Maximizing social impact and profit: a two-way street

By Jyothi Vynatheya Oberoi

Most interpreters of the triple bottom line – measuring business performance with the “three P’s” of profit, people, and planet – ask how businesses can improve living standards and support the environment. Fewer also ask how social businesses can maximize their potential for profit.

All organizations, however, can consider how they can maximize both social impact and profit, regardless of whether they are labeled as a “traditional” or “social” business. We at Dalberg Mumbai believe that young startups have a particularly apt opportunity to build the three P’s into their practices from the early stages of their business’s growth.

Igloo MumbaiWith this concept in mind, our team recently launched Igloo, an entrepreneurs-in-residence program based in Dalberg’s Mumbai office. Igloo provides catalytic organizations and entrepreneurs an enabling environment in which to grow. Our team will advise these young organizations through short-term formal consulting relationships and informal collaborative brainstorming and networking sessions to support their growth and refine their business strategies.

One of Igloo’s first members is Sonali Mehta Rao of Mela Artisans, a business that successfully straddles the line between profit-maximizing and impact-maximizing. The driving force behind Mela’s creation was an effort to keep local Indian artisan groups, who might otherwise live at the brink of poverty, in business. The founders initially envisioned Mela Artisans as a smaller-scale non-profit entity. However, as Mela’s founders gained a better understanding of the market forces that led to artisans’ poverty, they determined that the most effective way to support artisan livelihoods was to develop a socially conscious luxury brand that would sell crafts created using traditional local techniques to customers around the globe.

Mela’s model empowers artisan groups by showcasing their contemporary design capabilities, establishing linkages to buyers, and providing local craftsmen with interest-free working capital loans to fulfil their orders. In other words, Mela replaces the traditional middle-men and creates opportunities for artisans to sell their products to high-end global stores at a much larger scale than before.

Measuring the social impact of a company such as Mela can be challenging, as it is often too complex to quantify or standardize. As a result, for-profit companies whose work yields social benefits (e.g. job creation, pollution reduction, or infrastructure improvements) may not venture to assess these benefits, simply because they are difficult to quantify or claim as a direct result of their business.

Mela Artisans is a socially conscious luxury brand that works with artisan groups in Mumbai to sell crafts created using traditional local techniques to customers around the globe.

Mela Artisans is a socially conscious luxury brand that works with artisan groups in Mumbai to sell crafts created using traditional local techniques to customers around the globe.

For Mela, measuring success beyond the balance sheet is core to the business. For this reason, Mela tracks periodic metrics to ensure its positive impact on the livelihoods of the artisan groups within its network. For example, the business conducts household surveys of its artisan group members to understand individual and family income, assets, saving and spending behavior, and access to basic services such as healthcare and electricity.

Mela’s strong business model and deeply rooted linkages to local artisans recently led Aavishkaar, a Mumbai-based social venture capital firm, to invest $3 million USD in Mela. This investment marks a strategic inflection point for Mela, which will continue to grow while housed at Igloo. Our team in Mumbai aims to support Mela’s staff and other entrepreneurs-in-residence at Igloo as they develop businesses with an eye to maximize their profit and social impact.

Not every business lends itself to complementary benchmarks of both financial and social success. However, there is real value in assessing whether an organization can move beyond a single bottom line. Through Igloo, we hope to bring this impact-oriented thinking to the forefront of the startup scene in Mumbai.

To learn more about Igloo or to join this unique community of entrepreneurs, please visit Igloo’s website.

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INFOGRAPHIC: How Green is the Internet?

By Tania Beard, Libby Bova, and Gill Cassar

In recent years, the media has buzzed with stories applauding the Internet as a driver of economic growth, efficiency, and social change. Dalberg’s own report, The Impact of the Internet in Africa, added to the buzz with its examination of Internet-created opportunities in Ghana, Kenya, Nigeria, and Senegal.

Less discussed, and perhaps more equivocal, is the impact of the Internet on the environment. We examined this relationships and found that there are dark and bright sides to the Internet’s impact on the environment: the Internet contributes significantly to environmental degradation, yet also drives innovations that reduce humans’ carbon footprints.

Our research, presented in the infographic below, offers answers to the question, “How Green is the Internet?”:

The Impact of the Internet on the Environment

For more information on Internet-enabled innovations that can reduce your carbon footprint, click here.

To read more about how the Internet is enabling economic growth and social inclusion in other sectors, click here.

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The burgeoning opportunity in Ethiopia’s factories

By Paul Callan and Sanchali Pal

Could Ethiopia be the next big manufacturing hub?  Photo via Flickr.

Could Ethiopia be the next big manufacturing hub?
Photo via Flickr.

A factory whirring with dozens of technicians producing high-quality sportswear is an atypical image of Africa. For a long time, Africa’s potential has been defined by its abundant natural resources.

Yet this story may be changing as a handful of African economies try to follow the path paved by the Asian ‘Tigers’ before them – to become global manufacturing centers.

