Pakistan

Brian Trelstad is Chief Investment Officer at Acumen Fund, where he runs the global portfolio team, coordinating our investment process and post-investment management support.

Every now and again we meet compelling entrepreneurs with nascent businesses that offer real breakthroughs in how to serve the poor.  Sometimes the meetings are pure happenstance, like meeting the PeePoo team at a dinner at the Skoll World Forum. Other times we find ourselves going to the pipeline: as a judge at the Global Social Venture Competition (where we first interacted with d.light, one of our current investments) or as a reviewer for Echoing Green (where we met Embrace).

As an investor who has defined our target investment size as $500,000 to $2,000,000, we are often frustrated that we can’t offer immediate assistance and a smaller investment, say $150,000, to these early stage ideas that need additional proof of concept, market feedback and a more complete team before they are ready for an Acumen Fund investment.

In most cases, we tell people to keep in touch and when they are raising their next round of capital to give us a call.  But for the few with the glint in their eye and unwillingness to take no for an answer, we listen to their pitch, we offer introductions, and we serve as a sounding board during the fits and starts of their early stage of their business’s development.  Ghonsla is one of those teams, whom we met at the Harvard Social Enterprise Business Plan competition in 2008.  They are a building materials company to provide affordable insulation made from renewable and waste materials to underserved markets in Pakistan and beyond.

From their pilot project they have learned that the idea of improving insulation to mitigate deforestation and reduce respiratory diseases stemming from indoor air pollution makes sense. Also the dreadful images coming from Haiti have reminded us that rebuilding places from scratch will happen again and again.  Developing cheap, local and green solutions to do so are as urgent as ever.

Recently, Ghonsla was selected as one of the finalist ventures for the Unreasonable Institute, a 10 week summer program designed to attract and unite 25 high impact social entrepreneurs from around the world, while incubating and accelerating their ventures through rigorous skill training and guidance from expert mentors. The institute also allows for entrepreneurs to connect with seed capital and offers a global network of support. Other finalists include a slew of impressive, early stage companies we’ve met lately – MILLEE, FrontlineSMS:Credit, Global Cycle Solutions and the Rickshaw Bank, to name a few.

So to the early stage entrepreneurs out there, some advice: keep plugging away, don’t take no for an answer and keep in touch.  We may never invest, but we might be able to provide more assistance than money.

My experience shadowing Munir Ahmed and his team of enumerators revealed several stories that reinforced my conclusion that the search for black-and-white quantitative data is often colored by a cultural nuances and perceptions.

There are a few things enumerators must be cognizant of:

• Sometimes there is nothing you can do to elicit an honest answer/ correct data.
  While conducting research for an energy company on electricity utilization, Munir’s team had to attach a device onto the roofs of houses that measures the electricity output at the source (before it reaches the meter). When he and his team came to take the devices off houses the next day, one family had managed to collapse the whole roof in an apparent attempt to evade the exercise (without tampering with the devices) and avoid intrusion at any cost!

• You have to be smart and resourceful to get what you want.
  Munir and his team once travelled into rural Sindh to conduct agricultural surveys. The zamindaar (landowner) of the area did not grant permission for his team to come in and very pointedly told them they had no business speaking to “his” people. Instead of giving up, Munir thought about how to approach this particular problem and, banking on the culture of hospitality that is prevalent especially amongst the Sindhi people, he went back the next day with a strategy in mind. He asked the zamindaar, “What would you call people who have come from outside to visit the people of the land?” “Mehmaan (guests),” answered the landowner. “That is not how we have been treated,” pointed out Munir. Following this, the landowner saw things differently and welcomed them onto his property. He participated in the survey himself and even allowed the team to interview farmers individually. At the end of the day, the landowner sacrificed a goat in honor of his guests and everyone ate together.

• And sometimes you have to know when to walk away.
  One of our respondents, madrassah school teacher Mahmud-ul-Hasan told us he often conducts surveys as part of the national census team. He revealed that due to their conservative culture, Pathans are very difficult to interview. Once while taking census, his team asked a Pathan woman to complete a portion of their questionnaire.  Perceiving it as an invasion on her family’s privacy, she instead tore it in two. Over the next couple of days, the census team repeatedly asked for it back to no avail. When they approached her husband, he also refused, until a Pathan on his team who spoke Pashto explained the purpose of the census and appealed to his sense of brotherhood. The husband proceeded to go home to retrieve the questionnaire and scolded  his wife for withholding such important information.

As I learned, hard stats bring with them a degree of legitimacy that usually goes unquestioned, but you have to be careful to read between the numbers. Munir’s stories really underscore the necessity for the “soft” skills that go behind the quest for “hard” data.

