity to supply a value-added product, develop local economies and become successful businesswomen.”

Why Social Enterprise?

So Wright created Shea Yeleen, which buys shea butter from women’s cooperatives comprising almost a thousand women in Northern Ghana and Mali and brings it to the United States, where Shea Yeleen manufactures and distributes shea-based skin products for sale around the country. “Traditional aid leaves much to be desired,” Wright said. “There needs to be a better model, and I started looking for market-based solutions.”

Wright is the only full-time Shea Yeleen employee, but she’s ramped up production and capacity in the 7 years she’s been working on the project. When asked how she has come so far so quickly, Wright answered, “Trial and error, partnerships and committed volunteers.”

Wright brought her first shipment from Mali to the U.S. via air freight, and quickly learned that wasn’t economical. She’s continually improved her processes, finding local partners in Africa to expedite shipping, switching to sea freight and finding a processor in the United States that manufactures the finished products.

Shea Yeleen and Wright herself are attracting international attention for the way they’ve applied a different approach to social change. Wright and Shea Yeleen products have been featured in Oprah Magazine, Real Simple and in countless nonprofit blogs. “It’s been great to see the explosion of interest in social entrepreneurship and a new way of looking at development,” Wright said. “In particular, initiatives from the diaspora are bringing an infusion of new energy to the development sector.”

And now she’s passing her knowledge along. Wright forwarded me one of the handful of emails she gets every week from social entrepreneurs seeking her advice getting started, forming an organization, importing goods and finding customers. Here’s a summary list of the successful practices that have enabled her to scale up:

  • Use the power of partnerships to expand the footprint of your enterprise. If you’re creating an international enterprise, make sure you have local partners on the ground who know their way around.
  • Take advantage of business advisory programs and mentors to ask questions, network and stay up-to-date.
  • Remember that you’re not the only one with good ideas. Create an advisory board that will meet with you regularly to talk about challenges and brainstorm solutions.
  • One size does not fit all. Adapt and evolve.

Take Up Challenges with Shea Yeleen

Rahama is looking for graphic designers, web developers, board members, a social media volunteer and for Washington, DC based volunteers to assist her with the Shea Yeleen booth at the Smithsonian’s annual Folk Life Festival, where a group of Ghanaian women will demonstrate how to make shea butter. You can reach Rahama at rwright [at] sheayeleen [dot] org or info [at] sheayeleen [dot] org if you want to take up her challenges.

Development a Different Way: The Acumen Fund

The Acumen Fund is a nonprofit investment fund inventing a new approach to poverty reduction: patient capital. Acumen makes financial investments in businesses in East Africa, India and Pakistan that provide goods and services to the poor. Investments, not gifts.

Acumen’s 5-7 year equity or debt investments reach local poor populations that are under-served by existing markets and enterprises. Their long-term investments give companies and entrepreneurs time to evolve and adapt. When they invest, “[their] aim is not profit maximization, but profitability” – balancing social and financial returns on investment.

Acumen invests in scalable business models to unleash businesses that have the capacity to make broad social impact. For example, here’s a description of one investment they made in Kenya:

Acumen Fund invested $250,000 in Jamii Bora to build Kaputei, an affordable housing development outside of Nairobi. Jamii Bora has since repaid this loan, and Kaputei has 750 fully constructed homes for low-income slum dwellers who had proven their ability to repay but would never qualify for a traditional bank mortgage.

Since 2002, Acumen has invested more than $50M in companies that employ more than 35,000 people. To date, they’ve been repaid $4.1M and attracted more than $140M in “follow-on” investment from other funds and organizations following their lead into profitable investments in the developing world.

Does it work?

There are two metrics for measuring Acumen’s success: 1) Are they profitable?; and 2) Are they generating social returns on investment in addition to financial returns?

On the first point, while Acumen is a nonprofit organization, their long-term approach, including both debt and equity investments, means that it’s too early to say if they will be successful in generating profits from their investments. To date they have been repaid almost 10% of their total investment outlay, and many of their equity investments may prove profitable in the long term.