African countries lack the industrial capability that their Asian counterparts have refined over the last 50 years, but high and rising costs in current manufacturing zones have created an opportunity for them to make up for this lack of experience with cost savings. Wages in China rose 20 percent from 2007-2011, and the appreciating renminbi, along with increasing land and water scarcity, is driving up cost of production. Wages in Vietnam are rising as fast, if not faster than those in China. These changes have already led to a jump in manufacturing investment in Indonesia, Thailand, Malaysia, the Philippines and Bangladesh – but all five countries recently approved significant increases in their minimum wage.

As a result, global retailers are looking further afield to diversify manufacturing and reduce dependency on China and southeast Asia. Countries like Kenya, Tanzania, Egypt, Morocco, and Mauritius have already become common manufacturing locations. But the latest rising star is Ethiopia.

The Addis appeal

A few converging factors have primed Ethiopia to evolve into an important manufacturing center. First, treaties like the African Growth and Opportunity Act (Agoa) give it – and other sub-Saharan countries – a competitive advantage over Asian counterparts in light manufacturing. Agoa, passed by the US Congress in 2000, enables tariff and quota-free access for imports from sub-Saharan Africa to the US, while  goods from Asia are subject to fees and restrictions. Analogous treaties offer duty and quota-free access to European and regional African markets. The 2013 Agoa Forum actually took place in Ethiopia. After this meeting, in mid-August, apparel retailer H&M, announced that it would begin sourcing clothing from Ethiopia for the first time.

H&M’s decision reflects a second trend benefitting Ethiopia: relative political stability and increasingly credible regulatory oversight. H&M’s largest sourcing market is Bangladesh, where the manufacturing sector has been hit by safety concerns and negative  publicity after recent garment factory tragedies brought the hazards of poor safety precautions to light. In response, some retailers have begun to look for sourcing locations with more reliable enforcement of safety standards, increasingly paying attention to metrics such as accountability, corruption, violence, and political and economic stability when selecting sourcing countries.

H&M recently announced it would begin sourcing clothing from Ethiopia.

H&M recently announced it would begin sourcing clothing from Ethiopia.
Photo via Flickr.

In addition to its stable environment, Ethiopia’s economic performance is fuelling interest in its manufacturing potential.  While per capita GDP remains low in actual terms, the country has posted sustained economic growth at an average of 11.3 percent for the last seven years.

This growth comes, in part, from a reform-minded government keen to unlock capital flows; a third factor priming Ethiopia for further FDI. Government officials are selectively opening sectors of the economy to investment, and are enacting policies to improve infrastructure, transport, and ease of doing business – typical barriers to manufacturing in Africa.

Though landlocked Ethiopia is closer to Western consumers than Asian competitors, transport costs have historically been prohibitively high. The cost to truck a standard container 340 miles from the port in Djibouti to Addis Ababa equals the cost to ship the same container 3,100 miles from Guangzhou, China to Djibouti. Recent and upcoming logistics reforms aim to streamline customs and transport processes. Those include an ‘Authorized Operator Program’ to expedite regular exporters, four more dry ports for faster clearance, and privatized management of the port in Djibouti – though how quickly progress can be made remains to be seen.

Public-private partnerships have also created several new industrial zones. The first, Bole Lemi, opened in March 2013 and is targeting Asian investment in leather and footwear. The Ethio-China Light Manufacturing Special Economic Zone in Lebu, on the outskirts of Addis Ababa, aims to eventually employ 100,000 workers and pro

While production cost of certain items are lower in Ethiopia, landed cost  may be higher. Photo via Flickr.

While production cost of certain items are lower in Ethiopia, landed cost may be higher. Photo via Flickr.

Chinese leather shoe manufacturer, and interested investors include The China-Africa Development Fund and the International Finance Corporation. The zone is projected to require $2bn investment and yield $4bn return over 10 years.

Which brings us full circle to the final factor: wages and other costs. According to recent research by Dalberg, Ethiopia’s labor costs – even accounting for lower productivity – are less than  66 percent of Chinese wages. Additionally, utility and land costs are low, bolstered by significant government investments in hydropower. Efforts to build the $5bn Grand Ethiopian Millennium Dam began in 2011. The project has hit funding hurdles and sparked controversy among environmentalists and neighboring countries – but if completed, it will be largest hydroelectric power plant in Africa, with capacity to export energy to neighboring countries including Djibouti, Sudan, and Kenya.

Payback

Profit forecast scenarios suggest the Ethiopian market is a viable one. A garment assembly factory with yearly output of 25-30m units would require approximately $5m in upfront investment, with payoff in five years and an estimated rate of return over 10 years of 25 percent. A $4m investment in a leather shoe factory has an estimated simple payback of three years and an internal rate of return of approximately 30 percent after 10 years. Similar opportunities exist in leather gloves, leather shoes, cotton textiles, and fresh fruit and vegetable production. While our analysis and other studies show that production cost of certain items are lower in Ethiopia, landed cost (factoring in transportation and other potential costs) may be higher.

For any of this manufacturing potential to be tapped companies will have to invest in training and technology transfer. Nonetheless, recent trends suggest that for forward-looking investors willing to bring industry expertise – winds are blowing in favor of manufacturing in the cradle of mankind. And companies from China – the 21st century’s leader in manufacturing – have already taken steps to be among the first to respond to the winds of change.