Getting a true picture and perspective requires more than just asking questions. It requires listening and empathy and an understanding of cultural context. But it is this kind of effort that helps us to better understand the needs of low-income customers and the ways in which we can better serve them.

As I travel through Orangi Town, a district in northwestern Karachi of approximately 720,000 inhabitants, about an hour away from the city center, the landscape of Karachi shifts. A microcosm of the city, it is inhabited by mohajirs (Indian Muslim refugees), Biharis (Bangladeshi Muslim refugees), Sindhis, Pathans, Punjabis and Balochis. It was known as one of the largest slums in Asia until renowned social scientist and development activist Dr. Akhtar Hameed Khan pioneered the incremental development and bottom-up community development model with the Orangi Pilot Project in the 80’s.

Citi-Acumen Affordable Housing Research Project

Acumen Fund’s housing portfolio has been the most active in Pakistan, where we’ve been investing in housing since 2002.  In 2002, Acumen made its initial housing investment in Saiban’s Khuda ki Basti (God’s Settlement) low-cost housing project, the brainchild of Tasneem Siddiqui, incremental housing development expert extraordinaire. We’ve been committed ever since and are currently supporting its expansion in Lahore that is also underway. (Ann McDougall and Sasha Dichter from the team each wrote about the Khuda Ki Basti model following their respective visits).

Realizing that investment itself might not be enough, Acumen Fund also partnered with Citi Foundation to undertake a research study into low-income housing and housing finance to understand customer demand for housing and housing finance and the current supply. The end goal is to get a grasp of the market for affordable housing, different types of affordable housing models, and current mechanisms the poor utilize to fund housing purchase. Essentially, what is the BoP’s willingness to pay for low-cost housing?

To that end, the Citi-Acumen project comprises primary market research, including demand-side surveys of the major cities across Pakistan, focus group discussions and stakeholder interviews to assess the current market for housing and finance capabilities. Recently, I accompanied one of the surveyors as he went house to house to speak with individuals living in Orangi Town. As I was to learn, quantitative data gathering is often subjective and a matter of judgment and many human variables factor into this ‘quantitative’ exercise.

Pride

Pride plays a big role in influencing and skewing responses, especially when it comes to answering questions on matters of personal finance, savings and expenses. The nature of our survey was such that respondents will often mistake us for loan officers from banks, leading them to sometimes exaggerate and inflate savings in the hope that they qualify for a loan. Indeed as I was to experience, we were met with a mix of high optimism from some and deep suspicion from others who thought we were bank officers offering loans or government officials on inspection checks. Munir Ahmed (Lead Surveyor) was careful to have coached his enumerators in advance about instigating false hopes within respondents and indeed their ensuing explanation that we were here only to seek the community’s “rai” (opinion) and “mushvara” (advice) so that we may educate those who are in a position to help them - brought about a change in attitude towards us.

Still, there were others who remained suspicious of our work, an attitude exacerbated by the fact that work like this tends to get collective attention by neighbors and others around. One gentleman who was increasingly agitated by the personal nature of questions asked us to “close the interview” once we approached the topic of household expenditures and savings.

Personal pride can also manifest itself in less hostile ways. One respondent, Mahmood-ul-Hasan Qadir, a madarassah (Islamic school) school teacher briefly engaged a perturbed enumerator in a game of tug of war when he tried to pry the questionnaire out of the enumerators hand so he could write down his own answers. The question posed at the time was about his income, and the respondent’s constant self-conscious glances towards me made me realize that he did not want me (the only female in the room) to hear his income. I immediately busied myself with my tea (he was the only respondent who invited us into his home) to save him any embarrassment he might be feeling. At some point in the interview, he was asked how he had financed the construction of a new room that cost Rs.30,000 (USD 360) to which his son interjected, “Through the BC” (Bank committee, see below). After some moments, his father reprimanded him quietly, “Don’t say BC, tell them it was through the help of friends and family,” indicating to one of the options on the survey. Upon further probing, we found out the father had received money from an uncle’s wife to expedite his family’s home construction. He commented later, “I realized that we should be assisting you honestly in this endeavor,” his conscience overcoming any embarrassment he might have felt at receiving help or charity from friends/family.

Unfortunately, there were many others who failed ultimately to understand our role or intention of the exercise. The mindset of those who believed that we would be making some monetary profit out of the exercise tended to echo their own prejudice – and it was often these people who were not willing to participate until we told them what “faida” (benefit) it held for them. As in every community, there were some who were satisfied with the fact that they would not see any monetary or any other immediate benefit, but that in the long term this research could possibly improve the chances of organizations better understanding and meeting the needs of their future generations. And then there were those who couldn’t care less and just walked away.

