Embracing the Business of Development

September 29, 2015

Rubayat Khan

After years of diplomatic wrangling, the Sustainable Development Goals (SDGs) have become gospel for next 15 years. There’s no doubting their high ambition, with 17 main goals and no fewer than 169 subsidiary targets. But these lofty aims seem little more than a dream unless we answer one fundamental question: Where’s the money coming from?

Financing the SDGs is quite literally a “trillion-dollar question.” Yet the best the Addis Ababa Summit (where government leaders met to discuss financing of the SDGs) could do was reiterate a 40-year-old demand: that the West follow through on its 0.7 percent (of gross national income) commitment for aid!

That is looking in the wrong direction. The problem with public aid and philanthropy-based development isn’t just that there’s not enough money (that problem itself is worsening after the global financial crises); it’s that the development sector is wasteful, and worse, doesn’t replenish its own pot.

Some answers lie buried in the last goal on the list — number 17 if you’re still counting: Strengthen the means of implementation and revitalize the global partnership for sustainable development. This may seem like a wooly idea, but it will make or break the other 16 goals.

Development Needs to Think Like Business

While NGOs should certainly not follow the path of money-hungry corporations (there is already a feeling that many are too focused on fundraising), development should borrow from other important aspects of the business mindset.

Take revenue generation. Although considered impossible by many nonprofits, Bangladesh-based NGO BRAC successfully generated 70 percent of its annual expenditure of more than $700 million from its own revenues in 2013, and expects to reach full financial sustainability by 2021. It achieved this remarkable feat by taking a holistic view of development — not just training 65,000 poor rural women in handicrafts, for example, but also creating a market for them through Aarong, BRAC’s own premium artisan brand.

That’s not how most of the development world functions today. While designing an $80 million project with a highly respected nonprofit, I pushed for a mechanism to generate revenues from the project and make it self-sustainable. One of the organization’s senior executives told me wryly: “Thank you for this great idea, but unfortunately we don’t have the processes to manage revenue. Even if we did, the donor would never accept making money out of poor people.”

Let Social Enterprises Lead the Way

One model challenging the old orthodoxy is social enterprise — perhaps one of the most important innovations in development during the last two decades. Social enterprises build the concept of sustainability into their DNA.

While it’s true that not many have scaled successfully, shining lights like One Acre Fund, which provides financing and training to small-scale farmers, and Ignitia, which provides localized weather alerts to farmers via SMS messaging, are poised to reach millions of people. Ignitia’s subscribers have been shown to double their yields, and the company is well positioned to reach more than a million subscribers across four countries in the next two years.

Social enterprises are leaner and more flexible than traditional nonprofits. They often employ cutting-edge techniques — such as human-centered design and rapid prototyping — to quickly and cheaply assess customer needs and validate assumptions, instead of the all-too-familiar pattern of NGOs running pre-planned programs for years without responding much to context or feedback.

If NGOs can’t lead this change, they should at least follow.

Embrace the Private Sector

But the change must not stop there. SDG 17 aims to “revitalize the global partnership.” What is a global partnership that doesn’t tap into the private sector’s money and innovation?

Why should the private sector want to get involved? Many huge businesses, including telecoms and mobile-money operators, target poor customers. Poverty alleviation increases the customer base, which is why even traditional companies like Coca Cola and GlaxoSmithKline are integrating the SDGs into their planning as a business opportunity, not a corporate responsibility gimmick.

The SDGs could certainly use the boost. The car company Tesla’s development of a grid-scale battery is arguably the single most important contribution to making renewable energy mainstream. In Bangladesh, solar panel and telecom companies have managed to connect even the most disadvantaged people. Both are enabling ladders out of poverty.

Let Change Start from the Bottom

Not all SDGs lend themselves to private-sector investment or business-model approaches. Efforts to provide humanitarian assistance for war refugees, raise awareness about equal treatment of disabled people, and prevent violence against women may well be outside the realm of “return-on-investment.”

However, there are instances of innovative, for-profit social enterprises solving problems in the unlikeliest of areas. An Indian social enterprise called Get Up for Change, for example, uses the Rights to Information Act to provide Indians with an online portal to demand solutions to public inefficiency and corruption, for only $3. Despite the ease of the process, it has already led to quicker pensions, prevented graft, and facilitated roads being built to connect rural villages.

The UN and other development organizations could create incubators and offer seed financing to incentivize such private-sector innovators to take on SDG-oriented challenges.

Implementing these strategies will inevitably require out-of-the-box thinking from NGOs, governments, and donors alike, such as training in revenue streams and basic accounting for all aid workers. It will require close cooperation with the private sector, a willingness to learn from (and even acquire and internalize) social enterprises, and the flexibility to integrate new methods and ideas to adapt to this new era.

In other words, if we start at the bottom with goal 17 and get that right, we may just have a shot at achieving the others.

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Originally published on Stanford Social Innovation Review

A groundbreaking initiative designed to bring more expert voices from the developing world into the global development discussion.

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