On the second point, I’m on the lookout for professional evaluations of the impact of their investments, but by their own account, yes. Acumen has created thousands of jobs. The companies they invest in have reached millions of people with affordable housing, accessible electricity, clean water and health and agricultural services.

They’re also bringing their connections to global marketplaces and other sources of investment. Acumen’s track record of seeding further investment from other funds and sources demonstrates that their investment is a trusted mark of approval for other potential investors.

Finally, Acumen is contributing to the social enterprise sector in other ways, by managing a fellowship program and inventing new ways to measure the performance of impact investing. In partnership with Google, Acumen developed Pulse, a real-time social investment tracking tool that measures not only financial data but social data. Tools like this make it easier for social entrepreneurs and investors to understand their progress and demonstrate their success.

Why It Matters

Acumen is doing something new – they aren’t giving things away. They are creating functioning equity markets that support businesses, jobs, experienced entrepreneurs and services & goods that reach the poor.

When their investments are successful and Acumen is repaid (as in the example above), Acumen is at its best. They’ve accomplished their goal of creating financial returns by recycling their capital and created social returns by increasing affordable housing in Kenya.

Acumen unleashes the latent power of local entrepreneurs, who have both ideas and the ability to execute. Their work supports the connects capable entrepreneurs to the capital they need to get started, creating a group of local businesspeople with experience building businesses, seeking investors and delivering products and services.

Finally, Acumen’s investment approach breeds respect. They respect the capacity of local entrepreneurs to develop their own goods and services and they respect the capacity of the poor to become consumers.

The Road to Hell is Paved with Good Intentions: Aid & Unintended Consequences


I used to be an idealist. I joined the Peace Corps, lived in a small village in Africa for two years and expected that I would work in international development and policy when I completed my service.

But I was incredibly disappointed by the ineffectiveness of aid programs I encountered in Mali. Generally speaking, none of the large development aid programs I observed had any real, sustained impact. (I define “sustained” as self-repeating: an investment that causes a positive feedback cycle of economic, cultural, environmental or social activity).  I saw a lot of one-off construction projects and give-aways.

Governmental aid agencies and NGOs were eager to get work done, spend money and were not careful about corruption issues. I saw a lot of money misspent in my two years in Mali through laziness, corruption and incompetence.

In the end, I have a more basic problem with aid: Gifts, grants and giveaways make people less like to build things for themselves.

One of the examples I offer in this regard is from a village in western Mali. This small town had a market garden built for them by an international NGO, with several wells that had been constructed by another NGO. When a fellow volunteer started her service in this village, two of the three wells had collapsed and needed to be rebuilt.

My colleague asked why the village council didn’t get organize an effort to get the wells repaired, and her neighbors said that they were waiting for an NGO to come along and do it for them. The wells had been built by somebody else and the village felt no ownership. The people knew someone would come and fix them, and sure enough, some NGO came along and fixed them after a year or two.

I can’t think of a clearer way to discourage people from investing in their own town than by making them feel it’s unnecessary.

This is obviously an anecdote, but it exemplifies the patterns I saw throughout Mali. My village had four concrete buildings, and all of them had been built by NGOs. My neighbors were wonderful people, and wonderful partners. They welcomed the cash I raised to build a solar electricity system in the little health clinic, but when it broke they didn’t raise money or effort to fix it.

I am far from the first person offering this analysis. William Easterly and Dambisa Moyo are two economists who arge that aid is antithetical to development for a variety of reasons: disincentivizing ownership, crowding out local investment and pushing up value of local currency.

Dr. Moyo goes a step further than other aid critics: she asserts
that the aid is bad for Africa. I think she’s right; my experience is the anecdotal reinforcement of her research. So what’s the solution? I don’t know. But I do know aid is not working for Mali.

I plan to write more about alternatives to traditional aid; there are some case studies to come.