Creating a Pension to Fit the Needs of the Rural Poor 03-25

Pensions are, in a sense, a necessary by-product of a rich economy. But what will it take to sell the idea to the rural poor? Especially when their income (never particularly substantial) is seasonal, increasing at harvest time and with demand in the cities for construction-related labor. What are the inducements that can convince them to invest for a future forced upon them by the changing social structure?

Olivia S. Mitchell, a Wharton professor of business economics and public policy and executive director of the Pension Research Council, and Anita Mukherjee, a professor at the Wisconsin School of Business at the University of Wisconsin-Madison, set out to answer these questions in a research paper titled, “Assessing the Demand for Micropensions among India’s Poor.” They chose India as the subject country because it is an ideal setting to study the market for micropensions, or pension plans designed for low-income individuals; the country’s new pension system is designed to reach informal sector workers. A micropension product — Swavalamban — has been applicable to all citizens in the unorganized sector who have joined the National Pension Scheme since 2011.

This scheme was funded by grants from the government. It has been replaced with the Atal Pension Yojana, in which all subscribing workers below the age of 40 are eligible for pension of up to Rs. 5,000 ($74) per month after turning 60. In the Atal Pension Yojana, for every contribution made to the pension fund, the central government also co-contributes 50% of the total contribution or Rs. 1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of five years. The minimum age of joining the Atal Pension is 18 and the maximum is 40. The age of exit and the start of the pension is 60.

There was a significant need for a pension system in India. “According to the government of India’s Planning Commission (2014), nearly 30% of the country’s 1.2 billion population lives below the poverty line (BPL),” the researchers write. “At the same time, according to the Population Research Bureau, the share of India’s BPL population age 60 or older is expected to increase from 8% in 2010 to 19% in 2050. Many of these older persons work in the unorganized sector and, as such, lack the identification and proof of employment documents required for accessing basic financial services. Nevertheless, current research estimates that about 80 million of these workers are capable of saving for retirement and the untapped savings are in the order of $2 billion.” 

There are other systemic pressures at work. “In India, as in many developing countries, younger adults are moving from rural to urban areas for economic opportunity,” Mitchell and Mukherjee tell Knowledge@Wharton. “Often this means that parents are left behind in the rural areas and, though they may receive financial support from their children, this revolution in traditional family structure can make older people more vulnerable. As a result, older cohorts today may be more interested in a micropension product than they were in the past.”

“Our research shows that individuals broadly preferred a micropension plan that offers withdrawals starting at age 60, as well as partial withdrawals beforehand, to other variants that had different access features.”

Micropension Options

The experiment was conducted in two of the 71 districts in the central Indian state of Uttar Pradesh — Fatehpur and Siddharthnagar. Overall, the statistics are comparable to those of BPL populations. The average survey respondent was 43 years old, owned land, was illiterate and had minimal schooling. The two most common livelihood activities that the respondents engaged in were farming via cultivation of one’s own land (37%), and agricultural labor supplied to non-owned farms (34%). With respect to educational attainment, more than 60% had never attended school, while 21% had five to 10 years of formal schooling. Insurance access among the respondents was low, at 20% of the total sample population. But 66% held a life insurance policy. Saving penetration was relatively high, with 55% having access to a formal saving account. Respondents who had saved had an average balance of Rs. 3,000 in their accounts. 

The study placed the existing pension plan as the baseline. An appropriate information and educational scheme was unfolded for the respondents. They were then asked two sets of questions.

Group 1 was asked about variants 1B, 1C and 1D, and Group 2 was asked about variants 2B, 2C and 2D. The first variant (A) is the basic micropension product that was then being offered by the Indian government. The other variants included early withdrawal (1B), where the eligibility age was 55 instead of 60; a lower matching rate of 50% instead of 100% (1C); no early withdrawal (1D); delayed withdrawal, where the eligibility age was 65 instead of 60 (2B); a higher matching rate of 150% instead of 100% (2C), and option for full withdrawal at age 60 (2D).

“Our research shows that individuals broadly preferred a micropension plan that offers withdrawals starting at age 60, as well as partial withdrawals beforehand, to other variants that had different access features,” say the authors. “This is similar to the micropension currently on offer in India. One exception to this, not surprisingly, is that our respondents preferred an option that boosted government matches to their plan contributions.”

