Investor in people

• Last Updated: November 06. 2009 2:27PM UAE / November 6. 2009 10:27AM GMT

Jacqueline Novogratz, wearing yellow, the founder and CEO of the Acumen Fund, on a visit to India. The firm has helped 40 companies in four countries, Pakistan, India, Kenya and Tanzania, and is now looking to Egypt. Susan Meiselas / Magnum Photos

The former banker Jacqueline Novogratz founded the Acumen Fund to provide capital for small businesses in developing countries. She explains to Helena Frith Powell why, if you want to help the world’s poor, you have to invest in them, rather than just giving them money.



Bankers have overtaken lawyers and journalists as the most unpopular members of society. First they drive the world’s economy to the brink of ruin, so governments are forced to step in and underwrite their debts. Then as the stimulus packages kick in, banks start becoming profitable again, so the bankers resume the practice of awarding themselves healthy bonuses. It is amazing that they haven’t all been lynched.

However, not all bankers are the same. Muhammad Yunus, for example, set up the Grameen Bank in 1976, pioneering the concept of micro-banking, which aims to help poor people borrow small sums of money. Its success won him the Nobel Peace Prize in 2006 and helped millions escape the poverty trap.

Jacqueline Novogratz, the American founder and CEO of the Acumen Fund, is another banker trying to make a difference. She is taking an entrepreneurial, as well as a socially aware, approach to fighting global poverty, which she hopes will eventually change the way we all look at how to help the world’s poorer countries develop.

“I want to change the way the world sees poor people and the way we confront the issue of poverty,” Novogratz says on a recent visit to the UAE. “I wanted to create something that honoured people’s ability to work and their creativity.”

The Acumen Fund has invested US$40 million (Dh147 million) in 40 companies in four countries: Pakistan, India, Kenya and Tanzania. One of the reasons for the Dubai visit is that Novogratz is looking to add Egypt to that list. “We invested there right after 9/11. But back then we were so young and we were already involved in the four other countries, so felt we had taken on too much. Now with the help of our local partners, Abraaj Capital, and encouragement from the Egyptians, we are going to go back in.”

Novogratz founded the fund in 2001. “I had spent 20 years in commercial banking and philanthropy. And I learnt that dignity is more important than wealth.”

Central to her theory is that poverty cannot be cured by charity. “We believe that investing money, as opposed to just giving, is much more effective. Traditional charity often meets immediate needs, but fails to help people to solve their problems over the long term.”

Novogratz, at an Acumen-funded project in Kenya, wants to change the way the world sees the poor. Susan Meiselas / Magnum Photos

Novogratz is elegant and dynamic, with an relaxed manner. It is easy to see how convincing she can be when it comes to getting investors to part with their money.

She began her career at Chase Manhattan Bank and more recently founded and directed the Philanthropy Workshop and the Next Generation Leadership Programmes at the Rockefeller Foundation, which was founded in 1913 and is one of the world’s leading philanthropic organisations. She also founded Duterimbere, a micro-finance institution in Rwanda. In 2008 she won the Ernst & Young Metro New York Entrepreneur of the Year Award. Her memoir, The Blue Sweater, was published in March.

Novogratz has several excellent examples of where her market-based philanthropy has worked – for example, the fund’s water portfolio, dedicated to investments that aim to help the 1.2 billion people worldwide who do not have access to enough safe water. In 2004 her fund invested US$600,000 (Dh2.2 million) in a water distribution company in India, WaterHealth International.

“We figured that rather than just give them money to build wells that will not be working a year from now, we would find an entrepreneur to build a company that could provide water to the local community and we would provide our acumen and investment.”

Five years on, the water purification company that Acumen helped to reach reached one million people in India with safe, affordable water, at a cost of just six cents for the water needs of a family of five for two days. “It is now the largest decentralised water distribution company in India,” says Novogratz. The company aims to grow from 150 water systems to 2,000. Other small enterprises have sprung up around the company, such as water delivery men.