This article originally appeared in the Financial Times’ This is Africa.

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Assessing the effect of data gaps on Internet openness and economic development

By Karen Mok

Few things are as important, or as undefined, as Internet openness; at its simplest level, it means an unrestricted Internet. But Internet governance is changing rapidly, and its openness may be at risk. On March 14, the United States announced that it would cede oversight of the Internet Corporation for Assigned Names and Numbers (ICANN) in 2015. ICANN selects the endings for domain names, such as .com and .org, and gives other entities permission to register them. In other words, control of ICANN is a big deal.

Future control of ICANN remains unclear, but already two camps are emerging: those like the Wall Street Journal’s L. Gordon Crovitz urging U.S. Congress to “save the Internet,” and others like the chairman of ICANN’s board Dr. Stephen Crocker who says this has been a “long envisioned” handover of control. The power transfer has given rise to concerns that the future of Internet freedom may come under threat if control becomes subject to corporate or political interests – a concern alarmingly relevant as governments around the world including Turkey, Venezuela, and Russia are cracking down on Internet openness.

The Importance of Openness

Open For Business? The Economic Impact of Internet Openness

Proponents of Internet openness have thus far used a human rights- and free speech-related rationale – important arguments, to be sure, but arguments that don’t necessarily resonate with some companies and governments. At Dalberg, we have taken a first step at understanding another value of openness – the economic imperative. The results appeared this week in our new report sponsored by Google, “Open for Business? The Economic Impact of Internet Openness.”

We found the economic benefit of an open Internet is overwhelming. In Chapter 3 of our report, “Understanding Restrictions on Internet Openness,” we outline five pathways through which direct and indirect restrictions on Internet openness harm economic growth; for one, restrictions reduce investor confidence and the availability of information that might otherwise enhance productivity or spur growth-generating innovation. Moreover, the ability of the Internet to propel a county’s economy forward, into competition with other countries, may slow if a country waits to capitalize on the Internet’s economy-boosting potential. During the time lost under the reign of policies that limit openness, other countries continue to surge ahead, widening the economic gap between open and “closed” countries and making it, correspondingly, harder and harder to close.

The Cost of Internet Restrictions

Turkey internet censorship protests

A man protests the Turkish government’s Internet restrictions.  Photo by Erdem Civelek.

Commentators’ worst fears seemed to be realized as Turkey banned Twitter on March 21 and YouTube on March 27. Direct government-instated restrictions like these can significantly hurt a country’s economic growth. Restrictions repel investors and force Internet-driven businesses to pay heavy legal fees. For instance, even before the ban, the founder and CEO of one of the most popular websites in Turkey, Ekşi Sözlük – an open-access online dictionary and social network – told us 15% of its total operating expenses go to complying with Turkey’s arcane and restrictive rules regarding website content. He added, “A business of Twitter or Facebook’s size and scale could never happen in Turkey until the legal system becomes more conducive to these types of business.”

We can measure costs of complying with Internet restrictions on a firm-level basis, and we know that restrictions harm growth, but very little hard data exists about the broader economic impact of Internet openness.  As a result, while many people—including former Secretary of State Hillary Clinton—have stated that restrictions have economic consequences (a claim that seems intuitively true) the chain of effects is so complex, the data so limited, and the factors so numerous, that (like many social science questions) it is nearly impossible to prove causality.

But given recent government restrictions – and the enormous emerging academic and political interest in Internet openness – the time to fill the data gap is now. So what should we do?

Solving the Internet Openness Data Void

  • Pick a standard: Currently, advocates of Internet openness – including Freedom House, the OpenNet Initiative, and the World Wide Web Foundation – use independent scores and rankings to calculate Internet openness. Each organization studies a different subset of countries and interprets Internet openness in a different way. Governments, think tanks, entrepreneurs, and Internet businesses (among others) need to collaborate and invest in efforts to define Internet openness metrics.
  • Get granular: These measurements of Internet openness circumvent the paucity of data and standards by creating aggregate scores of “Internet censorship” that are based on self-reported survey results that are subject to bias. As a result, we are unable to assess the specific effects of different types of restrictions. For example, Turkey’s Twitter ban is likely to have different economic impact than Thailand’s 2007 Act on Computer Crime, which banned certain content and holds many websites legally liable for their content. Until we have access to more detailed quantitative data on Internet censorship – the number of websites blocked in every country, for example – we cannot tease out the specific effects of these restrictions. A sustainable solution must also ensure that governments and businesses have incentives to collect and release detailed quantitative data on Internet censorship.
  • Break up with GDP: Gross Domestic Product (GDP), an aggregate measure of a country’s total economic production, is broadly considered the standard measure of economic well-being. So how does GDP capture the utility of free online courses, Wikipedia articles, Google maps, or YouTube videos? Well, it doesn’t. Since there is no money exchanged in such transactions and data on the indirect value of each transaction is kept private by companies, they aren’t captured in the country’s GDP. We need a new indicator to capture the nuanced benefits of Internet usage beyond monetary transactions if we are to accurately quantify the value of the Internet economy.