The BoP’s Savings and Loan Profile: Savings, Lump Sums and BC committees

The most common method of financing big purchases was through savings with BC committees. This reinforces the idea that, given the absence of formal credit or perhaps the undesirability of its institutional stipulations, members of a community will find a way to meet their needs internally. In the case of the residents of the communities I visited, they needed:

• Access to lump sums of money in the anticipation of big events or expenses, and
• The discipline to save this lump sum of money.

This discipline component is related purely to the social aspect of BC committees. Once a party has committed to contributing to a BC, they will push themselves not to renege on installments for fear of breaking the social contract. Once again pride has a big part to play, and as many families told me, they will go a long way to avoid “looking bad” or being scorned for non-payment. Though Microfinance Institutions have incorporated the aspect of “social collateral” into their operations, as one respondent we interviewed told us, an institutional loan is still viewed as foreign and does not warrant the same discipline as a community-managed BC committee does.

The most common amounts of the total BC were Rs.50, 000 (US$600) or Rs.100, 000 (US$1,200) and the average monthly installment was Rs. 2000 (US$ 24). Depending on the size, the total duration of the BC’s ranged from 1 to 4 years. This indicates a preference for short-term credit.

Housing Finance and Borrowing on Credit

Most of the respondents who indicated interest in procuring a loan for home construction or home improvement - and indeed, anybody who had knowledge of financing and interest - were of a certain demographic. By and large, this group consisted of micro entrepreneurs such as tailors and shop owners. A majority of them indicated first a preference for loans to expand their business and then for home construction or improvement loans.

Most families who had taken out a loan in the past from moneylenders or purchased home construction materials on credit from thallawallas (building-parts manufacturers/suppliers) had done it at high interest rates and were caught in a cycle of perpetual debt, usually only able to pay back the monthly interest and never the principal. In fact, most respondents did not exhibit enough of an understanding of principal and interest to realize how they were trapping themselves further in a vicious cycle of debt. As I reflected on this, I realized what a crucial role MFIs must play in educating and empowering their customers to make responsible financial decisions.

Other sources of loans were also mostly informal, such as loans from friends or family and credit from neighborhood stores. This was in small amounts and frequently to cover cash shortfalls experienced on a month-by-month basis.

As I discovered, there is so much to be learned from these surveys — and not just from the questions that we asked. Next week, I’ll share some true-life experiences of the surveyors that demonstrate the challenges and insights that arise from this work.

This NYTimes article discusses how a great technological break-through in breeding inputs can potentially harm the dairy industry during these times of recession. While global milk prices have tumbled during the last year or so, due to the global economic recession, more and more cows and hence milk is being produced as a result of the use of “sexed semen,” which allows for the birth of more female (i.e., milk-producing) calves.

However, in sharp contrast to global trends, in Pakistan, during the last four months, we have seen milk prices rise by at least 10%, generating a buzz in the industry with investors lining up to set up dairy farms. This is primarily because there exists a huge gap between demand and supply for processed milk in Pakistan. While the annual increase in the demand for processed milk is over 20%, the annual increase in supply is only 5%, thus driving up milk prices. This increase in milk prices in Pakistan is also incrementally altering the way the poor farmers view their livestock. Historically, livestock has been viewed as a mode of savings and a store of wealth for the poor. However, this perception is changing rapidly with farmers beginning to view their cattle holding as an increasingly viable revenue generator and a net contributor to the household income. This is leading them to take increasing interest in the well-being and efficient management of their cattle to maximize the income from milk sales. So, while the fortunes of dairy farmers globally are going through a rough patch, the poor dairy farmers in Pakistan seem to be eyeing a new ray of hope in their cattle.

Jassar Farms, Acumen’s first investment in livestock, has been one of the early adopters in the use of sexed semen in Pakistan. We have seen a success rate of over 85% with its use — with the first generation of calves projected to come into milk production during the 2nd half of FY10. This will be a key milestone in the country’s dairy industry and one of the first successful experiments with the use of sexed semen in the private sector.

Acumen Fund just issued a press release announcing new investments in Pakistan: Jassar Farms and AMC.

We’ve talked previously about Jassar Farms in the context of our new Agriculture Portfolio. Jassar Farms is focused on producing high quality, affordable inputs to help poor farmers improve breeding of livestock and increase milk productivity.

Our latest investment in housing is Ansar Management Company (AMC), a housing development company that builds off our past work with Saiban in Pakistan to create much-needed housing for low-income consumers.  As much as houses and infrastructure, AMC is focused on building community — the company is making sure residents are invested in living there, creating ownership in the truest sense of the word.

AMC represents the evolution of a rising leader as well. The entrepreneur behind the investment is Jawad Aslam, a former Acumen Fund Fellow, who has taken his learning and commitment (he is building a home in the community for his own family) to start AMC. By investing capital (and giving him access to additional Fellows to support his work), Acumen Fund is betting on his ability to succeed.

