To End Poverty – Fresh Approaches, Practical Solutions
“When we put the person at the centre of our economic thinking, we transform the way we look at wealth and poverty. Instead of asking what causes poverty, we begin to ask, what causes wealth?” – PovertyCure, vision statement
In today’s international development agenda, “sustainability” is the byword. Traditionally, poverty alleviation strategies have broadly failed to promote lasting economic independence – some even argue that “big aid” perpetuates a “big-helps-little” hierarchy in the global economy, creating an inherent barrier to true development. Big aid has therefore been getting a bad rep; any aid programme that doesn’t aim to promote long-term financial and social independence is considered anachronistic, and certainly not a practical approach to “ending poverty”. The wider public are increasingly looking to small, independent organisations and providers of “micro-” solutions as the new agents of social change.
The share of the world’s population living below the poverty line – i.e. those who sustain themselves on less than $1.25 a day – remains appallingly high. Despite significant progress in reducing the number of people living in poverty, it is nonetheless, as expressed by Kaushik Basu of the World Bank Group, unacceptable for the poverty line to be so low and, he says, “even more shocking that 1/7 of the world’s population lives below this line.” Evening out these extremes within the world economy is a global priority. However, the antidote to poverty is not money, nor does the “having” of money automatically signal wealth.
The first of the U.N.’s Sustainable Development Goals (set to be officialised at the end of this year to replace the Millennium Development Goals) is to “End poverty in all its forms everywhere.” It’s a bold statement – and its semantics are intentionally uncompromising. Expressed within this first goal are some of the stepping stones needed to achieve it:
SDG 1.4: “By 2030 ensure that all men and women, particularly the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property, inheritance, natural resources, appropriate new technology, and financial services including microfinance” (from the U.N. Sustainable Development Knowledge Platform)
It’s a mammoth undertaking – but the work of small, independent organisations like microfinance charity Five Talents is already ensuring that these exact aims are being met. “Economic Freedom Fighter” reads the business card of Stuart Palmer, CEO of Five Talents UK, and it’s equally a fair description of the philosophy of the organisation he fronts. Since 1998, Five Talents has been working to foster financial inclusion: their projects enable “unbanked” communities to build and manage their own financial services and use them as a springboard for entrepreneurialism.
Microfinance initiatives like those run by Five Talents assist in the creation of comprehensive saving plans and regulated, flexible loaning practices, which enable communities to manage their finances together and invest their combined funds wisely and profitably. While some, more cynical, onlookers question the ethics of “making money from the poor,” the difference with Five Talents is that as well as providing basic microcredit, it also assists in setting up community savings-led schemes. These are essentially community-run banks. The setup ensures full transparency, but these “banks” are powered largely by trust. Pooling community funds and resources is a huge incentive to invest responsibly, and business loans are often backed by a cross-guarantor system. This means that not only does business success pay financial dividends to the collective, but that the area also benefits from increasing numbers of community-serving enterprises – anything from chicken farms and grocers to hair salons and other transacting “shops”.
“Our work is about releasing talented enterprises,” says Palmer. “With clients in Kenya, Uganda and Tanzania we release blockages to development, mainly by sharing knowledge and building member-owned banks that can meet the capital needs of home grown enterprises.” One of the organisations Five Talents helped to bring into being was the Mama Bahati Foundation. Donald Mtetemela, former Archbishop of Tanzania, had been inspired by Psalm 113: 7-9, which effectively speaks about poverty alleviation. He asked a banana-seller at a local market what he might best do to help her and she responded that a small loan would allow her to buy more stock at a lower margin. The loan was duly offered and Mama Bahati’s business progressively grew, allowing her to pay back the loan and later take out another, larger loan to further expand. Five Talents and the MBF were brought together through the Anglican church network and it was thus, with the backing of Five Talents, that the Mama Bahati Foundation was born.
Five Talents, a Christian-run charity, draws its name from the biblical parable: the idea it seeks to promote is how to put your money to work, remaining fully accountable while doing so. Palmer explains, “By getting money moving, concentrating it and getting it working in small businesses who need it to buy a piece of equipment or more stock to trade, it comes back worth more.” Since Mtetemela made the first loan to Mama Bahati, MBF has become an NGO that offers microfinance-based help to over 6,000 clients, principally women, in the Iringa region of Tanzania, fostering entrepreneurial growth, financial freedom, and the empowerment of female householders. Five Talents, meanwhile, is now operational in 12 countries, launching and providing support to successful community-based microfinance projects.
Access to appropriate financial systems can be transformational in rural areas, or areas where business acumen abounds but the resources to develop strategies are lacking. Financial services are a luxury we take for granted in urban settings in nations where banks are two-a-penny and the threads of the financial establishment woven deep into the fabric of our everyday lives. For the unbanked and underbanked, meanwhile, engaging with larger financial institutions is not viable, both geographically, and due to the fact that the quantities of money they are borrowing and saving is, if you’ll excuse the wordplay, of little interest to the big banks.
