How to Profit Off the Poor to Eradicate Poverty
There is a growing belief that one of the best solutions to eradicate poverty is through social entrepreneurship and small business economics. The premise is that being poor isn’t just about not having money — it’s really about the lack of skills and capabilities. Based on past experiences, people are sophisticated enough to recognize that handouts alone are not only ineffective, they cause dependence. There are a lot of buzz about turning free-market entrepreneurs on the poverty problem and not increase handouts. Another driver is that many non-profits are moving away from a donor-funded model as fundraising has become enormously challenging and time consuming and moving toward a revenue-generation model. Of course, in the business of social needs, there has to be balance — solving poverty issues through self-sustaining means without compromising humanity in the name of efficiency.
TechCrunch featured a great case study of a for-profit company in India, NIIT, that is using free market to solve social ills. How are slum kids in Delhi able to get on a computer several hours a day to play games and to learn English, Math and Sciences — literally becoming computer savvy?
Back in 1999 Sugata Mitra, NIIT’s chief scientist, noticed his kid could learn how to use gadgets like a mobile phone far faster than tech-savvy adults could. At this time, computers were expensive and required training and supervision and most kids only got to look at them from afar in the classroom.
Mitra wondered what would happen if he left a computer out in the open for a group of children to discover. So he literally knocked a hole in the office wall to the slum on the other side. He shoved a computer in the hole and set up a camera on a tree limb to record what happened. A 13-year-old, illiterate kid who’d never seen a computer wandered over tentatively, and soon realized he could move the cursor by moving a finger across the touch pad. Within four hours, a small group of kids had gathered. They had figured out how to open Internet Explorer and were playing a game on Disney’s Web site. “All of us were absolutely shocked watching that,” says Abhishek Gupta who heads the program now. Some expected the kids to break or even try to steal the computer.
NIIT did a pilot project with the World Bank, setting up 22 “Hole in the Wall” kiosks around the country from 2001 to 2005 and studied the results. The most obvious take-away was that kids left on their own will learn computers. Other by-products include team-building and social skills—with 200 kids sometimes huddled around one screen.
When the pilot was over, NIIT decided not to run the project as a non-profit. The company is not adverse to such things—it’s also opening a new high-end university that is run as a non-profit; rather, NIIT’s strategy was to tap into the unique attitude in India that believes the way to eradicate poverty is to turn India’s scrappiest, free-market entrepreneurs on the problem. NIIT sells the kiosks at between $6,000 and $20,000—depending on which model and how many screens—to the government, who puts them mostly in schools in India’s poorest areas. There are 500 stations in India and a handful in 10 different African countries. Having customers means NIIT has had to compromise on the original vision. For instance, the government requires administrators to keep an eye on the systems. They’re not open when an administrator isn’t there. But running the program as a business has assured its survival and given NIIT the cash flow to pour money into content creation so it doesn’t have to rely on the country’s spotty Internet connections for kids to stay engaged. Gupta says his job isn’t necessarily to be a profit center. Success is running a break-even program that makes a social impact and away from relying soley on donors.
NIIT is an example of the growing number of Indian companies that are adopting this free-market entrepreneurship model to address the country’s poverty. Their goal is the enpowerment of common people earning less than $2/day. BTW, NIIT’s “Hole in the Wall” program was the inspiration for the “Slumdog Millionaire” book which became a blockbuster movie!