While data on Internet openness is lacking, Dalberg’s report “Open for Business? The Economic Impact of Internet Openness” advances what we do know about Internet openness at a time of dynamic changes in Internet governance and increasingly sophisticated censorship. Systematic measurement of Internet openness may have begun only a few years ago, but the time to capture new data and strengthen existing measures of openness is now.

Click here to learn more about Dalberg’s ICT & Mobile for Development work.

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Unlocking access to finance for women entrepreneurs: not just another charitable cause

By Lily Han

The challenges small businesses face in accessing finance to grow are familiar and well-established: they may lack the know-how to access formal financing sources, have little collateral to offer, or be perceived as high-risk clients by banks or investors, to name a few. In the developed world, and more recently, in the developing world, increased recognition of the role small businesses play in driving economic growth has led to a proliferation of programs to make it easier for small and medium-sized businesses to access capital and expand their operations.

As difficult as it is for small business owners to access finance in general, women entrepreneurs in the developing world face some of the toughest challenges, including lack of supportive policy environments and economic infrastructure, lack of suitable bank products, and limited networks and information.

The gap between credit supply and demand for women-owned SMEs outside of developed countries is estimated to be $300-350 billion.

The gap between credit supply and demand for women-owned SMEs outside of developed countries is estimated to be $300-350 billion. Photo courtesy of the World Bank.

Women in the developing world are more likely than their male peers to face legal barriers such as weak property rights. Additionally, women who were denied education or consistently discouraged from leaving the domestic sphere may lack the networks and information required to access formal markets.

On the supply side, banks sometimes avoid serving women-led small businesses because they perceive them to be high-risk borrowers that are difficult or expensive to serve. Often, banks do not develop products that meet the needs of women; rather, they offer products with high interest rate and collateral requirements.

Furthermore, many women entrepreneurs in developing countries lack the know-how needed to access capital from formal sources like banks. Dalberg focus groups with women entrepreneurs showed that they can find it difficult to identify their precise capital needs, find an institution that can help them, submit a loan application, and negotiate for fair terms. Although women entrepreneurs recognize that capital can speed up their business’ growth, they often are discouraged by how challenging it is for them to even attempt to access that capital.

The result is a gap between credit supply and demand for women-owned small and medium-sized enterprises (SMEs) outside of developed countries that is estimated to be $300-350 billion. In other words, as many as 70% of all women-led SMEs in the developing world are underserved or not served at all by the formal financial system. With such a large gap, it’s no wonder a recent report found that incomes per capita could increase by an average of 12% in many developing economies if the gap were closed.

As many as 70% of all women-led SMEs in the developing world are underserved or not served at all by the formal financial system. Photo courtesy of the World Bank.

As many as 70% of all women-led SMEs in the developing world are underserved or not served at all by the formal financial system. Photo courtesy of the World Bank.

Yet very few programs have focused specifically on improving financial access for this segment. In fact, programs that focus on access to capital for SMEs in general in the developing world total only $25 billion per year; a stark contrast with the roughly $30 billion in loan support offered to small businesses annually by just one government agency (the Small Business Administration) in one developed country (the United States).

Two weeks ago – just before International Women’s Day – the Goldman Sachs 10,000 Women program and the International Finance Corporation took steps to address the needs of women entrepreneurs. The two announced the world’s first global finance facility for women-owned SMEs, which will raise $600 million in capital to provide incentives to unlock local bank lending to women and grow the population of successful women borrowers.

The $600 million facility is the first globe-spanning effort to narrow the large and persistent financial access gap for women small business owners. Beyond mobilizing capital for women, it will also demonstrate the positive effects on communities in which women have access to finance to grow their businesses.

The mechanism paves the way for proving the commercial viability of lending to women entrepreneurs by bringing together a philanthropic donor, a multilateral agency, and various commercial banks who will participate in the facility. Their hope is that if local banks reach women-led SMEs and carefully measure gender-specific results, a rich array of quantitative data and qualitative insights will follow. These results can help tell a compelling, evidence-based story of why women entrepreneurs are profitable investments for global growth, not just another charitable cause.

Click here to read about Dalberg’s work in gender empowerment.

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Tackling Africa’s youth unemployment problem through civic service engagement

By Tania Beard

Africa has the largest population of residents under the age of 25 (600 million people), making it the youngest continent in the world. While a young population might seem to bode well for economic development, in reality roughly 60% of these youth are jobless.

Employing the continent’s young citizens is a challenge. With fierce competition for jobs, limited opportunities to gain work experience, pervasive nepotism, and financial and cultural barriers to entrepreneurship, African youth have a hard time getting a foot on the first rung of the career ladder. It doesn’t help that, in many African countries, the content students learn in the classroom is woefully misaligned with the skills that employers require.

The Ghanaian National Service Scheme (NSS), one of the oldest and largest National Youth Services in Africa, fosters employability, sustainable livelihoods, and entrepreneurship among youth.

The Ghanaian National Service Scheme (NSS), one of the oldest and largest National Youth Services in Africa, fosters employability, sustainable livelihoods, and entrepreneurship among youth.

