Five Ways That Charities Get It Wrong

SMITH BRAIN TRUST -- Low-income people don’t need your aid. An entrepreneur who helped deliver cellphone access throughout Bangladesh said underserved communities prefer business solutions that open economic opportunities. “It is possible to lift others, and in the process be lifted,” keynote speaker Iqbal Quadir said April 24, 2015, at the fifth annual Emerging Markets Forum in Washington, D.C.

Quadir, founder and emeritus director of the Legatum Center at Massachusetts Institute of Technology, said many people look at the poor and see charity cases. But profit-driven entrepreneurs look at the poor and see customers. “We are thinking about charity, but actually we have to think differently,” he said at the event, organized by the Center for International Business Education and Research (CIBER) at the University of Maryland’s Robert H. Smith School of Business.

Quadir cited the historical example of German printer Johannes Gutenberg, who invented a press that made books accessible to the masses. “He unleashed probably the biggest social transformation in Europe more than 500 years ago,” Quadir said. “He was, by the way, a for-profit entrepreneur. He was just trying to make money.” More recent examples include U.S. publisher Benjamin Day, who sold newspapers at one-sixth the price of anyone before him; U.S. automaker Henry Ford, who slashed transportation costs; and U.S. sewing machine manufacturer Isaac Singer, who developed an inexpensive product for home use and then found a way for housewives to pay for it. “He is the inventor of microcredit,” Quadir said.

In all of these cases, entrepreneurs made money by reducing costs for people at the bottom of the social pyramid. “Everyone wins,” Quadir said. Unfortunately, many with social agendas overlook or misunderstand the role that low-income people play in this innovation process. Quadir shared five important discoveries, based on his experiences in Bangladesh and other emerging markets, that charities often overlook when trying to deliver aid.

1. The force of numbers. Many people view the poor as passive players in the development of low-cost technology. “What we often overlook is that poor people are a stimulant to major innovations,” Quadir said. “They supply the volume. Without the volume, you couldn’t do it for the lower price.”

2. The abundance of resources. Some try to divide the world into haves and have-nots. But Quadir said all countries have access to two basic resources: Human capital and time. “Brains are a democratically distributed resource,” Quadir said. So is time. "Bangladesh has 24 hours in a day, and the United States has 24 hours in a day.” Inequality comes when one country harnesses these resources better than another. Entrepreneurs close these gaps by helping societies reduce waste.

3. The willingness to pay. Tools that make people more productive should be seen as self-paying devices. Cars, sewing machines and cellphones, for example, all save time and create income potential. “Poor people need services and are quite willing to pay,” Quadir said. "They have buying power."

4. The importance of income. Many charities start in emerging markets by trying to solve big problems such as hunger. Quadir said a better way is to start by creating jobs. “Increase their income,” he said, “and then we do not have to be the Big Brother to decide how other people will order their lives.”

5. The insights of laypeople. Experts sometimes visit low-income communities to impart wisdom, but Quadir said the learning should go both directions. “The poor can teach the experts,” he said. More than anyone, they know what tools they need to grow. “We do not need to aid them,” he said. “We need to create opportunities, and they will automatically embrace it.”

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