Is It Exploitative to Profit From The Poor?

“Putting profits first is the most effective and sustainable way for companies to make a positive impact on the lives of the poor.” On face value, this claim by Simanis in Profits at the Bottom of the Pyramid seems exploitative. However, I personally agree that in order to achieve long-term sustainability for social ventures, effort from the community should be incorporated by asking for something in return.

My own experiences resonate well with the aforementioned claim as well. Last year, in Pakistan, I was working for a non-profit that was trying to encourage civic education in public schools. All costs of the curriculum/material supplies and training of teachers were borne by the organization. Consequently, the program did not cost anything to the public schools being targeted. Additionally, the program was also implemented in some private schools, with these institutions paying a fraction of the cost involved. The real challenge at private schools was to convince the administration about the benefits and merits of the program being proposed. In contrast, convincing the local government about implementing the program in various public schools was a much easier first step. This gives credence to the notion that when there is ‘nothing-to-lose’, people generally tend to adopt more quickly, and perhaps even carelessly. This might also result in a casual laid back approach that might be detrimental to the impact of the product/service being offered. Analogously, the impact I saw in the schools was drastically different between the public and private ones. Some of this has to do with the fact that private schools in the region were in general more efficient than the public ones. However, I felt that a portion of the difference in impact could also be attributed to the fact that the private schools wanted their investment to bear fruit.

This also goes in line with the “Money Maker” video seen in class last week. Despite a $100 price that required the people of that region to actually plan and save for months, the locals were willing to make the effort because of the impact they knew they could generate. This probably would not have been the case if the Money Makers were handed to them for free.

Another example that I feel all students will be able to relate to is the cost of attending graduate school. My undergraduate education cost approximately one-fourth of the Carnegie Mellon fee structure. Bearing this cost has increased my motivation to make most of this opportunity and made me more conscious about how I spend my time over here, compared to my undergraduate studies.

Hence, whether you make astronomical profits or barely break even from the revenue generated by social innovations, I feel it is important to involve the community being targeted. A sure-fire way to do that is to make them give up something – this ‘payment’ could range from financial resources or time to even services, varying from case-to-case. But it’s an element that definitely increases ownership of the social innovation and helps more in long-term sustainability as compared to the practice of free charitable giveaways with no accountability.

As Whalan points out in How Misinformed Ideas About Profit Are Holding Back The World's Poor: “Coke is the biggest employer in Africa, and you can often find a bottle of Coke in a village where basic medicine is not even available…If Coke can make money selling sugary soda at 40 cents a pop to villagers who don’t need it, there is plenty of room for companies selling much more meaningful products they actually do need.”