Alleviating Poverty Through Business Strategy

This book is an attempt to discuss and share lessons from theory and practical experience arising from efforts to alleviate – or even eradicate – poverty by using business strategy. The first chapter argues that ‘commerce makes or is capable of making necessary and unique contributions to the alleviation of poverty’ (p. 6), and that we are failing to alleviate and end poverty primarily because we do not want to challenge and shift our mental models. One such model proposes that only large international organisations, or charitable or governmental initiatives, can solve the problem of poverty.

Chapter 2 agrees with C K Prahalad in The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits (New Jersey: Wharton School Publishing, 2006) and Stuart Hart (Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World’s Most Difficult Problems, New Jersey: Wharton School Publishing, 2005), who think that poverty can be reduced only by the collaborative and concerted efforts of business, governments, and international organisations. Like Dambisa Moyo (Dead Aid: Why Aid Is Not Working and How There is Another Way for Africa, London, Penguin Books, 2009), the authors of the second chapter adduce compelling evidence to show that poverty is on the rise in many parts of the world, in spite of the efforts expended by traditional aid institutions. For instance, the majority of the world’s 6.6 billion people live on less than $2 per day, and a ‘…child born in Malawi is expected to live 39.8 years, which is a full 37 years shorter than a child born in the United States and less than half as long as a child born in Japan…’ (p. 8). nd concerted efforts of business, governments, and international organisations.

Chapter 4 makes an interesting link between poverty, information and communication technology, education and health care, and business. The author argues that in spite of the phenomenal 8 per cent annual growth rate of the Indian economy (before the current recession), this admirable growth was not inclusive: ‘Nearly 250 million people in India are still below the poverty line’ (p. 61). The author argues that part of what it takes to alleviate or end poverty is people’s increased access to education and health care. Efforts to access education and health care are hampered by geographical location and distance. People in far-flung areas of vast countries cannot easily access the services of urban-based educationists and health professionals. The bridge is information technology. For this technology to be made available, business has an essential role to play.

Chapter 6 begins by making an important distinction between a social entrepreneur and a business entrepreneur. A social entrepreneur is ‘…someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to achieve social change’ (p. 100). The emphasis for the social entrepreneur is social change; business is simply an intervention through which change is facilitated. In the case of the business entrepreneur, his or her eyes are focused, not on social change, but on profit and return. There is, admittedly, a growing number of business entrepreneurs who deliberately aim to generate societal value alongside shareholder value. Examples in the chapter powerfully demonstrate that through capacity building social enterprises can be made sustainable.

The eighth chapter is concerned with the alleviation of poverty by the use of microfinancing models. The author distinguishes different elements of what are generally lumped together as ‘microcredit’. Microcredit refers to small ‘…loans that are guaranteed by social capital or social collateral – as groups of borrowers are collectively responsible for repayment and individual borrowers must vouch for (and occasionally “cover” for) each other’ (p. 149). Microfinance is defined as a range of financial services made available to the poor, including ‘…services that are or can be bundled with microcredit, such as microinsurance, microhousing loans, savings products, deposit services, transfer services, and others…’ (p.150). Microfranchising refers to ‘…the development and promotion (by sale) of smaller businesses that are affordable to enter and affordable to replicate for poor people in the developing world’ (p. 152). Chapter 8 concludes by offering a critique of the relatively new field of microfranchising, whose efficacy as a poverty-alleviating strategy is as yet unproven; we do not yet have disaggregated data on characteristics of successful microfranching and the degree to which this strategy can be scaled up and made sustainable.

The main strength of the book is its authors’ ability to study and reflect on real-life examples of how business strategy can and is being employed to fight poverty. Contributors acknowledge that the study of the interface between business and poverty is in its infancy, and that there is a need for more research. To the authors’ credit, the book is written in very accessible language. Even in cases where technical terms are inevitable, the authors have provided easy-to-understand descriptions or explanations.

I am convinced that the book is of potentially great value to development workers and policy makers. It makes a clear argument for the contribution that business strategy can make to shifting the systemic forces of poverty. Development workers ought to learn from the examples that it offers. It provides a basis for introducing innovative policy initiatives that will facilitate an increased role of business in the fight against poverty. Various chapters show that the notion and practice of business are much larger and even nobler than the few examples of selfish multinational corporations at the forefront of the current world economic crisis. Business still has relevance to development. As Muhammad Yunus has argued, there is enough space for the growth of social enterprises, as well as business enterprises.

The book could have been of even more practical use if the editor and authors had collaborated to develop or adopt a theory of the employment of business strategy in alleviating poverty, and a detailed guide to its application. The editor and the authors might be aware of the groundbreaking work of Otto C. Scharmer, whose ‘Theory U’ (Otto C. Scharmer, Theory U: Leading from the Future as it Emerges – The Social Technology of Presencing, Cambridge MA: Society for Organisational Learning, 2008) states that in order to facilitate profound change we must first become aware of our ‘leadership blind spot’ and learn how to access new data. The new data are likely to provide new insights. Thereafter, we must prototype the new insights so that we can learn by doing.

Overall, I would recommend this book to all development practitioners, policy makers, and community leaders interested in new approaches to poverty alleviation. I would equally recommend it to budding social entrepreneurs and business leaders interested in unleashing the positive aspects of business to fight against poverty.