Malik Sarwar is a long-time Partner of Acumen Fund and is the first formal Acumen Fund Ambassador, a new program being launched for Acumen Fund Partners who will directly support the work of our Business Development team.  Malik and Dubai-based Partner Amjad Ali Khan came to Lahore for a short visit. Below, Malik shares his reflections.

Amjad Ali Khan, the renowned lawyer from Dubai’s Afridi & Angel Law Firm (who has spent 27 years in Dubai after a stint with a white shoe law firm in early 80s), and I went on a 24-hour trip to visit Acumen Fund’s portfolio companies in the Lahore area. The cool and collected Ankur Shah, our organizer, arranged this trip within a matter of weeks by smartly coordinating with Aun Rahman in Pakistan.

Amjad and I were under strict instructions to read up on Acumen Fund in Pakistan before we landed. Afraid we might flunk a test, we frantically memorized key facts on all the companies. Unsurprisingly, our flight was fashionably late and by the time we arrived at our hotel, all the restaurants were closed. Luckily, we were able to get some Pakistani-Chinese food and, accompanied by Noor Ullah, plunged into a discussion on social entrepreneurship in Pakistan. We flaunted our deep knowledge of Acumen Fund, and the portfolio companies, and were careful to throw out terms like KKB4, MFI and incremental development.

Retiring at midnight, we reconvened early the next morning and began the fun part: taking pictures as we got a bird’s eye view of Acumen Fund’s high quality social entrepreneurs, their patient capital support and the generous TLC to help them blossom.

We headed for Kashf Foundation headquarters to meet with Khalid Kabir, CFO of Kashf Microfinance Bank. Off to a quick start, KMB already has 25,000 depositors and are on a rapid growth trajectory by providing loans of 25-100,000 Rupees ($300-1,200) to the lower-income communities that the mega-banks typically overlook and the money-lenders typically fleece. KMB is building on Kashf Foundation’s 300,000 customer base and is beginning to offer a full suite of financial services. We bump into the new CEO of Kashf and upon our insistence, he poses for a picture with us. Even though he was startled by our “ambush,” he was pleased to chat in the hallway.

We visited the Kashf Bank branch. This picture has the security guard stripped of his rifle, which I am holding (after he took out the cartridges), and shows the one female loan officer, who was easily the most enthusiastic of the five loan officers we met. Most importantly, it shows two clients in shalwaar kameez, who were proud to share how they paid off their 50,000 Rupee loan on time and were careful to insert a plea for a larger credit line to expand their business. The bank manager in the center was a confident, enthusiastic leader who clearly enjoys his role. Ever observant Aun noticed the vault was visible from the street and recommended that they cover it with a banner, just in case.

Driving an hour out of Lahore towards Kala Shah Kaku, we veered off the main road and drove a mile on the dirt road to reach a thriving low-income housing project called Khuda Ki Basti 4, meaning ‘God’s Own Village. Just before we entered, Aun pointed out the fields where many years ago, he and Jacqueline were caught in crossfire between villagers and some robbers as they waded for 10 minutes through knee deep water to reach the site. Now, electricity poles march overhead and a fresh road smoothly leads our vehicle to the verdant location of the project office.

We visted a few houses with Amjad, the bearded marketing head of AMC and a US graduate, whose last job was as an investment banker in Washington DC. He enthusiastically spoke about how his job was truly meaningful compared to what he was doing in the states. Unfortunately his family doesn’t see it the same way and he often finds himself defending the urgency of providing low-cost housing in a sustainable manner.

We are struck by the cleanliness of the housing clusters, the joy on the children’s faces, and the satisfaction of community members as they expanded their newly acquired homes. There are green fields at the center of the community which will have a park to match Central Park in NYC, as well as a DIL school. Khuda ki Basti’s success has been in delivering housing for less than 250,000 Rupees ($3000) while ensuring the community really takes ownership of their plots rather than sell them to speculators.

We meet community members. To the far right is the fourth person to buy a plot and build a house at KKB-4 and is now an inspiring salesman for the project. He was giving a tour to the gentleman in yellow who didn’t seem totally convinced whether he wanted to move from the city. I decided to try my sales pitch by reminding him that right behind us is only the second Central Park in the world and that his kids will get a quality education. When he quickly retorted he was single and had no kids, I reminded him that he will have kids inshallah and this would be the best place for them to get an education and play in the Park. The jury is out whether I helped close the deal or scare the man away for good.

I am standing with none other than Jawad Aslam, the CEO of AMC, Khuda ki Basti’s developer, who returned from the US to build his own house (seen behind) on the site. He refused my offer of buying his house at any price. I guess some people just can’t be bought. Jawad was hosting the CEO of Arabtec Pakistan. When Amjad asked his impression of the project, he paused before responding “You can’t argue with success”.

