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Should Businesses Make Money From Poor People?

August 2, 2013, 9:08 AM
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It's a hot debate. Should businesses make money off poor people? Paul Polak, the 79-year old entrepreneur, founder of the International Development Enterprises (IDE), and co-author of soon to be released The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers believes that business is the way to go if we want to positively affect the lives of millions. 

"The only way for a business to help at least 100 million poor people move out of poverty is to follow the laws of basic economics, which means providing an opportunity for both poor and rich investors to earn what they consider to be an attractive profit from their participation."

Polak's organization D-Rev develops low-cost products to improve the health and incomes of those living on less than 4$ a day. In the last 20 years, through enterprise, Polak has helped nearly twenty million people lift themselves out of poverty and believes that without a strategy for scaling from its very beginning, no social enterprise could hope to make a meaningful impact. Another crucial factor is the willingness to listen to those you are trying to help.

What is the best way to help poor people? Polak posed the question directly to the Bangladeshi farmers struggling to make ends meet and the answer he received was almost too obvious. They were poor simply because they didn't have enough money, and their way to make money was through farming (the case of 800 million people around the world earning their livelihood through small farms). Taking the time to listen to the needs of the poor, Polak came up with a solution - increase the farmers' income by reducing the cost they paid for tools and equipment, and help improve their farming practices through better access to information. To achieve this his company started developing radically affordable products for the farmers' needs -  an $8 treadle pump, compared to a $500 diesel pump, a $25 artificial knee, a $400 hospital lamp for treating neo-natal jaundice, instead of a $4,000 one, a $250 microscope to help diagnose malaria and tuberculosis, instead of a $1000 one. 

ReMotion Knee

According to Polak, governmental and philantrophic efforts can't reach scale because they can't attract massive resources. In addition, giveaways are harmful to local markets and not sustainable in the long term. However, he notes that even existing businesses struggle to get involved successfully in emerging markets. Polak thinks, that businesses can have a sustainable impact on global poverty only if they treat poor people as customers and producers, rather than recipients of charity, and if they revolutionize the way they design, market, price and distribute products.

For example, rather than simply giving out the treadle pumps (in the way a charity organization would), Polak's company trained local businesses to produce them, village dealers to sell them and well drillers to install them, thus recruiting about 70 manufacturers, 2,000 to 3,000 dealers and 3,000 well drillers, all of whom earned a living. Through his companies Windhorse International and Spring Health India, Polak aims to help 200 million people in the next 10 years gain access to safe drinking water by partnering with small shopkeepers in rural India and helping them store and sell purified well water for less than half a cent per liter as well as building a supply chain of bike deliveries at a cost of 4 cents for up to 3 kilometers. 

 

There are 3 billion customers in the world waiting for the businesses that will address their needs. The world of opportunities that we live in requires revolutionary thinking and a mindset free of prejudice and attachment to old paradigms. 

 

Paul Polak's article on the subject.

His TEDxMileHigh talk.

Huffington Post interview.

 

 

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