Profit And Poverty: Why It Matters

Forbes: Profit And Poverty: Why It Matters

Through the ages, we have come to associate profit with greed and serving the poor with self-sacrifice. Accordingly, now that the outstanding performance of leading microfinance banks has inserted banking at the base of the pyramid as an integral part of emerging-markets finance, socially conscious investors are starting to agonize over earning returns while serving the poor. By focusing on their motivations in helping the poor rather than on poverty itself, they have obscured the pragmatic realities of the problem they wish to address.

Any intervention that seeks to meaningfully roll back poverty–whether it is microfinance, education, primary health care, housing or access to basic services such as water and energy–must fulfill four basic conditions.

The first is scale. When there are three billion people surviving on $2 or less a day, reaching a few thousand is like aspirin in the face of a raging cancer. The second is permanence, an assurance that the intervention will be present not only for today's poor but for their children and their children's children. In turn, this requires that the intervention outlast the finite lives of its current champions. The third is continuous efficacy, the ability of the intervention to become better and better through time. The fourth is continuous efficiency, the capability of the intervention to become cheaper and cheaper with each passing day.

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In fact, humanity has found only one way to deliver consistently and simultaneously the four attributes of scale, permanence, efficacy and efficiency, and it is through private enterprise.