“Previous studies on the financial lives of the poor have documented that their incomes are irregular and highly seasonal. As a result, requiring them to pay significant sums in just a few payments could significantly reduce demand for the pension product.”

The study results included a few small surprises. Respondents were asked to rank their levels of trust in six institutions on a scale of one to five, with a level of one indicating a complete lack of trust and a level of five representing a very high level of trust. Banks topped the list with a score of 4.49. The government clocked in with 4.22, while non-governmental organizations (NGOs) at 2.55 and village councils (3.34) were regarded as relatively less trustworthy. “We do not know for certain why NGOs were less trusted relative to government entities, but it could be because they had a smaller presence in the areas we studied,” say the authors.

These results are informative about whether microfinance institutions or local governments are likely to be successful intermediaries in the micropension product. Since the government was viewed as a trusted entity, having government support for micropensions may have helped boost adoption and contributions, the researchers note.

The faith put in banks is understandable. “For some time, there has been a growing awareness of the benefits of secure banking, even in remote areas of India,” say the authors. “Moreover, technological improvements using audio cues and fingerprinting have helped expand banking to those who cannot read or write. The Jan Dhan Yojana plan was an important vehicle used to include many rural Indian families in the formal banking system. The Indian government’s demonetization policy has also spurred an interest in enhancing poor peoples’ access to banking, as it created cash constraints throughout the economy.”

Pointing out that India’s recent effort to eliminate larger banknotes was intended to crack down on the “shadow” economy,” the authors add: “It has prompted even poor and rural communities to take up mobile payment services. One example is Paytm, a phone-based system for transferring payments from a bank account to cover people’s everyday liquidity needs.”

Growing the Appeal

The paper has some advice for governments or other entities that are developing micropension products. The researchers write that an effective retirement savings device for the poor must take into account cash-flow needs, income seasonality, competing spending priorities and alternative investment options. They note that respondents to the study were among the poorest in their communities and relied heavily on income from agriculture.

“Previous studies on the financial lives of the poor have documented that their incomes are irregular and highly seasonal. As a result, requiring them to pay significant sums in just a few payments could significantly reduce demand for the pension product,” the researchers write. “For this reason, offering frequent opportunities for such individuals to contribute can be critical to the scheme’s success.”

“To grow [the appeal of micropensions], the focus should be on proper investments (inflation is currently around 10%) and policyholder retention.”

The ability to contribute frequently to an agent who makes door-to-door visits could also help explain why people were interested in micropensions even when making fixed deposits at an Indian bank would offer them high annual returns. “Our initial hypothesis in designing this survey experiment was that some respondents would exhibit a preference between early or late eligibility for withdrawal, and that we would be able to identify the heterogeneity driving these decisions,” the researchers write. “Instead, we found that with the exception of the high match variant, respondents were less willing to adopt or contribute to the alternatives to the baseline micropension product.”

Regarding the faith in the government, the authors elaborate: “In our study setting of rural Uttar Pradesh, one of India’s poorest states, individuals receive many benefits from the government such as ration cards for discounted groceries and free health care. We believe that this repeated and positive interaction with the government has engendered the high level of trust we found.” In addition, the country’s largest life insurance company, the Life Insurance Corporation of India, is also state-owned and enjoys a high level of trust. The authors note that the low levels of education and financial literacy found in the communities they studied highlight the need to provide a financial literacy program in conjunction with the micropension. 

“We believe that the move toward digitized finance can facilitate automatic contributions to enhance the appeal of the micropension product in India,” the authors say. “Yet for a micropension plan to work for India’s poor, it must allow policyholders to contribute according to the seasonal incomes they earn while encouraging savings sufficient to provide meaningful support in old age.”

The paper finds that the Indian government’s current micropension product is appealing to the audience it is meant to reach, Mitchell and Mukherjee say. “To grow that appeal, the focus should be on proper investments (inflation is currently around 10%) and policyholder retention,” they add. “The Gates Foundation is also pushing innovations in digital finance [in India] and elsewhere in the developing world, as a means to help the poor do more to save, invest, borrow and mitigate financial risks.”


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No More Blueprints, Visions or Plans....We Need Liberty 01-11

Shyam's take on this article....

Poverty is an essential bane of democracy. Poverty alleviation is a constant unfulfilled promise of various political parties and politicians in all the democracies of the world.