As a result, the National Youth Service, a longstanding institution that engages young people in civic service through provision of skills training, job placements, and leadership opportunities, has become a development priority for many countries. Eighteen countries currently house a National Youth Service. Kenya recently announced that its youth service will now be mandatory for all secondary school graduates, and the Flemish and South African governments are partnering to invest in youth service in the fields of art and culture.

In November 2013, Voluntary and Service Enquiry Southern Africa (VOSESA) partnered with Innovations in Civic Participation and the MasterCard Foundation to hold Africa’s first learning forum on the National Youth Service. Government, civil society, and private sector representatives from more than 20 African countries discussed how to “reap the demographic dividend” of Africa’s youth population to avoid the “demographic disaster” of youth unemployment.

Participants discussed how to ensure the effectiveness and sustainability of the National Youth Service. The group walked away from the forum recognizing the importance of private sector involvement in developing National Youth Service curricula and arranging work experience placements for youth.

The learning forum comes on the heels of Dalberg Research’s study to understand whether and how the Ghanaian National Service Scheme (NSS), one of the oldest and largest National Youth Services in Africa, fosters employability, sustainable livelihoods, and entrepreneurship among youth, and how it can do more.

Tania Beard with representatives at the Learning Forum

Participants at the VOSESA/ICP learning forum included (L to R): Flavien Munzuluba Kinier, National Volunteer Secretariat, Democratic Republic of Congo; Tania Beard, Dalberg Research, Senegal; Alemayehu Konde Koria , MasterCard Foundation, Canada; Serigne Falou Dieng, National Civic Service, Senegal; Henri-Gauthier Fene-Fene, UN Volunteers, Democratic Republic of the Congo; and Marie Trellu-Kane, Cikanam Conseil, France

In Ghana, the NSS places 80,000 post-university youth in year-long public, private, and civil society sector positions annually. Participation is mandatory for university graduates, who receive small monthly stipends paid by the Ministry of Education and private sector donors. The program gives youth work experience and helps the country fill jobs that might otherwise go unfilled, such as teacher positions in rural areas. It also gives youth an opportunity to give back to their communities while still earning a living. Following their service, youth can look for full-time jobs or transition into entrepreneurship; some opt to enter a follow-up one-year voluntary teaching placement in rural and impoverished communities called the National Volunteer Service.

Ghana Youth Unemployment ReportThe Dalberg Research study found that the Ghanaian National Service Scheme does make young people “work-ready” by giving them practical and soft skills to enter the job market with confidence. But, we also found that NSS could do more to tackle unemployment. For example, the NSS has great potential to alter the youth employment landscape in Ghana based on the sheer scale of the program, its well-timed intervention at a period of transition in young people’s lives, and its backbone of state financial and legislative support.  Ghana’s NSS is thus primed to provide a communication channel between Ghana’s education system and its key industries. The program could provide crucial feedback to parents, students, and educational institutions on the mismatch between skill supply and demand in the employment market.

Youth unemployment is one of Africa’s most pressing development challenges, and studying the National Youth Service is one way that countries can exchange and implement effective strategies to combat it. To start, access the full Ghana NSS report here. Or, click here to read more on Dalberg’s work in youth employment.

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Celebrating International Women’s Day 2014: Equality for Women is Progress for the Planet

By Ashley Eberhart

Recently, I worked on a Dalberg project to improve the livelihoods of people in fishing communities. At the outset, we expected to focus on giving fishermen access to better gear, so that they could catch higher-value fish and increase their incomes. However, as we began our research, we realized that this approach would exclude nearly half of the broader fishing industry: the women. Most people who catch fish are men, but much of the industry involves jobs frequently filled by women, including processing fish before sale. As a result, we began exploring other ideas – such as improving facilities and training for women to process fish – that could increase the value of fish products, and therefore, the incomes of male fishermen and women processors.

Applying this “gender lens” to development is particularly relevant this week, as people around the world celebrate International Women’s Day (IWD). Festivities kick off today at noon in New York City, where members of the United Nations and development community will gather to reflect on the UN’s 2014 IWD theme: “Equality for women is progress for all.”

Giving low-income women access to the same agricultural tools and technologies as men could increase farm yields by 30% and reduce the need for environmental degradation to expand farmland. Photo by CIFOR.

Giving low-income women access to the same agricultural tools and technologies as men could increase farm yields by 30% and reduce the need for environmental degradation to expand farmland. Photo by CIFOR.

Women make up half the global population, but 70% of the world’s poor; it should come as no surprise, then, that we can apply a gender lens to every development issue. “Applying a gender lens” is a strategy used in development to not only to examine how a social issue affects a whole community of people, but also to consider how each person’s gender affects the way he or she experiences that particular issue.

Take climate change, for example. The development community can apply a gender lens to three approaches to combatting climate change, ultimately doing so more effectively:

Increasing agricultural production in an environmentally sustainable way. To increase food supply to meet global demand, we must either turn more land into farmland (usually through activities like deforestation that speed up climate change), or make existing farmland more productive. The Food and Agricultural Organization (FAO) has found that giving low-income women access to the same agricultural tools and technologies as men could increase farm yields by 30%, reducing the number of hungry people in the world by 12-17% without expanding farmland through environmental degradation.

