May 2008

Can you imagine a world in which water is so scarce, it has to be transported to your community via a government-operated train or if the only safe way for you to consume your morning glass of water is via a dirty pond with a 12-inch long filtering straw? Believe it or not, for billions of people across the world, quick fixes like these are their everyday reality.

1.2 billion people lack access to safe drinking water; 2.4 billion lack access to improved sanitation (UNEP). Adrien Couton, Acumen’s Water Portfolio Manager, cited these statistics and others at Acumen Fund’s Water breakfast this week. Despite such sobering numbers, I came away from the breakfast with a sense of hope that even though there is no silver bullet, we are getting closer to understanding how to address the complex issue of water.

Adrien first discussed the need to move beyond our strong inclination that the latest and greatest technology will solve all of our problems. A perfect example is Water Health International (WHI), an Acumen Fund investment since 2003. Water Health International recognized that just because they had a proven technology didn’t mean the poor were going to buy their water.

LifeSpring’s maternity hospital outside of Hyderbad, India, is full of surprises. While the building is simple, and the maternal services they offer are low cost, the facility is immaculate and the quality of care is world-class. Expectant mothers dot the waiting room, along with their mothers or mothers-in-law, who do most of the talking. New babies gurgle, smile, cry and sleep. The energy in the halls is palpable.

I first visited LifeSpring on Mother’s Day, where, as part of a free vaccination offering, the hospital sat new mothers and their families for photographs. Later that week, I visited with LifeSpring manager Anant Kumar and Acumen Fund Fellow Tricia Morente.

LifeSpring addresses a powerful and daunting problem. Fewer than half of Indian women are cared for by a skilled attendant during childbirth, and the chances, over a lifetime, of an Indian woman dying due to complications in pregnancy and childbirth are 1 in 70.

Mr. Ayyapan, the Chairman and Managing Director of Hindustan Latex Limited - a large Indian public sector company - and his team created LifeSpring to address this problem. Acumen Fund then joined in as a 50/50 joint venture partner to help take the concept to scale.

Lifespring’s maternity care hospitals offer a low-cost alternative to public clinics, which are free but often low quality. At LifeSpring, expectant mothers pay 1500 rupees (about US$35) to deliver a baby. This price point seems to make sense, and Mr. Kumar told us that the mothers typically decide based on quality of service, and the fathers based on price. The opinion that prevails will often depend on the education level of the mother.

Editor’s Note: New contributor Noor Ullah is a Portfolio Associate based out of Acumen Fund’s Pakistan office. Before joining Acumen Fund, Ullah served as a consultant for the World Bank, and as a business development consultant for a number of multinationals and private enterprises. He holds a B.A. from Lahore University of Management Sciences.

Last month, Sehat First (”sehat” means “health” in Urdu) opened its doors to patients for the first time in the village of Chasma Goth, a peri-urban area of Karachi. In the first two days, they treated over 22 patients and had sales over 3,000 Rupees! One of the patients at the clinic remarked, “You are all angels, sent to answer our prayers.”

Sehat First is a new social enterprise that provides quality health consultation and pharmacy services to lower income communities. Each clinic provides health consultancy services to patients using an e-sehat (health) tele-consulting application that remotely links up doctors and specialists with their patients via internet in the poorest of the poor suburbs of Karachi.

Despite challenging conditions, Shahida Saleem, President of d.o.t.z technologies, is up-beat that the Sehat First outlets will help create a more healthy community together with ensuring financial sustainability for the enterprise. Such enterprises provide critical services to impoverished communities in Pakistan, where there is a substantial need for cost-effective, high quality healthcare at the bottom of the pyramid.

With Acumen Fund’s support, Sehat First has the potential to transform the delivery of healthcare to a population who previously did not have access to such services. Acumen Fund’s assistance will help the enterprise increase outreach and expand into more communities in the months and years ahead.

In case you missed it, Acumen Fund just issued its quarterly newsletter for Spring 2008. It includes highlights from Jacqueline Novogratz’s recent trip to Pakistan (the full journal from her visit can be found here), as well as announcements of new investments and updates on existing ones. As you can tell, 2008 has been an active year thus far — stay tuned for lots more to come.