It is not something unique to any one country.The day the poverty is really conquered, the relevance of the politicians and political parties comes to an end, or it gets substantially diminished.

While the poverty is a curse and suffering for people, it keeps the politicians relevant and affluent.

America has been debating the poverty and liberty for the last 240 years, and India for almost 70 years.

Now please read Ron Paul's Liberty report

It appears that Obamacare is going to be one of the early issues addressed by the incoming Trump Administration. There's a lot of back-and-forth about "repeal and replace" and "repeal and wait." It's all nonsense.

Politicians think of themselves as high and mighty architects, running around with their magnificent blueprints that they're going to force on society. However, (without exception) life and reality smack the pompous politicians down. The sought after results almost never come to pass.

Unfortunately, like dogs that chase their own tails, politicians bounce back with a new set of blueprints every single time...And around-and-around we go. 

No matter what type of society we are to live in, there will always be the poor, the uneducated, the hungry, and the unemployed. They would exist in an anarchist society. They would exist in a society with a limited or small government. They would even exist with free markets, sound money and rock-solid private property rights.

Poverty is not to be abolished. That's not an easy pill for many (most?) to swallow. As a result, people come up with the craziest ideas in order to fight this reality. Every idea has failed.

Take a look at America's current government. It's the biggest and most intrusive that the world has ever seen. 

Has it abolished poverty? On the contrary, it's a poverty manufacturer. 

Is it from lack of funds? Of course not! 

The U.S. government parasitically drains American citizens to the tune of trillions of dollars per year. And it doesn't stop there. The gang has buried itself in debt that can't possibly be paid...ever! 

And yet...

There are poor people everywhere. The uneducated (thanks to government schools) are growing exponentially and millions of people are still hungry and unemployed.

So what's missing? Does the federal government need another trillion dollars? Does it need more credit from foolish creditors? Does it need another professor to concoct another blueprint?

The answer is a resounding NO to all of the above.

A serious advocate for a society of liberty, sound money, voluntary interactions, and rock-solid private property rights understands that there is no getting rid of poverty. For it is a built-in part of life. 

But it's not as bad as it sounds. There's a very big upside, and here it is: In a free society, poverty may only be a temporary situation for each individual. As long as you have the freedom to think, to create, to serve, and to keep the fruits of your labor, you can raise yourself to unbelievable heights. That is the promise of freedom.

Unfortunately, that scares a lot of people. So instead of taking the peaceful route, most will choose to snuggle into the arms of the violent blueprint makers. "Let the politicians draw up plans to raise me out of poverty," becomes the belief. 

The blueprint makers love taking on this most impossible task. They get praise (and sometimes worship). But they live and breathe on mostly one thing: Dependency. 

Take a look at the arguments that are being presented in the Obamacare "debate." The left seems to brag about the numbers of dependents that they've created. What is to be done about the tens of millions who signed up for Obamacare? What are you going to do, rip their insurance away? 

The dependents have become political bargaining chips. 

Obamacare is just a small slice of the dependency web too. Factor in the unsustainable Medicare and Social Security scams and you've got a whole society of dependents (who believe they're entitled to what the government promised them).

Instead of a move towards liberty and free markets, the blueprint makers will bark at each other and settle on either keeping the monstrosity as it is, or "replace" it with another monstrosity that will inevitably fail.

A new philosophy must be embraced. Instead of trying to see how much poverty the U.S. government is able to create. Let's scrap the belief that stealing from (A) to give to (B) is a solution to any problem.

There's no way to make theft work.

There's no blueprint that will turn a wrong into a right.

Liberty is always the best option.

Perhaps someday it'll catch on.

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Economic Inclusion – Accelerating Impact Collectively 03-05

Economic Inclusion – Accelerating Impact Collectively

Social Entrepreneurs with proven models for including low-income populations convene to refine their impact scaling strategies and collectively overcome ecosystem barriers.

Great business ideas go global to serve customers around the world. Great social innovations, however, too often remain local or national because market forces do not work as efficiently in low-income markets. Although many of the ideas and the entrepreneurs behind them have the potential for global spread, the inclusive business sector still lacks the processes, resources and mechanisms necessary for scaling impact successfully. The Ashoka Globalizer is working to help change this scenario. Founded in 2010, Globalizer capitalizes on Ashoka’s global reach, selection process and network of social and business entrepreneurs to connect “ready to globalize” innovations with the strategic and intellectual support they need to go global rapidly and efficiently.