Clean cookstoves are well-suited for women-focused marketing. Photo by Ashden Awards.

Clean cookstoves are well-suited for women-focused marketing. Photo by Ashden Awards.

Encouraging adoption of sustainable products. Clean cookstoves provide a more efficient alternative to traditional cooking methods, which produce carbon emissions that disproportionately harm the health of women and children and hurt the environment. Women’s buying patterns differ from men’s; women adopt environmentally-friendly buying practices more readily than men and tend to purchase products that improve the health and wellbeing of their families. As a result, women are likely to find clean cookstoves appealing, making the product well-suited for women-focused marketing.

The impact on the environment from this approach would be significant: women consumers represent over 166 million households in India alone. Moreover, globally, women already control or have direct influence over 65% of consumer spending – and their buying power in emerging markets is projected to rise significantly by 2025.

Contributing to a sustainable level of population growth. Meeting the food and energy needs of a rapidly growing global population is a major hurdle in efforts to fight climate change. Population growth slows when women are empowered to plan when and if they want children, but over 200 million sexually active women who do not want to have a child do not use contraception – meaning that up to 85% will become pregnant within a year. Improving access to family planning – which includes teaching women how to use contraceptives and designing products that recognize the power dynamics between men and women – can play a major role in mitigating climate change. In fact, the Aspen Institute estimates that the relative carbon emissions reduction of making family planning accessible to all women who want it would be equivalent to stopping all deforestation globally.

International Women's Day InfographicConsidering how gender affects the experience of climate change yields an additional interesting conclusion:  climate change poses a major threat to achieving gender equality, suggesting opportunities for organizations fighting climate change and those focused on women’s rights to collaborate.

Women experience environmental shocks and stresses differently – and more negatively – than men. Research suggests that during environmental disasters, women’s mortality is up to 14 times higher than men’s and human trafficking may increase by 20-30%, mostly affecting vulnerable women who have lost their homes, spouses, and support networks. The everyday stresses of climate change – from drought to unpredictable rainfall patterns – also harm women in particular; they must travel longer distances to find water and firewood for their household, which leaves them vulnerable to attack and sexual violence.

While a gender lens is often used to uncover ways in which women are more vulnerable or marginalized, it can also reveal women’s enormous potential to drive positive impact for their families, their communities, and the planet. On International Women’s Day we challenge you, as we challenge ourselves, to use the gender lens to help secure “progress for all.”

Sneha Sheth contributed research and insights to this article.

For more on Dalberg’s work on how gender relates to everything from ICT to public transportation, read more on D. Blog.

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FAFIN: Supporting the need for private capital in Nigeria’s high-growth agricultural sector

By Jeff Kaiser

After a hectic week in Nigeria that included meetings with six small- and medium-sized (SME) agricultural processors, two multinational corporations working in agriculture, three banks, 15 smallholder farmers, and one of Nigeria’s State Commissioners for Agriculture, I was sure of one thing: the country’s agricultural enterprises desperately need better financing options.

This small poultry farm is seeking finance to purchase new, fully automated chicken cages that will significantly expand its capacity and improve productivity.

This small poultry farm is seeking finance to purchase new, fully automated chicken cages that will significantly expand its capacity and improve productivity.

The SMEs we met with in particular articulated a need for longer term loans and other financial products with fewer strings attached. Many of these businesses are too large to receive loans from microfinance institutions and unable to meet the strict collateral requirements or short repayment terms of commercial banks. This lack of access to finance isn’t just stifling the growth of these agricultural enterprises; it is also preventing Nigeria from fulfilling its true potential for agricultural production and food security.

I went to Nigeria as part of a Dalberg team to design a new investment fund focused on overcoming these financial obstacles in the agriculture sector. The fund, called the Fund for Agricultural Finance in Nigeria (FAFIN), had its first close in late January, which means it is ready to start investing.

Before FAFIN could exist and start serving Nigeria’s agriculture sector, my team had to answer a lot of questions. We started with the most basic: why don’t appropriate financing options currently exist for most agricultural SMEs in Nigeria?

Part of the problem is that Nigerian banks are generally unwilling to provide long-term debt financing to farmers and agricultural businesses. Nigeria is a fast-growing country with significant oil wealth. Banks can comfortably fill their commercial lending portfolios with deals in real estate, construction, telecommunications, and oil and gas, with lower perceived risk than lending to the agriculture sector. Though some banks are increasing their lending activity in the agriculture sector (in part due to government policies designed to catalyze this lending), thus far they have focused on lending to larger and more established companies. Few, if any, alternative financing options—e.g., private equity, venture capital, or even foreign investment—are available to agricultural businesses.

Dalberg team member Erin Barringer meets with farmers outside of Benin City, the capital of Edo State, to better understand their financing needs and constraints.

Dalberg team member Erin Barringer meets with farmers outside of Benin City, the capital of Edo State, to better understand their financing needs and constraints.

