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Healthy Skepticism, Social Businesses, and Remote Rural Distribution

A Danish colleague, Gry Hongsmark-Knudsen, sent me a Fast Company story about The Paradigm Project.  This kind of “social business,” which sells one environmentally-friendly durable object into a region and then leaves, was a fairly typical model about five years ago. I am surprised to see one still out there–and even more surprised to see Fast Company reporting on it in such a naive way.

Basically, the Paradigm Project purports to have a positive impact on poor rural people around the world by selling them a better stove.  This kind of thing has been around for decades.  The stove is meant to replace the practice of cooking over open fires.  The supposed positive impact is that the stove is more fuel-efficient, saves time (because you don’t have to gather wood), is safer, and slows deforestation.  All good. No problem with any of that.

The Paradigm Project distributes its products through a network of local salespeople, mostly women (it’s always mostly women).  The implication, of course, is that an additional benefit is providing employment.  There are hundreds of schemes out there that claim to provide employment for women by paying them to sell goods from which the owners profit.  Because the sellers are mostly women and mostly go door-to-door, these organizations claim they are following an Avon model.

They are not. There are several important differences, all of which should cause concern. The main one is actually the product itself.  Not that that this is not a good product–I really don’t know, but I assume it is.  However, it is a product that can only be sold once to a household.  So, when the women have sold everyone in the village a stove, there is no more income to be had.  The organization packs up and moves on, flush with cash and smug in the thought that they have “helped people.” But their “employees” are left behind, feeling badly burned.

When this has happened in a region several times–first, a bunch of well-meaning Westerners persuade them to sell stoves; then, another group appears wanting to hawk solar lamps; and so on–the women feel exploited and extremely skeptical about any other group of Western would-be do-gooders who show up with some gadget to be sold. Or, for that matter, any group of Westerners who show up to help them–including people coming around to give vaccines or teach handwashing.  So these schemes poison the well for everyone who comes along later, including people with legitimate aims.

A woman I know at USAID once described these types of systems to me as a “one trick pony” system.  Organizations like Avon and Jita in Bangladesh are very different:  they provide a continuous stream of frequently-purchased products, so that the women in the system can build up a steady income from customers who buy often. The organization itself builds up a relationship with the women and with the community.  Thus, they accept at least some accountability for what happens.

The second problem is the weight and size of the product. These “employees” are usually women walking long distances in undeveloped rural landscapes.  Carrying a large, heavy package–one at a time–is hardly a good way to earn a living.  And, as I am saying, they don’t really “earn a living” doing this, but merely act as a one-time human delivery truck to an organization that may or may not have their best interests at heart.

Which leads me to the next issue.  Figuring out the money trail on these schemes is often difficult.  Unlike Avon, which has been around for 125 years and has a reputation to protect, these schemes are usually purpose-built outfits, never intended to last beyond the distribution of one single object.  Once all the stoves have been sold or the funding has run out, they will simply disappear from the planet. The funding behind them is often a bewildering combination of foundations, charities, development agencies, and–in this case–churches.

But the part that really galls me is that many of these types of organizations, including the Paradigm Project, pitch themselves to trusting individuals in the West, who donate money for a stove or a lamp as a charitable contribution. Then, the organization turns around and sells the stove/lamp for a margin (that’s what makes them a social business and not a charity). This kind of thing used to happen a lot with microfinance.  A “charity” would spring up out of nowhere, would travel the United States getting donations from church groups and the like, and then would lend the money out at 100% interest.  I have always felt that such things are fraudulent at both ends:  the donors think they are facilitating a charity, the recipients are victims of usury.

Now, if the “take” from the sales of the large object were being reinvested in the communities where the stoves were being sold, I might be ok with that.  But usually the profit is rolled back into the business so that it can go on to sell stoves in other poor villages, leaving more desolate women in their path.

Yet the money these kinds of projects raise is often held up as a measure of their success. We need to learn to ask the hard questions of such schemes:  how much did the stove cost to acquire and how much was the donation given for it; how much was the stove sold for and how much did the woman on the ground get?  In other words, we need to learn to follow the money on these types of programs.

What bothers me the most are the misleading claims about “impact.”  The impact in this case counts all the people who are “helped” by having this stove.  So, that figure includes each woman who cooks on it and every member of her extended family.  Is that fair?  If we measure the benefit that way, then the potential impact extends to every person on the planet in a house that burns wood to cook food.  Which, believe it or not, is still about three-fifths of the human species.  These kinds of numbers allow organizations like the Paradigm Project to make promises about how they are going to help 25 million people, even though they have only have a handful of people working for them in only two or three countries.

These misleading advertising messages beg for some kind of regulation.

But the Western world just keeps accepting the pitch.  One of the reasons is that the residents of the rich nations have such arrogant ideas what the poor should have.  They suffer from a prejudice that says durable goods are morally superior to consumables, so they think selling a stove is better than selling small groceries.  21st century Calvinists want to keep the poor from having “luxuries” like cosmetics. They want to make sure that the remote areas of the world save fuel and limit their trash–even though they themselves probably use enough fuel and generate enough trash to bury an African village.  Such folks usually have no clue what the conditions really are like, so they are susceptible to all kinds of ideas that seem good from their own perspective, but make no sense on the ground and may even be harmful (like giving African schoolgirls menstrual cups). (In a previous blog, I catalogued a list of these dangerous assumptions as “The Seven Moral Failures.”)

Companies like Jita, and even Avon, in contrast, work hard to monitor what the customers on the ground want, not what some bunch of enlightened MBAs sitting in San Francisco think they should have.  And that, right there, is probably the main reason Avon (and now Jita) have survived when so many other of these “one trick pony” schemes have failed.

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