At the end of February 2014, a group of 20 international Ashoka Fellows will convene for the Economic Inclusion Globalizer Summit in Chennai, India. During three days of structured interactions with business and impact sector thought leaders, they will share and synthesize knowledge and best practices around emerging scaling pathways, exchange practical advice to support each other’s endeavors, and distill their stories to share with the sector at large. In preparation for the summit, Fellows spent several months working to distill or “unbundle” the core elements of their theory of change and refine their strategies for scaling with support from teams of advisors from Ashoka and our business sector partners.  

Systems changing innovations for Economic Inclusion

Much has been written about the great treasure that lies within low-income markets: Four billion people living on less than $3,000 per year who collectively spend $5 trillion per year. By 2050, the world’s population is expected to increase by 3 billion, with growth rates being highest in developing countries. This treasure, however, lies buried at great depth. In order to access it, entrepreneurs have to overcome significant systemic barriers such as low levels of education, inadequate infrastructure, and poorly designed and enforced regulations. Including low-income groups as pure consumers will not necessarily improve their livelihoods. This is why the most promising social entrepreneurship models go beyond increasing peoples’ access to critical goods, services, and financial markets. Rather, they also engage them in creating local value through stimulating economic opportunities. More than 500 of Ashoka’s 3,100 Fellows around the world work on solutions that engage low-income populations in economic value chains as contributors, producers, and micro-entrepreneurs.

Here are three examples of successful models that several Ashoka Fellows are using:

Creating employment and access to markets in remote areas through the set-up of locally owned last-mile distribution infrastructure: Katherine Lucey’s organization Solar Sister trains women in rural Uganda to become last-mile micro-franchise entrepreneurs who bridge the gap in the distribution of affordable, renewable energy products through peer-to-peer sales networks. Greg van Kirk’s Community Enterprise Solutions is delivering health-related goods and services to remote villages using a micro-consignment model in Central America.

Spurring economic opportunity through the support of micro, small and medium enterprises (MSMEs): Through his organization Agora Partnerships, Ben Powell is equipping promising impact entrepreneurs with business knowledge and access to investment capital to run for-profit businesses that help address social problems and promote development in their communities. Paul Basil’s Villgro provides mentoring and funding to early stage innovation-based social enterprises, which positively impact the lives of India's poor.

Empowering informal workers through lobbying and information: Arbind Singh’s organization NIDAN in India provides excluded informal workers with access to markets through large people-owned and managed institutions – large enough to influence policy and act as legitimate competitors in a globalizing marketplace. Ananya Raihan is ushering in an era of information-on-demand in the rural areas of Bangladesh by building a network of locally run kiosks that offer villagers access to everything from up-to-date market prices for their rice to health information and legal forms, all through a centralized, Bengali-language information clearinghouse.

 

How to scale the impact of inclusive business models in low-income markets

Over the last decade, the notion of “scaling what works” has emerged as a broadly shared priority across the social sector. Still, the challenge of enabling powerful inclusive business innovations to spread to where they are most needed continues to frustrate social entrepreneurs and their supporters. Many failed attempts to scale economic inclusion initiatives are due to widespread overreliance on the conventional wisdom of the business sector, in which scaling efforts typically focus on increasing the size of organizations. In recent years, however, the social entrepreneurship sector has increasingly focused on scaling social impact without necessarily increasing the size of the organization. Indeed, Richard Bradach may have framed the current thinking best when he wrote that “finding ways to scale impact without scaling the size of an organization is the new frontier for work in our field.”(1) This emerging paradigm holds the promise of shaping strategies that succeed, thanks to the defining characteristics of the social sector. Leveraging the collaborative potential of mission-driven innovators while keeping organizational footprints— and attendant resource needs—to a minimum are key. The Economic Inclusion Globalizer seeks to accelerate this paradigm shift in the field of economic inclusion.

