Innovation & Design

Philanthropy and Development in Emerging Markets


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In The Blue Sweater, Jacqueline Novogratz explains how the most well-intentioned aid efforts often fail, and the slow and steady approach works best

The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World

By Jaqueline Novogratz

Rodale Books; 256 pp.; $24.95

There really is a blue sweater in Jacqueline Novogratz's book of the same name. It was a treasured piece of clothing she wore constantly from the minute she got it in middle school until a few years later, when some classmates commented on how snugly it fit the now-adolescent Novogratz. The teenager unceremoniously stuffed the well-worn garment into the nearest recycling bin, never to be seen again.

Or so she thought. Years later, Novogratz saw her blue sweater again. This time the stretched, misshapen top—with her name tag still on the inside collar—was being worn by a young boy she spotted on a street in Kigali, Rwanda.

The sweater had passed through who knows how many hands on its way from Alexandria, Va., to equatorial Africa. The lesson for Novogratz—and a major theme of her book—is that we truly live in a world wide web, where people are connected around the globe. The point seems particularly timely given how the collapse of a few overheated housing markets in the U.S. Sun Belt erupted into a financial and economic disaster that now afflicts every continent.

Novogratz, who worked in the credit audit department at Chase Manhattan before taking a job at the African Development Bank and then the Rockefeller Foundation, is chairman and chief executive of Acumen, a nonprofit venture capital fund she founded in New York in 2001. Her book, The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World, is a lyrical look at her journey through the worlds of international banking and social entrepreneurship. It's also a pointed critique of conventional thinking about philanthropy and economic development in emerging markets.

An Enterprise-Based Approach

Novogratz, who left Chase to, as she puts it, "give more people a chance to become [bank] customers," is passionate about the need to ease global poverty, but she is no starry-eyed idealist. Her stories of working with some of the world's poorest people back her case for a pragmatic, enterprise-based approach to solving poverty. And she is blunt in her analysis that the most well-intentioned aid efforts often fail.

It's a delicate issue. After all, kind-hearted people don't like to hear that they are perpetuating poverty, not relieving it. But too often, Novogratz writes, that's all that happens. Instead of focusing on passing out grants and donations, she argues that charities and philanthropists should be empowering local entrepreneurs to take risks and responsibility, like Acumen does. The poor should be able to borrow what they can, make investments on their own within a market context, and succeed or fail on their own.

Novogratz uses the last third of her book to relay practical lessons she has drawn from her work with entrepreneurs in Africa, India, and Pakistan. We meet Satyan Mishra, the founder of a for-profit company, Drishtee, which is building a network of tele-kiosks across India, and Tasneem Siddiqui, whose Saiban organization is experimenting with new approaches to low-cost housing in Pakistan. Refreshingly, Novogratz is frank about the challenges and failures of these fledgling businesspeople and her own fund. One example: a flawed project to develop and market a $40 hearing aid. She also describes a set of posters commissioned by UNICEF for Rwanda. The materials were beautiful and written in local languages, but because so few people there are literate, they were essentially useless.

Since its start, Acumen has invested $40 million in 40 enterprises serving the poor, creating more than 23,000 jobs along the way, by Novogratz's count. Now she is looking to raise a new fund of $100 million. Against the hundreds of billions of dollars that the government is spending to rescue ruined banks and collapsed companies in the U.S., her fund-raising goal seems almost insignificant.

Building a "Real Community"

But for Novogratz, success lies not in stacks of cash, but in maintaining a slow and steady approach to investment. She believes that building long-term value outweighs short-term gains. She writes of her annual trips to see Jawad Aslam, the developer of land for Saiban, which received $300,000 from Acumen. Two visits showed little change. Undaunted, Novogratz reassures Aslam that a lost year or two "is sometimes inevitable" when attempting to build a new cultural and business infrastructure. By the end of 2007, 50 dwellings for low-income residents and a one-room schoolhouse had been built and occupied. As Novogratz writes: "The project was assuming the shape of a real community."

The lessons are compelling, but much of the power of The Blue Sweater comes from Novogratz herself. She's often entertaining, recounting the tale of an impromptu dance-off with women after her car broke down in a rainstorm. At the same time, she can be a brutal self-critic, particularly as she describes stepping away from her American upbringing to learn the culture and way of life in Africa.

At times, her tales are upsetting. She tells of visiting post-genocide Rwanda in 1997, looking to track down the initial supporters of one of her first ventures, a microfinancing organization called Duterimbere. Her account about trekking to a remote jail to talk with one of the women, imprisoned for helping to instigate the genocide, is matter-of-fact and yet astonishingly personal. Her confusion at meeting Agnes, a woman who had worked so hard to elevate the lives of so many women and yet had also committed inhuman acts of atrocity, is palpable and unresolved. It's a reminder that people are complex and contradictory, and also that real people are at the heart of economic statistics. For Novogratz, that's the most important story of all.

Helen Walters is the editor for BusinessWeek.com's Innovation and Design Channel .

Later, Baby
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