Kudos to Jawad, a former Acumen Fund Fellow and current Acumen Fund investee, for his vision and determination to make this project happen and to Acumen Fund for supporting him through this long drawn process of no bribe business set-up. The humming residential community in the middle of lush green fields, along with the water, electricity and transport infrastructure, was a phenomenal sight. That the developer will make money on the project is testament to Acumen Fund’s ability to find amazing entrepreneurs.

The last picture is my favorite. While we strive all year-round to make money and afford a week’s vacation on the beach, soaking ourselves in the water and thinking we are God’s chosen beings, the water buffalo gets it right from the start. While we sweat in 100 degree weather, they cool down in their favorite pristine muddy water pool. What joy it is to be alive. To be a water buffalo, very heaven!

As we wound down, Amjad and I were convinced of three things: 1) There is such a thing as a 24-hour trip that gives enough flavor of the power of Acumen Fund’s vision of finding the best entrepreneurs and helping them grow and succeed. 2) Equally important was the opportunity to have deep, practical discussions with Aun, Ankur and the entrepreneurs in the field. Their enthusiasm was dangerously infectious and truly uplifting. 3) Led by the incisive Ankur and the ever-practical Aun, we discussed concrete next steps for the short to medium term. I volunteered Amjad’s home in Dubai to host an event for potential partners and the ever-positive Amjad willingly agreed. Onwards to a successful Q4 as an Acumen Fund Ambassador - including a 48-hour trip to visit the Karachi companies!

Sara Irshad is a summer associate on the portfolio team in the Pakistan office.  She is a Babson MBA graduate, Class of 2009. At Babson her focus was on social entrepreneurship. Prior to Babson, she worked for two years at an educational institute as a Marketing Manager and launched SP Jain’s Global MBA program in Pakistan. During this time she also taught A-level Economics. She has a Bachelor in Business Administration from the Institute of Business Administration, Karachi.

I have lived all my life in Karachi so even though I am very aware of the plight of the people in my country, a visit to the ‘Katchi Abadi’ in Malir, Karachi, reminded me of how millions of people struggle to get through each day. As a summer associate at Acumen, I am working on providing management assistance to one of our investees, First Micro-insurance Agency (FMiA) and the visit was part of an effort to understand the company’s clients, their perceptions and thoughts on FMiA’s health insurance product. One of the clients we met was Rehana.

25-year-old Rehana is a charming young girl with dark hair, big brown eyes and a vibrant smile. She lives in Malir with her husband, children, brothers and their families. Rehana makes a living making shirt buttonholes and in an effort to establish her own small business took a loan from the First Micro Finance Bank (FMFB). With the loan came the mandatory micro-health insurance (FMiA’s product) for herself, her spouse and children. At the time of the purchase the $12 family insurance product did not seem to make sense on a loan amount of $190 however something about the concept resonated with her.

Rehana and her husband work from morning to dusk and struggle to make ends meet. They are paid daily wages, therefore one day of sickness means no income for that day. A week after her loan was approved, Rehana fell ill. Rehana was pregnant for the third time and something wasn’t right. The doctor told her that she must have an operation immediately or she risked losing her life. The insurance policy saved Rehana’s life and her family from falling into debt traps.

Risk is ever present in the lives of the poor. Unexpected health issues can push poor people under the poverty line. The wealthy and the poor can suffer from the same illness but their experiences can be very different. For example, an appendectomy, which can cost around $250, is a minor surgery by western standards but for the poor it can increase their debt load and push them further into the poverty trap.

FMiA introduced micro-health insurance in Pakistan two years ago and since then has made progress in terms of creating awareness within various communities in Pakistan. Insurance, particularly micro-insurance is in its infancy as an industry in Pakistan. Therefore it is no surprise that increasing awareness among the BoP market about the policies and coverage requires a herculean effort, which FMiA has undertaken under the leadership of Project Manager, John Pott.

Last month, Acumen Fund Pakistan held a Quarterly Tea event, “Micro-insurance: Pioneering Access to Quality Healthcare for the Poor,” to share insights from the FMiA health insurance pilot program.  The focus was on sharing best practices and identifying areas where more innovation is needed. Aga Khan Agency for Microfinance (AKAM) Project Manager, John Pott spoke to an audience of around 70 people including Acumen’s advisors, partners and members of the larger business community about the risk of illness to the poor and the important role for micro-insurance.

The brief presentation and Q & A that followed demonstrated the need for FMiA to continue to address this social need. John shared some interesting facts about the state of health care in Pakistan and the fears among the target market. According to a global survey, the number one cause for concern for poor families is illness. Another research paper by Steadman and Associates in Tanzania revealed that if people were given 1000 Tanzanian Shillings (approximately 1 U.S. dollar) to insure one of life’s risk, almost 60% would chose to spend it on health and medical coverage. With this information one would assume that individuals in developing countries would spend more on insuring their health. However this is not the case; in Pakistan health expenditure per capita is around $48 on purchasing power parity bases as compared to $6,096 in the United States.