With all the talk of rising oil prices and the potential of biofuels, I’m asked almost daily: When will Acumen invest in biofuels? Usually, the inquiry is more specific: When will we invest in jatropha based biodiesel in East Africa?

Acumen has looked at (and is considering) several opportunities, but we have found that there are some very challenging questions around the impact of biofuels that are almost impossible to answer. For example, jatropha is often touted as a biofuel “superplant,” as it appears to survive in marginal, semi-arid land of which there is plenty in Sub Saharan Africa. But the amount of oil that the plant yields increases dramatically (and may only provide significant economic returns) if the plants are irrigated. So where will jatropha really be grown, and what will it displace? If the land is otherwise useful, are we just creating crop substitution, adding to the global food crisis, and failing to reduce carbon emissions?

How will the cultivation work on the ground? Many of the proposals involve investor-owned plantations. Again, how will this land be procured, how will the local community be integrated into the process, and what are the local environmental impacts of introducing a new species?

Lastly, where will the fuels end up? The global commodity market is amazingly efficient, and the highest prices for biodiesel today are in Europe, as are the refineries that process the extracted oil. With this in mind, I ask myself: Are we back to a model where poor countries export natural resources and occupy only a small part of the value chain with little local value added?

We’re still trying to understand these issues, and are having lots of conversations on what’s going on. We’d like nothing more than to find the entrepreneur that has begun to address these challenges into a plan for a viable business.

Laurie Garrett, an expert on Global Health at the Council on Foreign Relations and a good friend to Acumen Fund, has written a thoughtful and compelling article (Food Failures and Futures) on the global food crisis and I urge everyone to read it. She breaks down the crisis into its component parts, showing how the high price of food is connected to global warming, oil prices, increasing demand for goods from a growing global middle class and swelling population.

In the article, Garrett argues powerfully against giving food aid as usual (and draws a connection to how food aid as “charity” demeans people in the developing world.) Instead, she suggests that we need a greater focus on “empowering possibilities of direct investment in the tools of efficient agriculture: reapers, sowing machines, tractors, irrigation systems, fertilizers, high quality seed stock, and the like.”

We need more such thinking - and calls for action - in the world. Finding ways to help 400 million farmers invest in their own fields and lives, therefore producing more food for the world at large, must be part of a growing solution to a crisis everyone is facing. We have gained some insights into different approaches to increase individual productivity and the challenge is to dramatically scale those innovations that are working while also engaging in the larger debates around how to reduce traditional approaches and encourage more market-driven ones on a large-scale basis.

Yesterday, I visited a vision camp run by Acumen Fund investee Scojo Foundation, about 50 miles outside of Hyderabad.  I was joined by Vipin Sharma, who is the Operations and Partner Channel Manager at Scojo Foundation, India, and by Acumen Fund Fellow John Tucker.  Scojo holds these camps regularly, as an opportunity for their vision entrepreneurs to educate people about reading glasses and sell them high-quality glasses that cost around 150 rupees (about $4).

Presbyopia – ageing-related reduced vision – typically affects people age 35 and older. It is estimated that in India alone, 20 million people are short-sighted.  For people whose livelihood depends on good vision – tailors, weavers, and anybody reading or doing detailed work – a pair of Scojo glasses can pay for itself very quickly.

While many of the people coming to the camp have vision and eye problems, only a portion of them suffer from presbyopia. The rest receive referrals to ophthalmologists at local hospitals. For those suffering from short-sightedness, Scojo has an elegantly simple series of tests, first developed by the World Health Organization, to calculate someone’s prescription. In addition to the standard tests, illiterate customers are fitted with a pair of glasses and asked to thread a needle. Time and again, I watched as pride splashed a smile across Scojo customers’ faces as they got the needle through the thread.  Talk about seeing is believing!