Agriculture is the backbone of Nigeria’s economy, accounting for over 42% of GDP and roughly 60% of employment (and Nigeria is Africa’s largest country by population, home to about one out of every seven Africans). Yet despite the economic importance of Nigeria’s agriculture sector to both country and continent, its potential is far from realized. Use of machines, improved seeds, and fertilizer is low, resulting in poor crop yields. Storage and transport infrastructure are insufficient resulting in massive post-harvest losses and spoilage. Additionally, millions of hectares of arable land remain uncultivated. As a result, Nigeria imports over $11 billion in staple crops every year.

Many of these problems are directly linked to insufficient finance. There is an enormous gap between supply and demand for agricultural finance in Nigeria, estimated at a minimum of $4 billion annually and possibly much greater. SMEs suffer from one of the largest finance gaps; we estimate the demand for finance among these businesses to be 10 to 15 times the current supply.

It is this particular gap in long-term growth finance for agricultural SMEs that FAFIN aims to fill. If the fund succeeds, it will allow enterprises to grow, creating new revenue, jobs, and opportunities for smallholder farmers. Furthermore, by demonstrating the profitability of investing in agriculture, FAFIN aims to “crowd-in” other private investors who can catalyze further agricultural development.

FAFIN logoFAFIN emerged out of a unique partnership between three anchor investors: the Nigerian government, through the Federal Ministry of Agriculture and Rural Development and Federal Ministry of Finance; the German development bank KfW, on behalf of the German Ministry for Economic Cooperation and Development; and the Nigeria Sovereign Investment Authority. As the only Nigerian investment fund focused exclusively on agriculture, FAFIN will provide tailored finance and technical assistance to investees, ensuring their ability to thrive. The fund will offer longer-term, flexible financial products like structured royalties and convertible debt, as well as some direct equity and traditional debt. Seasoned investment professionals from Sahel Capital Partners who have experience both in Nigeria and in agriculture will lead the fund’s operations.

According to the founder of one mid-sized agricultural processing company, “Nigerian agricultural businesses are transforming. There were a lot of problems before, but now we are ready to take off, and we need investors who are willing to contribute expertise to move our businesses forward.” I hope FAFIN will be the first of many initiatives to support these fast-growing businesses and spur private development of Nigeria’s agriculture.

The Dalberg team meets with fund sponsors from KfW and the Ministry of Agriculture, including the Minister of Agriculture Dr. Akinwumi Adesina.

The Dalberg team meets with fund sponsors from KfW and the Ministry of Agriculture, including the Minister of Agriculture Dr. Akinwumi Adesina.

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Protecting Virunga National Park: Following Dalberg and WWF report, OECD agency launches examination of company exploring for oil in park

Virunga is home to 200 of the last 880 mountain gorillas left in the wild. Image by Brent Stirton, WWF-Canon.

Virunga is home to 200 of the last 880 mountain gorillas left in the wild. Image by Brent Stirton, WWF-Canon.

By Gill Cassar

Virunga National Park is a UNESCO World Heritage Site in the Democratic Republic of the Congo known for its wildlife-rich network of forests, savannas, rivers, lakes, marshlands, active and dormant volcanoes, and permanent glaciers. As Africa’s oldest national park, Virunga is also famous for being home to 200 of the remaining 880 mountain gorillas still living in the wild.

A Dalberg-authored report, “The Economic Value of Virunga National Park,” valued the natural assets at $48.9 million annually. But recently, London-based oil company SOCO International has planned to explore for oil in Virunga, threatening to disrupt this vital natural ecosystem, national park, and UNESCO-recognized site. In response, the World Wildlife Fund (WWF) launched a campaign to save Virunga National Park in August 2013. The campaign was supported by the report Dalberg created for WWF, which highlights Virunga’s environmental, social, and economic value.

New developments in the Virunga campaign surfaced this week, as a UK agency within the Organization for Economic Co-Operation and Development (OECD) – an international body that promotes policies to improve the economic and social well-being of people around the world – launched a formal examination into SOCO for alleged violations of human rights and environmental protections.

The corporate watchdog’s actions follow an official complaint from WWF that included findings from Dalberg’s report. According to the OECD, the WWF complaint about SOCO’s plans to explore oil in Virunga exposed “material and substantiated issues meriting further examination.”

Dalberg’s Regional Director for Europe, Wijnand de Wit, commented, “As a mission-driven firm, we are privileged to collaborate with WWF on this landmark campaign. WWF’s work continues to push the boundaries of conservation advocacy while fostering sustainable economic development for communities around the park.”

WWF’s Executive Director for Conservation, Lasse Gustavsson added, “Dalberg’s research has given us the ability to walk into ministers’ offices and show that there can be an economically sustainable future for Virunga National Park without oil.”

Approximately 20,000 fishermen rely on Lake Edward for their livelihoods – now under threat from oil exploration. Image by Brent Stirton, WWF-Canon.

Approximately 20,000 fishermen rely on Lake Edward for their livelihoods – now under threat from oil exploration. Image by Brent Stirton, WWF-Canon.