As an example of why selling health insurance in Pakistan is difficult, John spoke about the inability of people to pay $5/year/person for their policy.  For people in developed countries this amount might seem ridiculously low, whereas for a poor man in Pakistan this is a large investment. John also emphasized the need for innovative product development and building partnerships to further micro-health insurance in Pakistan.

Dr. Mariam, an FMiA employee is the gatekeeper for Karachi, who verifies all the claims made against hospitalization and makes sure that the patients are given appropriate treatment. She also runs a one-person 24/7 tele-health service for FMiA customers in Karachi. In a conversation with her, she highlighted some challenges faced by FMiA’s clients.  For example, Illiteracy makes it difficult for clients who call in for medical advice to write down the name of over the counter drugs.  As a result she sometimes has to speak to the pharmacists to make sure they get the right drugs. The problems don’t end there; corruption is so wide spread that pharmacists often take advantage of patients who are illiterate sometimes selling them the wrong medicines.

The most interesting takeaway for me from the event was the determination of the employees of FMiA and the optimism of the greater business community.  Both groups are committed to not only working together on solutions to BoP challenges like healthcare financing, but also are willing to partner on outreach and innovation. The kind of change that is being catalyzed by Acumen, FMiA and AKAM is sure to affect the healthcare industry in Pakistan.

It is interesting to note that at a time when the healthcare reform debate is raging in the US, Acumen is mobilizing the micro-health insurance market in Pakistan. This effort has not only started impacting the policy holders but is also developing a market that did not exist two years ago. More insurance providers are entering this market, which will eventually lead to greater awareness and a better quality of life.

Kyle is a summer associate in the Pakistan office for Acumen Fund.  He is also a Master of International Affairs candidate at Columbia University’s School of International and Public Affairs.  Prior to graduate school, Kyle worked as a management consultant at The Lucas Group in Boston and as a research assistant at MIT’s Security Studies Program.  He holds a BA in Middle East Studies and Politics from The Gallatin School of Individualized Study at New York University.

Shahzad Iqbal gazed across Jassar Farm’s sprouting field of maize deep in rural Punjab where a new sprinkler system sputtered around in endless circles.  Without warning, he kicked off his sandals, rolled up his pressed chinos, and bounded through the muddy field toward the device, narrowly missing the rotating blast of water.  The rest of the management team, myself, and a pack of local villagers watched from a safe distance as the CEO of the Farms wrestled the beast into a position he found more agreeable.  After instructing his staff member on how to properly set up the system, he returned grinning, feet encased in rich mud.  “Look how beautifully it works. See the quality of those plants?  Never before in these fields.”

Ensuring proper plant quality to use as cattle feed is part of any Pakistani dairy farmer’s job, but then Shahzad Iqbal is not your average Pakistani farmer.  After graduating with an MBA from Pakistan’s elite Lahore University of Management Science (LUMS) at just 22 years of age, he began a 16-year career international climb through the operations of Coca-Cola, PepsiCo, and British American Tobacco.  Before the age of 38, he sat at Union Bank where he successfully managed a team of over 2,500 responsible for 40% of all profit.  He was at the top of his game—highly educated, well paid, and well connected.

Then in 2007, Iqbal unexpectedly quit his job at the bank.  In a crisis of conscience, he realized that the corporate executive lifestyle was not compensating for his growing sense of personal mission to help his largely impoverished homeland of Pakistan.  The idea of Jassar Farms was born soon after, commencing months of intense research and a feverish search for financing until Acumen signed on.

As Batool Hassan eloquently described in a previous post, it is common for rural Pakistanis to own a few cows but the milk productivity of these animals is often up to a fifth lower than their cousins in more developed economies.  The disparity emerges from the highly advanced selective breeding techniques that Western farmers have developed and implemented.  With financing from Acumen Fund, however, Jassar Farms is playing catch-up by importing high-grade cow semen and embryos to breed a more productive dairy herd.  At the same time, it will sell quality semen produced on the farm to local farmers at affordable prices.  Within a few years, the Farm expects to multiply the amount of milk a poor Pakistani farmer can produce by several times.

From an American perspective, Iqbal fits a familiar archetype: Banker becomes disillusioned, quits his or her job, and joins the ministry or becomes a writer  (or starts a little non-profit call Acumen Fund).

