Is it OK for firms to profit from poverty?
My first reflection on the subject came a few months ago when a good friend was volunteering in Africa. In one of our (long) phone conversations we started to discuss if nonprofits are really helping Africa or if they are becoming a barrier to development. You may have never thought about it, but when the nonprofit is focused only in giving goods, it does not create the correct incentives toward development and becomes an almost unbeatable competitor for local products¹. Nonprofits can be responsible for creating unsustainable, and often inefficient, markets.
On that note, I believe that organizations, either non-profit or for-profit, that do not rely only on giving are the real motor of development. Organizations that create the environment and the means for the local community to develop and sustain itself are truly making the world a better place. One example on the nonprofit side is Kiva, which follows the microfinance logic of the Nobel winning Muhammad Yunus. It is a platform that connects entrepreneurs around the world that need money with individuals who are willing to give. As they say on their website: “It’s a loan, not a donation.”² And by the end of the period, the “donor” receives their money back.
However, non-profits are not the only organizations that have a place in developing countries. Investments have been growing recently in sub-Saharan Africa, as shown in Sy’s article (2016). And according to the Africa Report, it looks like there is space for all: “South Africa and Nigeria remain the largest markets for personal care and cosmetics in Africa, estimated at €3bn ($4bn) and €1.6bn each, according to consultants at Roland Berger” (Africa’s Beauty brands primped for profit, 2014).
To be successful in Africa, the for-profits need to rely on the African people; contrary to the negative belief of profiting off from others, this is a mutual agreement between both sides. And, at least for me, this does not sound like “profit from poverty,” it sounds like joining forces. They need to understand how the local market works, understand the wants and needs of the community, and tap into the entrepreneurs available there — or even train locals to become entrepreneurs.
Here is what Melinda Gates explains about Coca-Cola at the Ted Talk “What nonprofits can learn from Coca-Cola”:
“They set them up as what they called micro-distribution centers, and those local entrepreneurs then hire sales people, who go out with bicycles and pushcarts and wheelbarrows to sell the product. There are now some 3,000 of these centers employing about 15,000 people in Africa. In Tanzania and Uganda, they represent 90 percent of Coke’s sales. Let’s look at the development side.”
Once we stop thinking of the poor population as people in need and realize how capable, creative, resourceful, and, yes, profitable they are, the world will come one step closer to equality.
Edited by Isabelle Jade.
LET’S CONTINUE THE CONVERSATION!
The comments below are open and ready for your inputs.
References:
Africa’s Beauty brands primped for profit. (2014, September 11). Retrieved July 20, 2017, from http://www.theafricareport.com/Society-and-Culture/africas-beauty-brands-primped-for-profit.html
Sy, A. (2016, July 29). Investment in Africa: Who Profits from the Boom? Retrieved July 20, 2017, from https://www.brookings.edu/blog/africa-in-focus/2014/03/07/investment-in-africa-who-profits-from-the-boom/
¹Read more about it:
Dugger, C. W. (2007, August 14). Charity finds that U.S. food aid for Africa hurts instead of helps. Retrieved July 20, 2017, from http://www.nytimes.com/2007/08/14/world/americas/14iht-food.4.7116855.html
Huenink, J. (2016, October 25). How To Make Sure Your Charity Doesn’t Keep People Poor. Retrieved July 20, 2017, from http://thefederalist.com/2016/10/25/make-sure-charity-doesnt-keep-people-poor/
² Watch the emotional Ted Talk of Jessica Jackley, co-founder of Kiva:
https://www.ted.com/talks/jessica_jackley_poverty_money_and_love
