on poverty elimination: scope and my approach

Poverty-elimination is one of my life-goals. Recently, I took some time to scope the problem of poverty-elimination and attempted to come up with an initial approach. I approached it in the same way, I would approach any new product launch – by segmenting the market and understanding each segment's role. Here's a snapshot of my early analysis. I would love to hear your thoughts:

Question: What can I do to eliminate global poverty in the next 35 years?

Answer: Assuming that microfinance works, most obvious thing to start with would be to make microfinance more accessible in a measurable and leverage-able way.

More on the answer..(I don't know answers to the questions in red, but the search is on..I'll post the answers as I find them..)

Segmentation: In an effort to understand the market needs, following segmentation of the addressable market seem to make sense to me, but there are some fundamental questions (listed in red.)

1. Poor versus Ultra poor: At a very high level, needy poor can be divided into two categories:

1. People living just above the poverty line (say $2 per day) and

2. People living below poverty line (ultra poor)

Out of the two billion+ poor in the world, how many fall in #1 vs #2?

I’m assuming that microfinance typically addresses the needs of the economically active poor (i.e. those who live above the poverty line). With sophistication of the industry, more commercial institutions (banks, commercial lending groups, etc.) are likely to enter the market, but would serve the needs of the poor who are living above the poverty line. NGOs are most likely to serve the ultra poor in these circumstances. Would the NGOs be able to meet the demands of the ultra poor in terms of scale and type of services? Also, when resources-laden commercial banks enter the market how would the existing MFIs differentiate themselves/maintain a competitive advantage?

2. Willingness versus readiness versus access to microfinance:

Another way to segment the poor could be:

  • ·         Those who are not willing to borrow, due to social beliefs, fear of debt, etc.
  • ·         Those who are not ready to borrow, due to lack of markets, political/geographic instability, etc.
  • ·         Those who don’t have access to microfinance, due to lack of access to MFIs or lack of enough MFIs in the market.

    Is this segmentation apt and  how many of the poor fall in “not willing” vs “not ready” vs “don’t have access” category?

Innovation: I believe that three types of entities have a bigger opportunity as well as higher probabilities to innovate and add value in measurable and leverage-able ways:


Entity

Type of Innovation

Potential value-adds

1

MFIs

Service Innovation

a.       MFIs could design and implement newer delivery mechanisms of microcredit to make it more accessible to a larger set of poor and decrease the number of  (not willing + not ready + don’t have access).

b.      MFIs could design and implement newer ways to offer micro-credit at a cheaper rate than today, by introducing technical/process innovation (for instance: automatic credit approval and lending, auto-payment options, etc. to reduce manual inefficiencies from the microfinance value chain)

c.       MFIs could design  and implement new services that span beyond just microcredit  (for eg: money management, health insurance, credit rating, etc.)

2

NGOs

Social Innovation

d.      Test and deliver high cost/riskier programs to address the needs of the ultra-poor.

3

Social Enterprises

Product Innovation

e.      Design and distribute products that directly impact the bottom line of occupation/work that the poor are typically involved in (for instance, Grameen Phone initiatives in Africa, Cheaper irrigation products by Paul Polak, etc.)

This is a first step in doing something measurable and leverage-able towards poverty-elimination.

Let's eliminate poverty!
-Kintan

Extra: I had asked similar questions to Paul Polak – "Can we eliminate global poverty in the next 35 years?" His answer was Yes (with conviction). I liked how he explained pragmatically : Considering that half of the world's poor rely on agriculture for their livelihood, desiging innovative and affordable products to make effective agriculture accessible to the poor farmers – can solve half of the problem. Similarly product innovation can help with the other remaining half as well…

6 thoughts on “on poverty elimination: scope and my approach

  1. hey kintan, nice post but what are your views on education…program recently started by timesofindia such as teach india..i think only sustainable solution to end this problem of poverty is through education.

  2. Thanks Nikhil,
    I believe poverty can solve illiteracy. How could one teach a child, who hasn’t eaten in days? Imagine “below poverty-line” kids’ parents and their thought-process – their highest priority is “survival”. Once survial is solved, education is automatically the next choice.

  3. Thanks Kintan. Very well organized thoughts on your blog post. As you mentioned, education does have a huge role – even if it’s secondary to survival. Poverty is a very generational problem — if I am poor, I am not able to educate/feed my kids, thereby dooming them to a life of poverty. However, with strong education, we can break that vicious cycle and turn it into a virtuous one. With every generation that is educated, the chances of a family being impoverished drops dramatically.
    I look forward to seeing how your thoughts evolve on this issue and reading more posts!

  4. Thanks for sharing your thoughts Amar. I see illiteracy as one of the “poverty traps”, along with hunger. I believe firmly that an educated child can take the family to the next level, but chances of a child getting educated are minimal under poverty..
    Quoting an impact assessment study that I once read:
    “In all study countries, children from poorer families are less likely to go to school. In India, 48 percent of children living in ultra poverty attend school, compared to 81 percent of children living above the dollar-a-day poverty line, representing a 33 percentage-point gap. In Vietnam, the gap is 30 percentage points, in Ghana it is 28 percentage points, and in Burundi it is 24. Without education, the future of children living in ultra poverty will be a distressing echo of their current experience.”
    More at : http://www.ifpri.org/2020/dp/vp43.asp

  5. Great conversation you started here, Kintan. I had a chance to spend time in Latin America after college, working for a group whose mission was development (or poverty reduction). They took a comprehensive approach, focusing on education, healthcare, political rights, and basic needs. Although I appreciate the idea behind it, I found the practice to be cumbersome. The reason microfinance appeals to me is that it relies upon the fundamental resourcefulness of humanity. We are a crafty bunch, and given an opportunity, most will make use of it. Microfinance also has a built in self-sustaining mechanism and can grow with its clients. Most poverty reduction programs are designed to end after a period and send the clients out on their own, so to speak. Microfinance hopes to graduate people up to more traditional financial models. finally, microfinance brings with it a measure of dignity and respect. It’s not a handout, it’s a handup.

  6. Right on. Thanks for sharing your thoughts Ryan. Microfinance definitely works for a large segment of the poor. It would be interesting to see as to how big that segment is…

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