But Pakistan is different.  As a Summer Associate without any prior experience in Pakistan, I did not fully understand Iqbal’s story until I found out that my own two-week project on the farm was longer than most urban Pakistanis will spend outside major cities in their entire lives.  By simple observation, it becomes clear that Pakistan’s disparity in wealth positively correlates with the urban and rural divide.

In many ways, Iqbal has become an outlier, spending most of the last three years out in the cow pens and hay fields of Jassar Farms with the goal of improving lives of Pakistan’s poor dairy farmers. “I’m completely mad.  You have to be in order to do this,” Iqbal disclosed with some measure of pride as he sat in the 120-degree heat at the farm.

Acumen Fund’s model of patient capital assumes that there are talented and passionate entrepreneurs who want to roll up their chinos to lift their countries up.  In the case of Pakistan and its divided culture, finding this type of leader is often one of Acumen Fund’s greatest challenges.  As Iqbal began washing his feet in a nearby irrigation canal, however, he proved that with a little bit of “madness” nothing is impossible.

As (social) venture capitalists, a question we ask ourselves a lot here at Acumen is how we can go about nurturing and mentoring our investees. One of the challenges we face as a socially driven venture capitalist is how to act as an incubator for our investees that are usually in their early ‘survivor’ stages. Most of our investees are in this stage - usually because they are pioneering products and services that no one has had the audacity to explore before.

A few weeks ago, Acumen Fund Pakistan held an Investee Workshop on Leadership and Talent Building in Early Stage Social Enterprises in an effort to share ideas and creative solutions on one of the most common problems our investees - and indeed most resource constrained enterprises in their survival stages - face: attracting talent. The CEOs of our investee companies attended, along with some of their HR personnel.

The workshop kicked off with self-reflective note from our CEOs.  Many of the activities and group exercises in the early part of the workshop were very insightful in exemplifying the role the participants play as leaders and team players. For example, in one exercise, participants made repeated mistakes.  Their desire to avoid looking foolish led them to mimic those who went before, even though the first participants had not necessarily made the right choice. Realizing that mimicry is common in social and group settings, leaders become cognizant of the rule of ‘leading by example’. Living by your philosophy is the only way to see that culture permeates throughout your organization.

In another activity – this time a timed game of strategy – many of the participants admitted afterwards that they had a hard time relinquishing control. It was apparent how the (sometimes unconscious) reluctance to empower a team undermined the team’s authority, effectiveness, and efficiency and ultimately impeded team motivation and goal achievement.  Ramiz Allawala, our highly talented facilitator, also helped us recognize that there is an ‘internal’ and ‘external’ view to our companies and it is important to have a team member be able to step back and act as a ‘bird’s eye view’ when we are all too busy getting our hands dirty in order to assess the bigger picture.

Another common concern echoed by the CEOs was talent acquisition. Resource constrained social enterprises cannot compete with the compensation packages of larger for-profits, and attracting the right talent is largely a matter of finding creative ways in which to appeal to the social conscience of the talent pool while balancing their needs of professional growth. One of our CEOs added that the problem of talent acquisition is only likely to exacerbate once the economy turns around. Certainly many of us have wondered how instrumental the recession has been in helping social organizations (including Acumen) attract talent.

The ensuing discussion provided valuable insights into thinking how to creatively position the opportunities in an organization. Through shared stories, it became obvious that not only does one have to think of alternative, unorthodox channels to find the right talent, but also creative ways in which to appeal to the talent pool.

For example, Jawad Aslam (2008 Acumen Fellow and current CEO of Ansaar Management Company, a low-income housing development in Lahore) learned the necessity of networking and alternative channel hunting to find candidates that were suitably matched to his organization when he stumbled across a website called www.muppies.org for Muslim Urban Professionals living abroad. Here he had a pool of qualified individuals, who had a vested interest in giving back to their country. In order to appeal to not only their social conscience, but their self interest as well, he devised the position as a 2-year engagement with a high degree of responsibility during which they would be involved in the start-up of his company. In this way he ensured their professional interests were met, and kept it as a short term engagement to attract anyone who might be temporarily out of work due to the recession. In return, AMC will benefit from much needed expertise in its early, most crucial stage.

As the other CEOs chimed in with their experiences, we heaved a collective A-Ha! moment – one of the reasons why our investees have had trouble attracting talent is that the social entrepreneurship space in Pakistan has not found a place in the people’s consciousness yet. There is still ambiguity around it and the community here needs to understand the alternative between the NGO, traditional aid and CSR models of social development (Acumen Fund Pakistan hopes to be instrumental in perpetuating this paradigm shift).

Even as the day wound down, energies were high. We received an overwhelming positive response from the investees regarding their interaction with one another. As one of our CEO’s remarked, there is something great to be gained in hearing your concerns as a social entrepreneur echoed amongst a group of like minded people.