All businesses, whether standard or inclusive, face similar challenges when growing such as lack of access to appropriate financing mechanisms and qualified human capital, or the lack of a conducive regulatory environment. When operating in low-income environments, however, structural barriers make coping with these challenges even more difficult: Consumers are even harder to reach; support organizations, such as training providers, are not available; and the general business infrastructure is less developed. This is why the first day of the Globalizer summit focuses on the systemic barriers preventing economic inclusion initiatives from scaling their impact to meet their full demand. Ashoka’s social entrepreneurs will come together with leading minds from different sectors, industries, and markets to share their challenges, solutions, and new ideas for tackling these systemic barriers collectively. A special pool of funds will benefit the most outstanding solutions that emerge, thanks to GIZ and eBay Foundation, in partnership with Ashoka India and Ashoka Globalizer. The Globalizer Summit seeks to facilitate the creation of a strong economic inclusion ecosystem that truly allows economic opportunities to thrive where they are most needed..

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Corporate volunteering in China – a massive opportunity 01-07

Corporate volunteering in China – a massive 

opportunity

By Simon Brown, Asia Pacific Corporate Partnerships Manager for VSO

The role of the private sector in development is evolving rapidly, nowhere more so than in China where the role of the private sector per se has changed so dramatically in the last decade. With this in mind, VSO China began research into corporate volunteering in China earlier this year. The results, published last month (17 December) show that the appetite for volunteering is quite phenomenal. More than 99% of the nearly one thousand staff surveyed said that under the right conditions, of company support and meaningful opportunity, they would want to volunteer.  In a country with close to one billion people of working age, it’s not difficult to see the potential of corporate volunteering to help combat poverty.

The potential of volunteering and the social sector has also been recognized by the Chinese Government. In 2011 it published its 12^th Five Year Plan, which targeted a 10 per cent volunteer level by 2015, a three-fold increase from current levels equivalent to over 100 million volunteers.

Understanding why companies are (or are not) starting or scaling up community engagement programmes was one of the key aims of the research, led by VSO in partnership with Beijing Normal University. It also examined what motivates staff to volunteer and to continue volunteering and how community groups and social organizations are responding to the opportunities and the challenges of an increased interest in employee volunteering.

We interviewed close to one hundred senior managers and decision makers across a broad range of domestic and foreign companies, as well as social organizations. We also surveyed close to one thousand company staff. Some of those companies have volunteering programmes, other not; some of those staff have volunteered, other not. Our aim was to get a rounded picture of what is and is not working, and what the challenges are in scaling up volunteering in the private and corporate sectors in China.

The report is released on the eve of the third Beijing Volunteering Expo,  itself an innovation in bringing government, corporate, social, academic and media sectors together each year to celebrate and inspire volunteering in China. The full report can be downloaded from www.vsoconsulting-cn.com/en  .

China is not alone in Asia in the private and corporate sectors’ increased interest in community engagement through volunteering.  But the current scale of that interest in corporate volunteering is quite a phenomenon in China. Encouraged by government, volunteering and community contribution is at the centre of the growth that we are seeing across the whole of Chinese society.  Both foreign and domestic companies are very much part of that growth and are looking for models of corporate volunteering in China to inform their own programmes. 

As the research report shows, the potential is enormous.  Staff are looking to share their own skills and acquire new ones. They are seeking opportunities where they can make a real difference to the lives of marginalized people and to the environment.

There are challenges as well as opportunities and the research brings those to the surface.  Social organizations in China, outside of the government system, tend to be local and relatively small, unregistered and often in more remote Western regions that are beyond the reach of company volunteering programmes centred in urban, Eastern cities.  Accessibility and scalability are challenges to which we must find solutions, perhaps through networks and cooperative partnerships that provide sufficient scale and legitimacy for corporate programmes.

There’s also a balance to be struck between what works for the volunteers and what works for the organizations with which they’re volunteering. Opportunities need to be found within reasonable distance of company premises, but corporate programmes also need to reach out along value chains and into rural communities.  Overarching this, volunteering programmes must focus on meeting the needs of the poor and marginalized and be demand-driven.

But in a country of innovation, we surely will find those solutions. While there may not be an immediate opportunity for a billion people to volunteer, there is certainly opportunity to realize a significant part of the potential. To do this we need to build the capacity of companies to develop meaningful volunteering programmes; and the capacity of social organizations to engage with the corporate sector, provide opportunities and demonstrate impact.

The results of the research are hugely encouraging.  As the private sector continues to evolve in China and corporate volunteering evolves alongside it, perhaps that target of 100 million volunteers is not looking so hard to reach.