Following the OECD’s examination and decision, WWF and SOCO will begin a process of confidential mediation. If WWF and SOCO cannot agree on a solution, the OECD will conduct an investigation to determine whether its corporate governance guidelines were breached and issue a final statement with recommendations for how the company should change its policies to remedy the situation.

Addressing the risk to Virunga is not the first time Dalberg and WWF have teamed up to transform research into action; a 2012 report that Dalberg published with WWF helped catalyze a variety of initiatives to reduce wildlife poaching and trafficking around the world.

Follow Dalberg and WWF on social media for updates on how the Save Virunga campaign progresses. Interested readers can also join over 500,000 other signatories seeking to protect Africa’s oldest national park from oil exploration by adding their names to WWF’s global petition against Soco.

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Defining your End-Game: The “new normal” for nonprofit impact

What's Your End-Game - article snapshotmothers2mothers (m2m) is a leading health nonprofit that uses mentor mothers to provide education, psychosocial support, and referrals to prevent mother-to-child transmission of HIV. mothers2mothers’ founders began in 2001 with the usual nonprofit starter kit: a mission and a vision.

In 2010, m2m reached its largest scale – as defined by size. The organization operated 800 direct implementation sites, reaching approximately 15% of the 1.2 million HIV+ pregnant women in the world. At this stage, m2m had proved the “mentor mother” model worked.

Yet, m2m’s leaders realized that despite the organization’s dramatic growth, to reach all HIV+ pregnant women in the world, m2m would need to work in 20 countries and scale almost seven times to a budget well over $100 million. Meanwhile, global health funding was retreating amidst the global recession.

With an ambitious vision and a pragmatic sense of the funding constraints, m2m decided it would stop growing with the intention of serving all HIV+ pregnant women in the world directly. Instead, to reach impact at that broad scale, m2m would advise governments on how to adopt their “mentor mother” model and help local NGOs and implementing partners build the capacity to manage “mentor mother” programs.

mothers2mothers program

A mentor mother teaches HIV+ mothers in a mothers2mothers program in Western Kenya. Photo by USAID.

Today, m2m strives to make the “mentor mother” model part of every HIV care program, and it has become a core part of the UN’s Global Plan. m2m maintains some sites of its own for research and training purposes, but its primary focus is on sharing its proven-effective approach with others who can implement it.

m2m faced an inflection point that most nonprofits who make it beyond seed stage reach: having achieved “minimum scale,” they had to decide what comes next. Many nonprofits default to “grow funding and size indefinitely.” But often, limitless scale is neither the most effective nor an achievable path. m2m’s model is now likely to reach more HIV+ pregnant women at least in part because the organization pursued an alternate path – a path designed not to maximize the scale of their funding for direct service delivery, but rather the scale of their impact. In sum, m2m defined its End-Game: its specific role in the overall solution to mother-to-child HIV transmission.

For m2m, their End-Game is Government Adoption, with Replication of their proven-effective program by other local partners. But Government Adoption and Replication are just two of six End-Games identified in a new article, “What’s Your End-Game?” by Andrew Stern and Alice Gugelev of the Global Development Incubator, a nonprofit founded by Dalberg in 2007.

Stern and Gugelev explain why more nonprofits need to shift their approach as m2m did:

Most of the nonprofit organizations celebrated by leading foundations are not reaching the scale required to catalyze change. It’s time for nonprofits to ask a more nuanced set of questions than “How Do You Scale?” – including “How Do You Reach a Minimum Scale?” and an even more fundamental question: “What’s Your End-Game?” Nonprofits can better define scale by accounting not just for the impact they hope to achieve, but for the ultimate sector change each organization aims to create.

We believe that there are six End-Games for nonprofits to consider – and only one of them involves continuing and sustaining the organization’s original services. Nonprofits should pursue one of these six time-bound End-Games, each of which has a clear impact goal. Grouping nonprofits into these End-Game categories is the next era of determining impact in the nonprofit sector. Nonprofit leaders need to define their End-Game early, and funders need to adjust their practices to help them get there.

The End-Game affects the decisions nonprofit leaders and funders should make. For example, the expected growth trajectory of a nonprofit’s funding varies greatly by End-Game. Articulating an End-Game can liberate fundraising resources to go toward mission achievement.

The chart above shows the budget implications of each End-Game. For some organizations, achieving scale in impact will involve slowing budget growth and transferring capabilities and services to other providers.

The chart above shows the budget implications of each End-Game. For some organizations, achieving scale in impact will involve slowing budget growth and transferring capabilities and services to other providers.

Nonprofit founders may not know at startup what their nonprofit’s End-Game should be, but as the authors write, “If a nonprofit’s true goal is impact, it will define an End-Game as early as possible, and intentionally pursue it.”

To learn how nonprofits and funders can embrace the End-Game to create the most impact, read the full article, “What’s Your End-Game?” >>

The Global Development Incubator was founded by Dalberg in 2007. GDI’s Initiative Incubator supports the development, piloting and scaling-up of innovative social impact initiatives, while its Social Enterprise Accelerator aims to increase the scale, reach and impact of social purpose organizations (whether for-profit or nonprofit). 

Andrew Stern, an author of “What’s Your End-Game?”, serves on the board of mothers2mothers.

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