It is worth mentioning that the success of our workshop was largely due to the excellence of our facilitator, Ramiz Allawala of Gulfstone Training, himself an entrepreneur in his past career. Through his experience and background, he was able to relate to the discussion and offer insightful experiences and examples to draw from. A definite takeaway for us was that entrepreneurs appreciate communicating and consulting with other entrepreneurs as they have all experienced similar growing pains, and we should keep this in mind when thinking of the management assistance or mentoring we try to provide for our investees.

The next series of blog posts will cover innovations from the field. Recently, I conducted some in-depth farmer interviews around Hyderbad and learned about some pretty interesting innovations that are happening on the ground. Keep in mind that these are not college-educated individuals; most have not even finished high school. What I saw was human ingenuity in its purest sense. At the end of the day, I found myself leaving inspired by their innovativeness and creativity.

Zulfiqar Ali, a four-acre farmer in the small village of Dabri, Pakistan, doesn’t travel to his nearest bank branch when he needs some cash. All he has to do is open the door to a room where he stores his wheat crop and travel to the market. Unlike most farmers in Pakistan, Zulfiqar does not sell his wheat crop upon harvest. He realized that harvest season was the worst time to sell his crops due to a glut in supply. Zulfiqar stores his wheat crop and sells it one bag at a time, based upon when he needs cash. With each passing week, the value of his remaining wheat increases. A wheat ATM… that is innovation.

Joel Montgomery

“This looks just like South Jersey!” In true Acumen fashion, I had an “Aha” moment driving through rural Punjab on the way to see Acumen Pakistan’s newest investment, Jassar Farms. Located two and a half hours outside Lahore in Narowal, the region is surrounded on three sides by India and is only three kilometers from the border. So why did it look like South Jersey? Punjab is the breadbasket of Pakistan with a beautiful sea of green fields on both sides. As we drove deeper into the heart of Punjab, we passed fields of rice and wheat and sugar cane, all sporadically peppered with brick kilns. Even at the farm itself, spread across 250 acres of land, there were fields of sorghum, alfalfa, and corn, all being grown to process into livestock feed at the farm. At the farm, I met up with Shehzad Iqbal, social entrepreneur and CEO of Jassar Farms who had a thing or two to share about dairy farming in Pakistan and the social impact of this new line of business. Jassar Farms is a corporate dairy farming business focused on dairy and breed improvement of poor livestock farmers aiming to increase milk productivity. Here are a few interesting facts about dairy farming in Pakistan:

• Pakistan is the 5th largest producer of milk worldwide, yet one cow has the productivity level of only 1/5th of a Western cow.
• On average, the milk production of one cow is approximately 1,800 liters of milk per year.
• As a comparison, one western cow has a milk yield in the range of 8000 – 10000 liters per year.
• In the normal 9-10 year lifespan of a cow, she can give birth 9 times in her lifecycle and is lactating 270 - 305 days per year.
• The milk producing livestock in Pakistan is divided almost equally between buffalo and cow. Pakistan is among the top producers of buffalo milk globally but herds most commonly suffer from poor farm care, poor quality feed and lack breed improvement. While buffalo breed improvement could reap great benefits, breed enhancement through artificial insemination has been less studied in buffalos as compared to cows, worldwide.
• Through experiments in artificial insemination and other methods of livestock breed enhancement, there is strong potential to improve the gene pool of cattle offspring.
• If a cow is on average producing 1,800 liters of milk per year and it is artificially inseminated with a bull who’s mother and grandmother averaged, were producing for example, 10,000 liters of milk per year, then the cow’s female offspring will have the genetic potential to produce the average of the two (10,000 + 1,800)/2 = 5,900) and thereby slowly improve the milk production capability generationally.

This is where Shahzad really explained the social impact of the business idea. In the Pakistan agriculture sector, over 75% of livestock owners are poor farmers owning less than four cows.

The cost of importing high quality bull semen doses costs between $75-$100 and is essentially unaffordable to rural, dairy farmers who own 2-5 cows per household. Shahzad gave the example of a local farmer, Mohammad Butta, who owns two cows and has a family of five. Mohammad milks the cows in the morning and then sets off to work his fields. With a family of five and a household income of $75 per month, he cannot afford the high cost of imported semen dosages. So by producing semen doses locally and making it affordable to the rural livestock farmer, Jassar Farms has the potential to increase incomes of farmers from increased milk yields.

This is the first Acumen Fund investment in agriculture and specifically in the livestock and diary space and it will be interesting to see the value and impact this new business innovation may yield.

It is critical that any social enterprise have a deep understanding of the customer it is trying to serve. At Micro Drip, we conduct in-depth farmer interviews using various techniques in order to understand the particular farmer’s circumstances along with how he makes decisions. Many thanks to IDEO for their Human Centered Design Toolkit which served as a guide for our work.