Wednesday, 25 November 2009

Why Making The Poor Pay, Pays Off

(a.k.a. The blog in which I purport to argue that the poorest and most vulnerable people on the planet should be charged for life-saving products and services)

This blog was originally written and posted on the UnLtdWord Blog as part of the 'SHOUT OUT for Social Enterprise' series.

For almost 9 centuries we have, in the UK, nurtured the idea of charity as an honourable activity that will win you respect from your neighbours, help you sleep soundly at night, enhance your CV and earn you kudos with the guy (/ girl / folks) upstairs. As a formalised notion it is viewed as a self sacrificing gift from the better off to those less fortunate, bearing the cost of providing otherwise unobtainable goods or services.

But, like any gift, donations are dangerous when they become expected and often not what was really wanted in the first place. For too long our love of charity has blinded us to the emerging realisation that the current donor/gift model is often no more appropriate a method to effect sustainable change in developing countries than relying on the novelty jumper, two sizes too small, sent by your great aunt at Christmas would be a wise provision for your long-term clothing needs. The jumper may be hideous (though she means well, of course) but since you politely say thank you and drag it out to wear it once a year when you see her, she never finds out how much you loathe it. Seemingly satisfied, she’s going to send you another next year..

So, for all the smiling images of African children receiving our gifts of aid I want you to hold in mind this alternative reality, because when the cameras go away and the charities have enough footage to satisfy their donor community, that novelty jumper goes straight to the back of the wardrobe.

Don’t take my rich, western, word for it either, take the following quote from one of my favourite articles on the matter:
“When free American maize turned up in Kenyan schools in 1984, thanks to Bob Geldof and USA for Africa, it arrived in gunny bags and presented itself at school dining tables: steaming yellow, not white like the maizeflour we knew as a staple [...] I must confess that I hated school food, anyway, and that yellow maize porridge tasted not that much worse than everything else we were forced to eat. But our speculation was powerful. It is American animal feed. And it started tasting a bit too earthy. It has been treated with contraceptive chemicals. And it started to taste metallic. It was sent to us because it has gone bad already. And it started to smell funny.
Soon, in the Njoro High School dining hall, vast amounts of yellow porridge went directly into the bins. Our teachers, normally violent fascists in matters of discipline, looked the other way. We had food fights with the porridge every evening, and the floor would be littered with the clumpy remnants of America's love.
("Pure Product" written by Binyavanga Wainaina for Harpers Magazine, June 2007 )

The inevitable reality is, be it food, water, fuel or mosquito nets, aid is managed most effectively where there is a price associated with it. Free is worthless and even ‘beggars’ will be ‘choosers’.

Ask yourself: so long as it doesn’t cost you anything to receive unwanted gifts where is your incentive to stop accepting them, and how do I know when to stop giving?

A fundamental truth of human nature demands autonomy; so much so that this will even be expressed to our own detriment. 35% of Sub-Saharan Africa's improved water sources are out of service at any given time, mainly due to poor maintenance. If the community had paid for that pump, had elected to install it and had invested time and money in it – do you think this figure would be so high?

Demanding a user pays a nominal fee for a product or service encourages autonomy, it becomes opt-in marketing and it’s far more valuable to all involved. Without it you create a market with no feedback loop. A charity works on a top down model, e.g. they look at a situation, evaluate the problem, raises funds from donors, procure a solution and deliver.

Done correctly, commerce and free market forces unavoidably establish communication channels. It is a more honest, empowering and, I would assert, cost effective model if an enterprise looks at a situation, evaluates the problem and offers up a solution; then, if no one purchases/contributes, modifies the offering until something of true value gets made.

If the enterprise can’t sell the product, they can’t evidence its desirability and they won’t break-even as neither end users nor those who provide any subsidy will back something that can’t be sold. Inevitably, if they don’t break-even the business goes under and natural selection weeds the offering out of a market that doesn’t want / need it. If a charity is similarly failing and doesn’t break-even – they raise more donor funding and remain in the market despite forces saying they should be gone.

If you want real world experience of why user buy-in is an absolutely essential modification to the traditional charity methodology, try this:

This Christmas it personally costs you to receive each gift, 10% of the gifts value. If you don’t pay, the gift goes back to the store and you get the cash.
I’d venture it’d cost less in total, reduce waste and more effectively provide what you really wanted.

(Almost) Everyone benefits if we allow market forces to empower the poorest populations to take responsibility for their own welfare. Those who don’t benefit don’t deserve to monopolise a multi billion dollar industry with ineffective product or service offerings simply because no one knows better (yet).

Please feel free to comment below or, even better, join the full debate at UnLtdWord!

1 comment:

James Brown said...

In the 1990s the Indian Government distributed (for free) 20 million new stoves to try to reduce the country's 400,000 annual death toll from smoke inhalation. Because this was a "donate and forget" scheme it failed, there was no ongoing aftercare and the kit was made as cheap as possible. Once the stoves broke there was no incentive to maintain them and so people went back to the traditional open-fire.

A new spinout from the University of Colorado, funded by the Shell Foundation is now taking a for-profit approach to the same problem. The company, Envirofit, is combining innovative design and a business model which incorporates micro-finance initiatives to ensure the project's sustainability.

It'll be interesting to see how this approach works in the long term as it closely echos RBD's ethos. They have $10m from the Shell Foundation to start the roll-out, so watch this space...