Remarks by USAID Administrator Dr. Rajiv Shah at the Columbia Business School Social Enterprise Conference in New York City

Friday, October 8, 2010
Subject 
Columbia Business School Social Enterprise Conference

I. INTRODUCTION – A GROWING COMMUNITY

I want to thank Columbia Business School for inviting me here to speak today. As a Wharton grad, it’s nice to know I’m welcome here. Thank you to Professor Ray Fisman [Director, Social Enterprise Program, Columbia Business School], and to your conference organizers, Daniel and Lucia [Class of 2011] for inviting me to close this important conference.

I really appreciate the chance to address this audience, one filled with students and social entrepreneurs, both poised and eager to address the world’s inequities.

Twenty years ago, if we wanted to assemble the, quote, “development community,” we wouldn’t have to go too far beyond the walls of USAID.

Today we can look to the people in this room; we can look to the members of the Global Impact Investing Network, a group leading the charge on maturing the impact investment industry, and I’m happy to say, partners of ours.

We can look to mPedigree and Frogtek, and a dozen other organizations and companies that are unlocking the potential of the most powerful development tool we’ve ever seen: the mobile phone.

We can look to an entire field of development and social entrepreneurs that matter—deeply— to the discipline we call development.

In many ways, you are driving a massive change in approach to the development field. As non-government actors, you are in a system that forces you to be disciplined, bringing the best lessons of the private sector to bear on the issues of development.

You’re focused from the start on bringing down unit costs, and on designing smart business models that deliver goods and services efficiently, in ways that are scalable.

And you also appreciate the local environments in which you work, developing a customer-oriented and focused approach.

Muhammad Yunus tells a great story about the inception of microfinance. He simply went around to villages in Bangladesh and asked women directly how their needs could best be met. He was as much an anthropologist as he was an economist.

That cross-disciplinary customer-oriented approach is one that has increasingly gained traction in our community. Today, we consistently think about how we can contextualize our efforts, how we can work closer with local partners, and how can we adapt successful projects for different environments. It’s almost taken for granted now, but it didn’t always use to be the case.

You also focus on perhaps the two most important development concepts at every stage of your work: innovation and sustainability.

There is a perception in the official development community that we have a clear understanding of what works, that we just need to commit more dollars or more effort, and then we can transform Tanzania into South Korea.

If that were true, if there were some secret recipe to the growth of nations, I’d never leave the kitchen.

That is why innovation is so important. We need to try new approaches and take more risks, and commit to rigorous measurement and evaluation at every turn, so that we can discover what is truly effective and replicate it.

And we need to do so with an eye toward sustainability. Treating a disease is important, and it improves lives in a dramatic and immediate way, but curing a disease is better.

Delivering food aid during a famine is critical, but investing in the agricultural development of nations so that they become food secure is a more important mission.

So I want to very clear: the methods you have brought to development are changing the mindset. In fact, many of the reforms I’m spearheading at USAID are rooted in this entrepreneurial, innovative approach.

II. CHANGING THE MINDSET, NOT THE SYSTEM

But here’s the reality: while you may be changing the mindset, you’re not yet changing the overall system.

The system, by and large, is still dominated by large, official assistance agencies like USAID; agencies that can deliver massive sums of assistance, and wield powers that only governments can.

What we offer is more than assistance. We can take a whole of government approach, harnessing the power of trade and investment, increasing security and good governance, and using the tools of diplomacy to ease tensions and stifle conflict.

Now, I come here knowing full well the perception many of you might have of USAID or other development agencies. You think we’re slow; sclerotic; risk averse. You think we’re bureaucratic in our approach and ossified in our ways.

To some, USAID represents the old guard; the old ways of pursuing development. We write the big check and hire the big contractor but we never quite solve the big problem.

And I have to be honest, I agree with many of those criticisms. I used to be one of you, after all.

For too long, USAID has taken on the bad habits of a large government bureaucracy. Too often, our staff is encumbered by our process, unable to break free and do the thoughtful, meaningful work they joined USAID to do.

But I want to discuss with you the true assets an agency like USAID has to offer, and share some of the major reforms we’re leading to ensure we can work not just more closely with you, but more closely like you as well.

III. USAID’S CAPABILITIES - SCALE

What I didn’t appreciate before I arrived was the sheer scale at which an organization like USAID was operating. Even when I was at the Gates Foundation—the largest philanthropic venture in the world—we could only afford to distribute about $3.5 billion a year.

USAID’s 2011 budget request is 6 times that, with over $21 billion available for development assistance.

What does a budget that size actually mean? It means working on development projects that can impact entire countries, not just communities or villages.