Another success story is the 1298 Ambulance Service in India, a company set up by a group of young professionals with the help of the London Ambulance Service. During the Mumbai terrorist attacks, Novogratz was proud to see the ambulances driving around in every shot she watched on CNN. “I thought to myself then, you can do this, you can change the game.” The company has won three state contracts and the aim is for the network to eventually cover the whole of the country.

Local farmers using Global Easy Water Products for low cost irrigation meet Jacqueline Novogratz in Aurangabad, India. Susan Meiselas / Magnum Photos

In 2002 the Acumen Fund invested US$325,000 (Dh1.2 million) in a Tanzanian company, A to Z, which makes long-lasting anti-malarial bed-nets, with a further US$675,000 (Dh2.48 million) follow-on investment to ease distribution channels. The company is now the largest insecticide-treated bed-net producer in Africa, and Tanzania’s third largest employer.

Novogratz’s approach is simple: instead of giving away money, you invest and provide acumen. You do more and you get money back. In addition, you don’t have to “repeat the same journey again and again” as Novogratz puts it, meaning that if you simply give money one year, you will end up giving it again the next.

It is a “high risk, low return” business model, but surely that is better than no return at all? So what is holding the developed countries back from investing?

Novogratz says that the problem is often linked to electoral cycles and the need for short-term results.

“At the World Bank, for example, there is a drive for really quick results, but not much incentive for accountability in the long term. An electoral cycle is only a few years and politicians need to show what they’ve achieved and spend all the money they have allocated. To make a difference you need to be in a country for at least five years. Give us seven to 10 years and we will show you a real difference. The other problem is politicians come up with sound bites and unrealistic aims like ‘free maternal healthcare for every woman’. Rather than wait for the point when that becomes possible, why not start by getting costs down as much as you can, as we have done with LifeSpring hospitals in India?”

More than 100,000 women die every year from pregnancy-related illnesses in India. The infant mortality rate is among the worst in the world. LifeSpring is a network of hospitals that provides health care to the urban poor. So far there are nine hospitals and they hope to set up another 30 by 2012, reaching an estimated 1.2 million women.

“People say you shouldn’t charge for maternal health care, but there is no perfect solution and even the state hospitals are not free. Also, if you go into a government hospital it is filthy and there is blood everywhere. When I questioned a lady about the state of it she said ‘This is for the poor peoples.’ We need to change that way of thinking. At LifeSpring it is clean, safe and decorated in pink. The prices are listed in a transparent manner and there is accountability among the doctors.”

Novogratz set up the Acumen Fund in April 2001 and was just about to move into her new office in the World Trade Center when the September 11 attacks happened. “I lost a lot of people that were close to me in those towers, and also a lot of contributors to the fund,” she says. “I had a meeting with the seed investors [which included the Rockefeller Foundation and the Cisco Systems Foundation] who asked me what my response to 9/11 would be if I were king. I said, ‘I would go to the Muslim world and demonstrate what people there are capable of building.’ I raised a million dollars and then thought, ‘Oh gosh, where do I start?’”

She feels strongly that she has a duty to be in places that others would deem too dangerous. “Pakistan, for example, has turned out to be an incredible place for us to work,” she says.

One company, MicroDrip, distributes affordable drip-irrigation systems to low-income farmers, allowing them to increase their crop yields and income.

“It might be dangerous to be there, but then, that’s the point of what we do. Poverty is a battle and I strongly believe that the societies we are working with now are essential for a safer future.”

One of the most important things is to find reliable local partners. “There is no perfect answer, we just work on a case-by-case basis and try to make sure we know who our partners are. I suppose you could call it reined-in capitalism. We did exit the equity we invested in one healthcare company because we felt there was not enough focus on the poor.”

The ultimate aim of the Acumen Fund is to change the way aid organisations and charities do business. “We believe this system works, that we can increase sustainability and make a big difference. By 2012 we hope to have touched 50 million lives.”