There was a particularly powerful moment when a customer at the camp showed us a paper prescription with his diagnosis from an ophthalmologist.  The doctor offered the man a 400 rupee pair of glasses (more than twice the price of Scojo’s glasses).  However, the Vision Camp prescription matched that of the ophthalmologist – a testament to the quality of a Scojo diagnosis.  The man happily bought the Scojo glasses for 160 rupees, boasting to everyone around him about his high-quality, low-cost deal.

This week’s Acumen Fund Pakistan Quarterly Tea event at the Sheraton Hotel - Karachi opened up with a spectacular light show – or lack thereof. Actually, the power went out in the entire hotel for 15 minutes as the event was to begin. Not so surprising when you consider that Pakistan faces an electricity shortage of 3000 to 4000 megawatts at peak times. But what was surprising and impressive was that everyone in attendance, from Acumen Fund Pakistan partners to advisors to entrepreneurs, all 50 people strong, carried right on with their conversations in the pitch black and did not miss a beat, even with the air conditioning out. Some even used their cell phones as a light source, which showed their resourcefulness and also how common these power outages are becoming in Karachi.

When the power came back on, Brian Trelstad gave an overview of the Acumen model, highlighting the importance of providing ‘patient capital for impatient people’ – those unwilling to sit on the sidelines and watch the problems of poverty. He also spoke specifically about our investment in A to Z Textiles and Water Health International (WHI) – both of which have shown an impressive ability to scale: A to Z is producing millions of bednets a year and has created more than 6,000 jobs; and WHI has 85 water systems serving 250,000 Base of the Pyramid customers, with plans to grow to hundreds of systems serving millions of people in the next 2-3 years.

When it comes to the lessons we are learning, it is within the context of how to best solve the problems of poverty. While increasing aid is important, Acumen Fund is looking at different ways to utilize philanthropic capital. Acumen Fund’s investment philosophy tests market-based mechanisms, and invests in the ingenuity of entrepreneurs and their teams.

After the brief presentation, Brian opened up the floor to questions and for me personally (as well as the Acumen Fund Pakistan team), it was incredibly exciting to see how engaged the audience members were as they asked very specific, focused questions.

Today, we had the pleasure of meeting with the MicroDrip team to discuss their drip irrigation systems being rolled out in the Thar desert region of Pakistan. Dr. Sono is the visionary founder of the Thardeep Rural Development Program (TRDP), which is incubating MicroDrip as a for-profit to serve poor farmers living in the desert. TRDP, the non-profit, provides support services, like education and training, to these farmers.

This is my second chance to meet Dr. Sono, who spoke at Acumen Fund’s 2007 Investor Gathering and Celebration last November. Dr. Sono was joined at the meeting by Saqib Khan, the COO of Micro Drip, and Javaid Chaudhry, MicroDrip’s Technical Sales Manager.

MicroDrip is a for-profit company that sells and distributes drip irrigation systems to farmers in the Thar region. Acumen Fund has supported the formation of MicroDrip as a for-profit company and is making a US $500,000 loan to support their growth.

Acumen Fund has been working with drip irrigation since 2003, when we first funded International Development Enterprises India (IDEI), an NGO that had the ingenuity to engineer drip systems that were inexpensive enough to make economic sense for farmers making as little as $1 a day. MicroDrip now buys these systems from Global Easy Water Products (GEWP) in India, a recent Acumen Fund investment in scaling the domestic and international distribution of affordable irrigation technologies available to smallholder farmers. This is a powerful partnership across the India/Pakistan border.

Drip systems are deceptively simple. Rubber tubing with tiny holes delivers water directly to the roots of plants. These systems can more than double farming yields, especially in parched areas, while requiring less water and fertilizer than flooding. Drip also allows farmers to plant three crops in a year instead of one, and has the potential to pay back the farmer’s investment in the system in one growing season.

So why is it so hard to grow MicroDrip and improve the live of hundreds, if not thousands, of smallholder farmers? Like Saiban, MicroDrip is creating a new market – one whose customers are some of the poorest people in the world – and this requires an amazing amount of experimentation and iteration.