It means a large amount of capital available to assist and fund programs.

And it means we have massive buying power, capable of establishing supply chains and driving promising new products to scale, significantly lowering costs.

USAID spends $600 million a year on health commodities alone per year. Imagine the leverage that provides us when negotiating the prices of life-saving drugs. And we are exploring ways to use this purchasing power to create markets.

Imagine that same leverage applied to the production of a cleaner burning cook stove or an off-grid solar panel.

Operating at this type of scale allows USAID to have a unique impact. For example, currently, private philanthropies have worked hard to provide credit guarantees in order to leverage private financing for development initiatives. But they do so with great difficulty, on a deal-by-deal basis.

At USAID, our Development Credit Authority program has mobilized almost two-and-a-half billion dollars in financing through the same kind of partial credit guarantees.

We’ve been able to help nearly 90,000 enterprises in more than 70 countries, with each of our dollars yielding $27 in private financing. That’s an incredible leverage ratio by any measure.

IV. USAID’S CAPABILTIES – PARTNERSHIP AND PRESENCE

USAID isn’t satisfied with this success. We’re continuing to work on new funding mechanisms and business models that will foster even greater investments of private capital, and build the infrastructure to channel that capital to the people who need it most.

That’s why we’re supporting the research of Monitor Group, on new, customer–focused, bottom-of-the-pyramid business models that can be employed to reach not just tens-of-thousands of people, but tens-of-millions.

And it’s why we partnered with Root Capital to provide credit and loan guarantees to farmers in Rwanda, Tanzania, Uganda, Kenya and Ethiopia to produce premium coffee for export. One of the varieties we helped distribute, Blue Bourbon, now retails for $22 a pound, and is sold in over 5,000 Starbucks around the world.

We all know, though, that local entrepreneurs need more than just capital, and here too USAID can be an incredibly effective partner.

We’ve worked extensively with both public and private organizations, helping to strengthen the enabling environment for business creation by providing technical assistance, building regulatory and IP structures, and pioneering the “Doing Business Rankings,” now conducted by the World Bank.

These types of efforts should make our work easier. One of the cruel realities of developing world entrepreneurship is how many great minds are discouraged, and how many great ideas lost, under the crushing weight of red tape, graft and corruption.

And perhaps one of the greatest assets USAID has is its truly global presence. USAID currently has more than 80 missions in more than 90 countries, staffed with thousands of local development experts. In fact, 70% of our mission staff are foreign service nationals, with vital local expertise.

These missions are in Accra and Delhi and Bogota, but they’re also in places where development entrepreneurs are less visible; places like Juba, Bamako and Luanda. When you seek to replicate the success of a project in a new region, the expertise and local knowledge of USAID can help.

V. EMBRACING A SPIRIT OF INNOVATION

Even with these existing, surprising capabilities, USAID is still in need of reform. That’s why, since assuming leadership of the Agency, I’ve made it my top priority to embrace a spirit of innovation. I asked a Columbia entrepreneurship instructor, Maura O’Neill to bring her expertise to lead USAID’s focus on innovation.

That means harnessing the power of science and technology, employing new models of development work, and changing the way we procure contracts, partner with institutions, and evaluate our performance.

Those of you who know our history, know that USAID used to be the world’s leader in applying science and technology to the issues of development. We helped develop the innovations that produced the Green Revolution and pioneered Oral Rehydration Therapy in Bangladesh.

By the time I took office, that science and technology capacity had almost completely eroded. We are currently working hard to rebuild that tradition, establishing a science and technology policy division and hiring more scientists and engineers.

We’re also inviting 25 innovation fellows from leading academic institutions, social entrepreneurial ventures and the private sector to work with us at USAID. And, we can be novel in how we source and fund innovation as well.

IV. ANNOUNCING DIV

Today, we are unveiling our Development Innovation Ventures fund.

Borrowing from the venture capital model, DIV was created to promote high-return and sometimes high-risk ideas and projects, catalyze game-changing innovations and create new portals of entry for social entrepreneurs to work with USAID.

I’m proud to announce today that we’ve recruited Michael Kremer, the world-renowned Harvard economist, to join us at USAID as scientific director of DIV, helping to recruit new talent and ideas to the agency. We’re incredibly excited to have someone of Michael’s immense talent working with us at USAID.

And since the Red Sox aren’t in the playoffs, he should have an easier time getting people to follow him out of Cambridge.

As part of our launch, we ran a small test over the past few months in order to identify an initial set of projects. Today I’m happy to announce that we are investing in our first eight ventures.

I want to mention two of these projects in order to give you a sense of the kind of development entrepreneurs that we know will accelerate our impact.

