Venture Development and the Poor

In an article, “How Misinformed Ideas about Profit are Holding Back the World’s Poor,” which focuses on for-profit business with poor West African consumers, the following questions guide the article’s discussion:

• §  Is it taking advantage of the poor people to try to make money from them?
• §  And do they event have any money to give?

The author of the article currently owns a for-profit business that sells products and services to West Africans who receive less than $6/day. According to the author, the notion that profit-making from the poor equates to taking advantage of the poor is “absurd.” The article presents three main arguments to support the author’s argument.

First, West Africans and other poor persons are still consumers who participate in markets and deserve access to meaningful products. Second, the poor often pay higher rates for necessary goods like water or credit. Unscrupulous business owners may take advantage of desperate, poor consumers, but offering new competitive services in the same market helps reduce cost of goods and increases affordability of goods. Lastly, the author references the role of charity and argues charities are not a substitute for the potentially positive impacts of for-profit businesses in low-income markets. Charity contributions at their worst “[encourage] laziness and stymie initiatives.” For these three reasons, the author argues the legitimacy of for-profit-making by selling goods to the poor.

Although, brief in detail and context, comparative examples, recognition of market complexities and relevant externalities, I personally appreciated the author’s argument as a novel one. I hadn’t previously heard of arguments that legitimize for-profit engagement with the poor, but I now have a clearer understanding of its potential validity.

In layman’s conversations, charities are assumed to be the one and only solution to revitalize the poor. Based upon this article’s arguments, I would recommend greater research be conducted in investigating the opportunities for for-profit business to serve the same role.

In class, we have touched upon innovative products that provide sustainable solutions to those in need, but we have barely scratched the surface when addressing sustainable solutions initiated by for-profit businesses that promote economic and social development for the poor. In essence, perhaps there are opportunities to revitalize and reintegrate the poor and needy into a competitive market by bringing the competitive market to the poor and needy.

Are there good examples of this model being done today? What are your thoughts regarding the potential positive impact of for-profit business engagement with the poor as a means to revitalize them?