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A philanthropic strategy for enhancing the reach and impact of individuals, organizations and nonprofits 01-07

A philanthropic strategy for enhancing the reach and impact of individuals, organizations and nonprofits

  

By Ric Leutwyler Founder & President, Philanthropegie  
  

What would you do if you found out you were using less than 1% of the resources available to help you achieve your philanthropic goals?  Here’s what I did.

I have served philanthropic and social good organizations in some capacity for most of my adult life.  A common theme I saw along the way was that these organizations struggled to achieve clearly defined and compelling goals due to a lack of resources. 

Over time I was able to assist these organizations by helping them connect with individuals or other organizations that had what they needed.  In each case I was able to see a significant increase in the organizations’ ability to achieve their goals.

Then, it struck me.  If one connection can have such a positive impact for one organization…how much could be accomplished by facilitating hundreds, thousands or millions of connections?  I decided to find out.

In the year or so that I’ve been working on this, I’m not sure if I’ve spent more time explaining what Philanthropegie   is all about – or helping people figure out how to pronounce it? For the record, the phonetic spelling is written like this: Fil-un’n-THROP-eh-jee

Launched in summer 2012, Philanthropegie   is finally a reality. It’s much better than I originally thought it would be when we launched – and so much less than what I hope it will be in the future. We describe Philanthropegie as “a philanthropic strategy for enhancing the reach and impact of individuals, organizations and nonprofits dedicated to making a meaningful difference in the world.” You’re probably saying ‘Yeah… so what does that mean?’ If you’re bothering to read this, I’m guessing you have an interest in – maybe even a passion for? – philanthropy, social responsibility, giving back, doing good…making a difference. Thankfully, you’re not alone. There are thousands of organizations, millions of individuals and a very large, and growing, number of nonprofits that share that special interest in doing something to make the world a better place.

Far too often, we as individuals, or members of an organization or nonprofit, feel limited or constrained in our ability to make a real impact. Sometimes, it’s because we just don’t know where to start. Sometimes it’s because we don’t feel that we have the resources we need to achieve our vision of giving back, of empowering, of breaking a cycle or of giving hope. And all the while, there is actually an abundance of people, tools, services and organizations that likely have just what we need – if we could only find them.

Our strategy is to bring you together with the resources that you – as an individual, or a member of an organization or a nonprofit – need to accomplish what you feel in your heart you want to do. We believe that the best way we can make a difference, is to help others to make a difference.  To accomplish this, Philanthropegie  …

• Serves three key audiences (individuals, organizations and nonprofits) who we believe can accomplish much more working together than apart
• Makes it easy to find the resources needed for virtually anything to do with philanthropic endeavors
• Includes resource descriptions, tips, testimonials and ratings that will help users choose the best resources for their specific needs
• Supports users in building their own, personalized library of favorite resources
• Encourages the exchange of information and insight through our blog and social media channels

There is no fee to access the resources or post a resource on the website. In addition, we have no paid staff. All that you see on the site is the result of volunteer efforts.

I know we’ve only scratched the surface. Our site lists only a fraction of the wonderful resources ready to help you meet your philanthropic objectives. At this point, we have focused almost exclusively on North America – while the need is clearly a global one. It’s a start though – I believe a good one.

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Achieving success at the Bottom of the Pyramid 01-07

  

By Paul Polak, Founder, IDE

Question: If you build a better mousetrap will the world beat a path to your door?

Answer: Without superb marketing and distribution nobody beats a path to your door.

In my work with a multitude of affordable technologies over the past 30 years, one key feature has become abundantly clear: If you have met the challenge of designing a transformative, radically affordable technology, you’ve successfully solved no more than 10-20% of the problem. The critical other 80% of the solution lies in designing an effective marketing, distribution, and profitable business strategy that can be brought to scale. Of these, perhaps the most important is designing an effective scale strategy.

Some technologies are simply not scalable. They solve a problem that exists only in a village or two but is not applicable to a thousand villages. The first step in designing an effective scaling strategy is therefore to put first priority on technologies that, if successful, can be applied to address parallel problems in at least a thousand villages.

For example, an Engineers Without Borders   team successfully fixed a broken motorized pump that supplied drinking water to several hundred families in a village in Rwanda. This mechanized piped water system was too expensive to be implemented in many other villages, but fixing it addressed an important problem in one village. Designing a robust, affordable hand pump, on the other hand, could have addressed a drinking water problem for many of the other families in the village and in thousands of other villages as well.