We’re awarding SiGNa Chemistry $100,000 to develop the E-Bike, an affordable fuel-cell powered bicycle that also serves as a portable, general purpose power source. The fuel-cell operates at one-sixth the cost, weight and volume of existing battery technologies, giving the E-Bike a range of up to 100 miles, while emitting only water vapor and air. And the fuel cell can easily be removed to serve as a stand-alone power source.

We’re lucky to have Michael Lefenfeld from SiGNA, a proud Columbia alum, here with us today. Michael, congratulations, USAID is excited to partner with you, and we’re all curious how you got to the conference today.

By offering a clean, cheap alternative to the dirty two-stroke engine scooters you find throughout the developing world, we expect the E-Bike to have a significant impact—at least until Apple offers the i-bike.

I am also excited to announce that Eli Berman’s team at UCSD has been selected as one of our initial venture partners. Their ground-breaking work uses cell phone monitoring technology to innovate in the democracy and governance sector. They set up a randomized trial in 450 polling locations in the recent Afghanistan elections. Stay tuned for some results coming out in the next few months.

Those are just two of the eight grants we’re announcing today, which in total represent $1 million devoted to innovations like solar lighting in rural Uganda, self-test to prevent the second largest cause of maternal mortality, and mobile health surveillance in India.

We are accepting proposals on a rolling basis and invite you to submit your innovative work. The examples I’ve just highlighted are what we call Stage 1 ventures that demonstrate to us a proof of concept. For those of you who who are further along in developing your ventures, we are also soliciting Stage 2 and 3 proposals, with investments averaging $1 million and $6 million, respectively.

V. IMAGINING THE FUTURE OF USAID

Innovations like DIV are just one of the many reforms we’re leading at USAID, reforms that will revolutionize not just the way this agency operates, but how development is conducted throughout the world.

I believe these reforms can truly unleash our potential because I’ve seen a focused and untethered USAID in action, during my very first week as administrator.

Just days after I had been sworn in, the world witnessed the massive earthquake in Haiti. There, in the aftermath of that disaster, I witnessed first-hand an empowered USAID staff operating with a sense of urgency, a sharp focus, and a willingness to take risks. In short, I witnessed our staff behaving like you, like development entrepreneurs.

Time and again, I saw our people employ novel strategies and solutions. For instance, based on the findings of a behavioral economic study, when we distributed water to survivors, we also handed out chlorine tablets. That simple idea has led to a 12 percent drop in diarrheal disease in Port-au-Prince. In fact, more people have access to clean water today than they did before the earthquake.

We are working hard to ensure that same spirit of entrepreneurship, of turning need into opportunity, informs all of our work. Because we must embrace that same active, urgent approach, not just in instances of disaster like in Haiti or Pakistan, but in our day-to-day work as well.

VI. CONCLUSION – A NEW CHAPTER OF PARTNERSHIP

So let’s usher in a new chapter in the relationship between development agency and development entrepreneur; one in which we work together in a new spirit of camaraderie and common purpose; one that acknowledges the vital contributions we both have to make.

Together we can move development into a new realm, with the discipline and focus of the private and entrepreneurial sectors, and the scale and reach of the public sector.

As different as our approaches have been in the past—our goal is one and the same. We are all seeking a world where development entrepreneurs don’t just fill this room, where they don’t just fill one agency, but where they fill the villages and markets and cities of every country around the globe.

And to the students in the room, I save my final thoughts for you.

Right now, you’re facing a world that is providing you with a wealth of options. You’re probably spending every Friday at conferences like these, or recruitment events from different companies, trying to decide in which direction you’ll focus your talents.

As you embark on this exciting decision—perhaps the most important one you’ll make—I want you to seriously consider what a life working in the field of development can offer.

We can’t offer you the lure of a corner office in a Manhattan skyscraper; we can’t offer you the bonus check that wipes out all your student loans; we can’t offer you the chance to have your last name on a wing of the Lincoln Center.

But we can offer you the peace of mind that comes with a life devoted to service. We can offer you a career that does more than shift money from one wealthy person to another. We can offer you a career that directly contributes to the building of a better world; a career whose nobility or worth or necessity you will never have to justify or defend.

One look at this crowd will show you how many rich opportunities there are to make a difference. I’m not just making a pitch for USAID—though please keep in mind we are working hard to build an organization that deserves your talents.

Wherever you find yourself— whether at an NGO, or a startup, or an investment bank—do your best to steer your career toward serving those in this world with the greatest need.

Thank you.

Columbia Business School Social Enterprise Conference, New York, NY

Last updated: March 10, 2014

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