Surowiecki on “the missing middle”

I applaud James Surowiecki for raising the issues he does in his March 17 column in The New Yorker. He cites the importance of microfinance as a critical innovation that delivers a basic service — credit — to low-income people in a way they can access and at a price they can afford. He then goes onto say that not everyone is an entrepreneur and that there is a much needed role for developing small and medium enterprises that actually employ people and don’t expect everyone to be an entrepreneur.

In my years of working directly with microfinance in the 1980s, I was struck by how appreciated access to credit was by nearly everyone. For the first time, women could access not only credit for strengthening their small businesses like selling tomatoes at the market but they also could improve their lives by purchasing refrigerators or improving their homes. Microcredit is a way to strengthen access, connect the very poor to a community (which has enormous social value that is very difficult to measure) and most important, expands choice and the ability for poor people to solve their own problems. The design and philosophy of microcredit thus has much to teach those interested in ending poverty.

At the same time, microcredit is not a panacea, not a silver bullet. I agree with James that not everyone is an entrepreneur. In fact, very few people are truly entrepreneurs (and as an entrepreneur myself I can only say thank goodness for that — or else we as a world would be very long on vision and big ideas and desperately wanting for systems that enable us all to get things done). My own experience corroborated James’ findings that only a small percentage of borrowers went onto create larger businesses that employed significant numbers of people. But we’ve learned how to deliver at least one product to the poor, and we have an unprecedented opportunity not only to build larger businesses that employ people but also to deliver other critical products — healthcare, clean water, housing and alternative energy — to the poor in ways they can access and afford.

Acumen Fund, a nonprofit venture capital organization for the poor, has invested more than $30 million in enteprises specifically providing these critical services to very low income people in South Asia and East Africa. Our investments typically range from $300,000 to $2 million, or the “missing middle” as Surowiecki calls it. These investments have helped create more than 20,000 jobs while also bringing tens of millions of people products they’ve never before been able to access. A to Z Textile Mills in Tanzania, for instance, now employs 5,000 individuals, mostly uneducated women, and produces eight million bednets per year, providing protection against malaria to more than 16 million Africans. Water Health International now sells clean water sustainably to more than 300,000 rural people in India while creating hundreds of jobs. ABE, an artemisinin manufacturer in Kenya supports the improved incomes of more than 5,000 farmers, and produces more than 4 million tablets that help treat malaria. IDE-India has sold nearly 100,000 drip irrigation systems to the poorest farmers in India, significantly improving the incomes and lives of more than a half million individuals. Change is possible through a combination of smart, patient capital as well as supporting enterprises with talent and knowledge of what works elsewhere.

From these investments, we’re learning even more about what it takes to serve the poor in ways that are sustainable; and most important, give choice and access to low-income people. At Acumen Fund, we dream a world in which every human being has access to the tools, services, products and knowledge she or he needs to make her own choices and solve her own problems. Building companies in the “missing middle” that are focused on those needs is one important step in getting there.