In many instances, the design of a scaling strategy is not very complicated. What development practitioners usually miss is the importance of building design for scale into a project from the very beginning of the design process. For example, if you need to sharpen ten pencils, the way to do it is simple. If you need to sharpen a thousand pencils, you need to use a different strategy, but it can be done. If you need to sharpen 100,000 pencils, you need a still different strategy. Each of these problems is eminently solvable, but each one requires a different series of logical steps; it’s very difficult to efficiently change from a ten-pencil strategy to a hundred-thousand-pencil strategy if you’ve already committed your resources and your time to the former.

  

About 3 million manually powered treadle pumps like this one have been sold to $2-a-day customers

25 years ago iDE (International Development Enterprises)   recognized the transformative potential of a simple, $25 treadle pump installed on a tube well. The design of that technology incorporated affordability, easy reparability, and applicability  to millions of small farms.

Yet the key challenge was to design the mass marketing and distribution strategy that would make it available to several million farmers. In Bangladesh 25 years ago, there was no pre-existing system of mass distribution in rural villages, and many of the one-acre farmers who needed a treadle pump had never heard of the technology; didn’t know how to read and write; and had no access to mass media.

  

Private sector treadle pump manufacturer

To address the problem of distribution, we recruited 75 small private sector workshops who manufactured the treadle pumps; 3,000 village dealers who sold them at a 12% margin; and we trained 3,000 well drillers through a three-day course with a diploma, who then installed the treadle pump in the field for a fee. This set up the treadle pump market infrastructure, but that alone wasn’t enough.

  

A village dealer who sells treadle pumps at a 12% margin

  

Manual well drilling in Bangladesh costs 5-10 cents per foot and drills to a depth of up to 100 feet

The next step was to create market demand, so that each of these small enterprises could sell enough volume to make a decent living. For an illiterate population unreached by mass media, flyers, brochures, or radio campaigns wouldn’t work. So we recruited several village troubadour and theatre groups to write songs about the treadle pumps, and had them perform at markets and larger celebrations, incorporating demonstrations of working treadle pumps into their performances. Finally, we created a Bangladesh-style 90-minute Bollywood movie featuring the treadle pump that played off of a truck-mounted projector to an audience of a million people every year, in village open-air settings. Our film was often the first movie that our customers had ever seen.

Without the design of a scalable manufacturing, distribution, and installation network involving thousands of small entrepreneurs, we never could have sold the first million treadle pumps in Bangladesh. Without a large-scale marketing program incorporating activities like the Bollywood movie, neither the 75 manufacturers, the 3,000 village dealers, nor the 3,000 well drillers could have earned a reasonable living by making, marketing, and installing the treadle pump. The design of the mass distribution and mass marketing strategy turned out to be much more important to the success of the treadle pump program than the design of the treadle pump itself. Design of a transformative affordable technology was a necessary, but far-from-sufficient, condition for its success.

The design of an effective for-profit business strategy, of course, pulls all of this together. Every key player in the distribution chain has to make an attractive profit. The most important person in this chain is the end customer. A basic principle I’ve learned over the past 25 years is that for $2-a-day customers, income generation is the single most important feature of a successful technology. I don’t work with any technologies for dollar-a-day customers unless the customer can get three times his money back in the first year by using the technology. A treadle pump installed on a tube well costs $25, including a profit for the manufacturer, the dealer, and the well driller. The average farmer who buys it earns $100 net income in the first year, and could potentially earn $500 a year – 1/5 of purchasers of treadle pumps earn $500 in net income right away.

  

While it’s the most important, for the ultimate purchaser alone to earn a profit is not enough. The manufacturer has to make an attractive enough profit that he is likely to continue making the treadle pumps. Each dealer has to sell at least 20 treadle pumps in a season to earn enough income so that it is in his interest to continue to market treadle pumps to customers, year after year. And finally, the well driller must install enough treadle pumps in a season to make it worth his while to continue installing them. All of these active participants in the supply chain need to earn attractive profits before the technology can be successful.

A successful social enterprise serving $2-a-day customers begins with the design of a radically affordable, scalable, transformative technology. But this is only the beginning. It will fail to make a meaningful impact unless 80% of the designer’s energy is successfully turned towards designing a profitable business capable of reaching a million customers through an effective branding, marketing and distribution system.

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