Through introducing financial facilities and frameworks, and, like Five Talents, offering business advice and mentoring, microfinance initiatives create boundless possibilities in the form of community-supported entrepreneurialism. Section 8.3 of the proposal for the 2015 SDGs mentions ideals of “productive activities, decent job creation, entrepreneurship, creativity and innovation” and the “growth of micro-, small- and medium-sized enterprises...through access to financial services.” So, whilst money has been seen to be the cure for poverty, it seems that, in fact, it’s business. “There is a mindset that business and development do not mix. Yet, at the same time there is lots of hand wringing about ‘sustainability’,” says Palmer. “The only activity designed to consistently produce a surplus is enterprise.”
“Any sufficiently advanced technology is indistinguishable from magic” – Arthur C. Clarke
Beyond business, the use of technology for social enterprise and innovation is another huge discussion within the development sector – for an insight, see the hashtags #socentTech” and #seizethefuture, launched by change-making organisation Ashoka – and it’s hardly surprising. Apps and online tools have changed the face of the 21st century and this modern-day dependency has turned hyper-convenience into a commodity. Away from the “for-profit” realms, technology’s extraordinary ability to short-circuit normality is also being harnessed in hard-to-reach target areas for financial inclusion.
The use of digital solutions, like mobile banking for example, is integral to strong and sustainable economic development and such technologies play an important role in cultivating financial inclusion. Within small business and microfinance, one of the biggest problems has been moving money around. The physical presence of so much cash multiplies the risks involved and slows every process down, stealing time that could be put to better use scaling the business.
Five Talents identified this as an improvement area and capitalised on the widespread use of mobile phones across Africa. According to an infographic from the GSMA’s report “The Mobile Economy 2014”, whilst “2.5 billion people in lower and middle-income countries are unbanked, 1 billion have access to a mobile phone.” In Tanzania, for example, mobile phone penetration is currently at 68 percent, according to Reuters figures, and rapidly rising. Five Talents worked with mobile technology provider Musoni Services to come up with an innovative mobile banking and money transfer solution to expand MBF’s ability to help clients launch their businesses and conduct transactions.
“Our pioneering work, for the first time, links up locally managed groups on a common operating system, using simple handheld tablet computers, cloud computing, the existing mobile phone network and mobile money,” says Palmer. The project has recently been recognised in a ceremony at the House of Commons. MP Stephen Lloyd, who chairs the All Party Parliamentary Group on Microfinance in the UK, presented a financial innovation award to MBF’s CEO Japhet Makau on behalf of the Institute of Financial Services University in February this year, to celebrate how far the organisation has come since providing the very first loan to Mama Bahati herself.
According to UK-based charity Practical Action, “technology and development are inextricably linked: technological innovations enable more people to meet their basic needs, improve wellbeing, and increase productivity, income, and life expectancy.” Practical Action works to implement technology-based development initiatives worldwide. Their projects, which reach over a million people, include optimising paddy fields through aquaponics; teaching communities to build ceramic fridges; and leveraging the power of the African sunshine through solar photovoltaic waterpumping.
However, there are some reservations about the relevance of using technology and digital technology as a core mechanism for combating poverty. The primary concern is that such innovations are exclusionary. On the forwards surge in mobile technology innovation, Practical Action’s Technology Justice Advisor Amber Meikle says, “We must remember that it is largely the poorest, most remote and most marginalised people who comprise the 49 percent who remain unserved by this increasingly vital service. Current investments target the upgrading of existing networks and focus on app-based solutions, rather than on expanding networks and improving SMS-based services.”
It’s essential that development initiatives, if they are to be successful and sustainable, take into account the existing amenities, culture, and capacity for new technologies when developing projects. Apps conjured up in Silicon Valley are not the silver bullet for poverty alleviation if they fail to meet the needs of the end user – or can’t reach them at all. Technology, and other tools for development, conversely have the “potential to exacerbate vulnerability, create new risks, and undermine the coping mechanisms of people living in poverty,” according to Meikle. Thus, the idea of Technology Justice championed by Practical Action involves “ensuring the technology transforms the lives of those at the bottom of the pyramid, rather than entrenching existing digital divides.”
It’s broadly accepted that disruptive tech innovations alone, be they farming apps or mobile banking, will not catapult national GDP into prosperous figures; equally, though microfinance initiatives aim to fortify local economies, they do not have the power, independently, to engender “from the bottom” transformation of the economy of an entire nation. Though only large-scale systemic change will prove truly transformative when it comes to meeting the U.N.’s development targets, these smaller initiatives, formulated on the ground to fit the exact circumstances of developing communities, are instrumental in changing everyday life throughout the developing world – as well as providing a template for what lasting change could look like.
As we work towards realising the new development goals, we might consider the key to effective change programmes, large and small, as summed up in two words at the 2015 World Bank Forum on Microcredit by development economist Dean Karlan: “Understand clients.”
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This article originally appeared in the 'Practical' issue of Ours Magazine which can be purchased on iTunes or in print.