As I walked into Desmond Tutu Center in New York on Thursday night, I wasn’t quite sure what to expect from the social networking event hosted by Good Capital. Good Capital is an investment fund aiming to accelerate the flows of capital to social enterprises, and they successfully convened an incredible group of colleagues, investors, and friends.

Just to give you a sense of the event, my first conversation was with two women from Scojo Foundation, an Acumen Fund investee that reduces poverty and generates opportunity through the sale of affordable reading glasses. I then had the pleasure of talking with Tim Freundlich, a partner at Good Capital, who - among other things - told me of the upcoming conference they are hosting in San Francisco in October. This was followed by a conversation on community building with Jed Emerson, one of the leading thinkers on Blended Value and also an Acumen Fund and Good Capital Advisor.

I finished up the evening discussing the growing spectrum of capital with two fellow Michigan Alumni, Josh Cohen of City Light Capital, a money management and business development firm that focuses on the security, media and energy sectors, and Michael Baratoff of Equilibrium Capital, a growth equity fund focused on sustainability.

As I walked out of the event into the breathtaking and serene courtyard of the seminary behind the Tutu Center I realized that we are no longer a few disparate mavericks but instead an interconnected community leading a movement that can demonstrate the power of the market as a tool for sustainable and innovative solutions to social problems.

Editor’s note: Sasha Dichter is Acumen Fund’s Director of Business Development.

Earlier today, I visited Saiban’s development at Khuda Ki Basti-4, about 30 minutes outside of Lahore. Saiban’s potential seems limitless. Simple, clean, brick homes for people making between two and four dollars a day, in a self-contained community with full plumbing, electricity, commerce, schools, and even playgrounds. Someday, this will be a full, vibrant community of 2,500 people who have moved away from rental and slum dwellings.

There is still a long way to go. 45 families have already moved in to the Khuda Ki Basti-4 (KKB-4), out of 115 plots that have been sold and booked. There is also a 3-room school, a small playground, one shop in place and another three planned. Acumen Fund Fellow Jawad Aslam is even talking about putting in a soccer pitch. A few gardens are planted, and houses throughout the site are in various stages of construction. But, three years into this project, it still takes a lot of imagination to envision a full, thriving community of 500 families.

Jawad and the team at KKB-4 are in the business of overcoming challenges, whether it’s getting the permit for the site, bringing in power and sewage, or getting the access road to the site built – which took a full year longer than expected. Saiban’s customers are now able to get 10 year mortgages from the House Building Finance Corporation, which are the first mortgages ever to be provided to this segment of the Pakistani population. But it is a long, hot, dusty road, and nothing comes easy.

There is talk of the need to get a critical mass of customers in order to show people that the development is for real. Jawad tells us that there are a lot of fly-by-night housing schemes in Pakistan, where people simply put down money and get nothing in return. More common still are developments where land is purchased by speculators who either hold or flip their empty plots, and no houses are built for 10 or 15 years. So Saiban’s proposition of building a community that will be vibrant and full of homes in less than five years’ time is more aggressive than it seems. They have done it before in Karachi, and all the pieces are in place to have similar success at KKB-4.

Editor’s note: Fareed Zakaria will be hosting an online discussion about his new book, The Post American World, on Monday May 12 at 3:00 PM EST.  Visit the Washington Post web site for details.

This is a powerful article (The Rise of the Rest; Newsweek - May 3) by Acumen advisor Fareed Zakaria, who argues there is a case for real optimism in the world. In fact, he believes – as do I – that we are living in one of the most important moments in history. There is less violence today, more resources, and more interdependence than ever before. The key challenge for the United States will be to recognize the changing nature of a world where there are many players – and the wonderful benefits that can come of that.

For Acumen, our challenge is to help “push the inevitable”, as John Gardner used to say, and identify and scale those innovations that help all people on earth gain access to the goods and services they need to solve their own problems. Through our work, we can be a further reminder that we are a single world, each of us dependent on the action – and inaction – of players all across the globe; and that we have the collective opportunity to solve those problems of poverty that most vex our ability to leave peacefully and prosperously.

I urge you to take a few minutes and read this article.