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In 2002, after nearly 10 years of running a nonprofit to help poor farmers in India get the most out of their land, Amitabha Sadangi was frustrated. Government aid to alleviate poverty had largely bypassed individuals earning less than $1 day. Instead it was subsidizing large farms and being invested in technology he said his farmers didn't want. Sadangi sought to treat the poor as customers, not passive recipients of charity. He decided he would adapt a water-saving drip irrigation system to the specific needs of Indian smallholders and sell it at an affordable price.
Acumen Fund, the nonprofit venture capital fund I lead, gave Sadangi's nonprofit, International Development Enterprises India, a $100,000 grant and loans to experiment with his product.Then in 2006, we invested $1 million in equity in Global Easy Water Products (GEWP), a for-profit spinoff Sadangi created in western India to further increase the technology's reach among the poor and sell other products to them.
To date, GEWP and its parent nonprofit have sold irrigation systems to some 350,000 farmers. Including the farmers' family members, roughly 2 million people are now benefiting from higher income levels—for some, $5 to $6 a day instead of $1 to $2. With 101 employees and sales that have tripled since 2008, GEWP is now one of Acumen's most profitable enterprises. It has even begun to pay dividends to its shareholders. By all measures, that is the kind of return on investment we need to see in a world with more than 2 billion people living in poverty.
Acumen Fund builds new markets that sell critical products and services to the poor. We invest what we call "patient capital," debt or equity investments we make for up to 15 years in entrepreneurs such as Sadangi, who see the poor not as passive recipients of charity but as agents who want to solve their own problems. One reason traditional capital fails to address low-income markets is because they are too difficult and costly to appeal to investors seeking quick returns. On the other hand, traditional charity rarely scales and is vulnerable when funder priorities shift.
The poor are willing to pay for services they value and can afford. One investment of ours, WaterHealth International in Irvine, Calif., builds and operates water purification systems in rural areas across India.For the first time, 500,000 customers are getting affordable, safe drinking water from the company's 400 systems.The success of the nearly 600-employee company is sparking a new sector of enterprises that deliver safe water in India.Hong Kong-based D.light Design's solar lighting products now illuminate the homes of about 3 million people in 34 developing countries who previously relied on kerosene for light.Hybrid seed developer Western Seed in Kenya near the Ugandan border distributes affordable seeds to hundreds of thousands of farmers in East Africa and plans to expand across the region in the next few years.
Today, six of our companies are serving more than 1 million people each. In total, the $60 million we've invested in 57 enterprises in East Africa, Pakistan, and India has created more than 35,000 jobs. In 2010 the businesses served 40 million people. Helping companies achieve financial viability also allows them to attract more capital from other sources. This isn't theoretical: Since Acumen's inception a decade ago, our companies have attracted an additional $200 million in follow-on capital.
Despite the benefits, it's not easy persuading investors to place long-term bets in troubled parts of the world. I remember speaking to a hedge fund manager during the subprime lending bubble in the U.S. He told me he would still make money on his investments if less than 90 percent of mortgage holders defaulted. The lack of accountability in the system, for both the lenders and borrowers, was striking. When I described how we're investing to bring low-income housing to slum dwellers in Pakistan, he was uninterested, though we've now been fully repaid and 2,000 people are living in their own homes outside the city of Lahore. He thought the financial returns were too low and that they took too long to generate.
In our interconnected world, using the tools of capitalism to drive the potential of all human beings is imperative. But instead of focusing solely on profits, let's create sustainable entities that extend opportunity to people who for too long have been excluded. As events such as last year's floods in Pakistan and recent regime changes in Tunisia and Egypt demonstrate, new approaches to helping the world's poor are crucial.