Americans once watched admiringly as celebrities like Bob Geldof and U2's Bono took the stage to alleviate hunger among the world's poor.
But today the game has changed: the world's impoverished economies have become the world's emerging economies, with growth rates already outpacing the U.S.—and a slew of lingering socioeconomic problems.
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This promise of growth and challenge has created alluring opportunities—not only for investors, but also for U.S. social entrepreneurs. Emerging economies like India, China and African nations still face pressing issues like water scarcity and lack of electricity and access to credit. But they also present entrepreneurial problem-solvers with a chance at creating a business and introducing a solution in an unknown market.
“The market for start-ups in many sectors—especially technology—is simply more attractive abroad," says Steven Koltai of consulting firm Koltai and Company, which works to foster entrepreneurship abroad. “One example is Africa, which accounts for 70% of today’s mobile payments—with 40% of those happening in Kenya.”
Here, we bring you three real stories of social entrepreneurs who are reaping the rewards—tangible and intangible—of launching in lands far away.
Peter Frykman, Driptech
The problem: Lack of simple, low-cost irrigation for small-plot farmers.
The solution: Irrigation that uses the cheapest of materials—plastic—and won’t waste water in regions suffering from water scarcity.
How he did it: "In 2008, while getting my Ph.D at Stanford in mechanical engineering, I was in Ethiopia doing research for a course and saw that small-plot farmers couldn't water their crops during the dry season. Ninety percent of the world’s farmers are small plot, meaning they work on five acres or less. Drip irrigation, which already existed, is the best solution, but everything on the market was too expensive, costing upward of $1,000 per acre, or too tough to install. We decided to make drip irrigation affordable, easy to install and maintain, functional even with low water pressure, and available locally.
Back in California, we developed an irrigation system that could be deployed anywhere for between one-third and one-fifth of the conventional price, so within months of the Ethiopia trip, I quit my Ph.D and started doing Driptech full time.
The potential for both financial and social impact is much larger in developing countries than in the U.S. because of the sheer volume of small-plot farmers there. India and China have roughly half of the world’s 500 million small plot farms, which amounts to a $10 billion market.
After a pilot study of 15 farms in Tamil Nadu, India, confirmed that farmers using our system were saving water and labor, and increasing their crop yields, we were ready to start selling. Shortly thereafter, we made our first major sale to a local government in China for 200 small-plot farms.
In designing for emerging markets, you have to be excruciatingly sparse: A small-plot farmer can't waste a cent of his income on a product or service that costs too much or doesn't do what he needs it to. The "trickle-up" effect applies: If you start with the goal of radical affordability, then it's easier to make a higher-quality product later.
The biggest challenges have been cultural and communicative: I don't speak any local Indian languages, so I have to rely on body language, context and my local team. India is very bureaucratic, so our business tries to interact with the government as little as possible. China, on the other hand, doesn't have a great commercial infrastructure, and the government can actually be quite effective at getting certain things done.
India has more small-plot farms than all of Africa, so if Driptech can establish itself there, we can address more difficult markets like African countries, where we’ve already reached hundreds of farmers through partners. The biggest challenge we face now is making enough product—it's a good problem to have.
Shivani Siroya, InVenture
The problem: Microfinance, the business of loaning small amounts to low-income clients in developing countries, lacks a way to evaluate business performance, making it difficult for micro-loan recipients to obtain further loans and build their businesses.
The solution: An accounting tool for micro-borrowers to keep track of their income and expenses and a credit scoring tool that uses this data to help lenders assess borrower risk.
How she did it: I started out in investment banking, but later landed at the UN Population Fund, where I interviewed micro-borrowers to see whether micro-credit had improved their quality of life. What struck me was the lack of private investment to help them grow and the lack of record-keeping tools to help them run their businesses. I was actually lending to micro-borrowers at one point, but noticed I had no way of knowing what was going on with my investments.
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Through other work at UNICEF and learning about other organizations, I was able to see the power of phone calls and text messaging to solve social problems. So in July 2011, we began developing InSight, an accounting tool that tracks and analyzes the income and expenses of micro-business owners through SMS (short message services), enabling both borrowers and lenders to see how a business is doing. InVenture had its beta launch in December 2011.
Here’s how it works: Borrowers, who undergo a training session, put their income and expenses into the system, via SMS or phone, daily. After a month, that information is processed into credit scores that help investors assess how risky each borrower is. Lenders can have their existing and/or potential borrowers adopt the tool and then log into InVision to see borrower spending patterns and credit scores. That information enables lenders to confidently lend to and help grow the businesses of micro-borrowers.
InSight was developed in seven Indian languages, and in early 2013 we released a voice version of the software that allows users to input their data over the phone through the keypad, making it free for them and easier for individuals who are unaccustomed to using SMS.
Globally, we have about 8,000 InSight users, who use our technology for free. Our revenues come from providing individual credit scores to partner financial institutions, of which we have five, and from licensing the technology to partners. We plan to license it to more institutions with cultural competency in places like Kenya, South Africa and Haiti.
Our biggest challenges are getting users to share their data and get in the habit of daily accounting through their mobile phones. We are overcoming these challenges by staying close to local NGOs and community leaders, and by making the product easier and more engaging.
We strongly believe that entrepreneurship contributes to economic development, helping to decrease problems like social or political extremism. People want to be productive, hold a job and have a livelihood. It makes a difference to have the means to pursue your aspirations.
Stephen Katsaros, Nokero
The problem: Kerosene lamps are expensive and harm people’s health in parts of the world without access to electricity.
The solution: Simple, affordable solar-powered lights.
How he did it: I am a mechanical engineer, and have developed several products for the ski and bicycle industries. One evening in 2010, when I was working as a patent agent, I started thinking about how to make string lights solar, and I came up with an idea for a solar lamp in the shape of a light bulb that could be suspended with a clip or set upright on a surface.
While researching possible markets, I learned that one in five humans lives without electricity—and that many of them burn kerosene lamps at night as a result. The lamps are expensive and bad for human health and the environment. Days afterward, I quit my job at the law firm to launch Nokero—short for “no kerosene.”
First, we had to make sure that what we had designed could be manufactured at a low price. We created a prototype to test and then looked for commercial partners—mainly master distributors and wholesalers with large networks of retailers—because they are much faster than governments and non-profit organizations at getting the product shipped and sold. In the end, 90% of the more than 500,000 units we have sold went to commercial partners who create viable approaches to distributing the lights. Container-sized orders have been sold to places like the non-profit organization Shelterbox and other NGOs, but those were slower and longer processes.
Through our partners, we get our product to farmers in Pakistan, midwives in Haiti, schoolchildren in Kenya, Rwanda, and Senegal, and fishermen in Ghana. We have never focused on one particular market, but India, Pakistan and Nigeria have the largest potential with about 70 million people each without electricity. The customers I remember the most are the children who just want to learn and can't because they are missing a key ingredient—light.
Our biggest challenge, though, is still a lack of in-country demand: Many people living in energy poverty aren't clamoring to buy these products, because they've been disappointed by early attempts, or they simply don't understand the benefit. Half the world has an average income of less than $4 per day, which makes our $15 N200 lamp model an investment. Another problem is dishonest competition: An unregulated market can make for unfair situations.
But I think the iconic shape of our product, a light bulb, is its advantage: Everyone knows what our N200 model lamp is and everyone knows what it does.