Notes
Dan Runde
The purpose of this seminar
was to demonstrate the value that private industry, with
its technological and intellectual capital, contributes
to achieving development goals. Public-private alliances
bring not only cash donations, but technical and business
expertise, supply chains, and marketing—which are
equal or greater in value to proponents of development than
cash. These are skills that USAID’s traditional partners
may not have. The panel attempted to highlight the private
sector aspect of public-private alliances and demonstrate
the impact of such alliances on development goals.
In the 1970’s more than 70 percent of resources to
the developing world came from U.S. government foreign aid,
a stark contrast from today’s resource pool, in which
80 percent comes from private organizations in the form
of foreign direct investment (FDI), remittances, donations
from corporations and corporate foundations, and private
gifts and grants from U.S. civil society. Due to the new
challenges that this shift created in terms of communication
and cooperation between public and private parties, Secretary
of State Colin Powell announced the birth of the GDA in
May 2001 in order to bring about a more unified approach
to development goals. In its first two years, the GDA facilitated
the development of more than 200 public-private alliances,
to which USAID brought five million dollars in funding,
which in turn generated two billion dollars in private sector
resources. Because CDIE, an evaluation unit within USAID,
raved about the overwhelming success of the GDA, USAID chose
to continue the GDA program for an additional two fiscal
years. The GDA works out of a small secretariat within the
Office of the Administrator.
David Weidner, Global Learning Portal
David Weidner, of the Academy for Educational Development
(AED), is Director of the Global Learning Portal, whose
partners include USAID, AED, and Sun Microsystems. The portal
enables and secures partnerships in collaborative projects
with ministries of educations, NGOs, technology companies
and educational content providers to promote improvement
in the teaching and learning process.
The project began two years ago through the “Education
for All” initiative, during which teachers in developing
countries identified a need for a place where information
could be shared. The Internet seemed to be the ideal technology
to foster collaboration and connectedness among teachers,
as many already had access to computers and had experience
using web technology. GDA suggested the idea of a global
portal to AED, who in turn contacted their partners at Sun
Microsystems.
Sun offered to provide hardware in the form of web portal
servers, 10,000 free copies of star office 6.0 software
(a $900,000 value), customized web sites, and intellectual
capital (without which the technology objectives could not
be achieved). Sun Microsystems was interested in expanding
their market to developing countries.
The Global Learning Portal (GLP)consists of web applications
serving primary and secondary school teachers. The web applications
provide tools that promote personal knowledge sharing and
collaboration. This year the program focused on teacher
training colleges and classroom teachers with the goal of
providing information. The portal is not just a web site,
but an application that provides knowledge and information
to a particular user, giving information in different languages
(Spanish, French, Portuguese and, hopefully by year’s
end, Arabic).
The program is currently underway in six countries, with
1200 contributing teachers of which about 250 are American.
Registration is free. The portal still remains a pilot program
in Brazil, Nicaragua, Ethiopia, Uganda, South Africa, and
Mozambique.
The GLP partnership has recently expanded to include the
International Reading Association, and has signed a “Memorandum
of Collaboration” with the GLP program for Brazil
and Uganda. According to Weidner, the GLP embodies a special
kind of initiative due to its multi-national, multi-lingual
characteristics. Sun is currently working on a technology
to bring the portal over mobile phones, further enabling
teacher training.
Weidner added that the GDA holds regular meetings with
non-profits to help private companies to modify their approach
to fit the developing world. Private companies transfer
private sector business techniques to non-profits, while
non-profits advise private companies on approaches for entrance
into the markets of developing countries. Weidner urged
the audience to participate by going to www.glpnet.org for
online discussions, ongoing questions and answers, and great
information.
Cheri Mitchell, Microfinance Banking
Cheri Mitchell is the Corporate Relations Manager at FINCA
International and has worked to build corporate partnerships
to help improve FINCA’s resources. She oversees the
VISA International pilot project called, “The Next
Generation of Microfinance Banking: Banking the Unbanked”
(ppt 456kb). VISA provides technical solutions to three
of FINCA’s relatively high transaction costs given
the smaller loan amounts in the poorest countries; a slow,
labor-intensive process resulting from the need to educate
clients individually; and security problems associated with
cash transactions.
FINCA believes that microfinance is one of the best ways
to alleviate global poverty. The goal of microfinance is
to give small amounts of capital to millions of potential
entrepreneurs to start or expand enterprises. FINCA seeks
to provide this start-up capital to create jobs and to improve
the standard of living in the developing world. FINCA runs
23 programs in 22 countries around the world. VISA is also
seeking to expand their marketplace.
The opportunities that FINCA provides are especially important
to women, who make up 70 percent of the world’s poor
and are more likely to spend their earnings on their children.
Mitchell gave examples of the deep and widespread benefits
of microfinance for women, and in general, by lauding the
success of Luchia, FINCA client and mother of four. With
five years and 15 loans (ranging from her first at $50 to
her most recent loan of $968), she was able to start up
two restaurants, and employ neighbors, build a house, keep
her kids in school, and take in local AIDS orphans.
Making sure that children stay in school guarantees a well-educated
labor force for the future. In addition, FINCA entrepreneurs
use the capital to purchase goods from people in the local
community. Mitchell this calls the ‘monetization’
effect (when an injection of cash is multiplied several
times throughout the community, thus creating jobs). Currently,
FINCA assists 299,000 clients, with 19,000 local banks and
holds a local $61.2 million portfolio with an average loan
rate of $285 and repayment rate of 97.9 percent.
FINCA sought a partner who could provide technological
solutions to FINCA’s problems. They found VISA. VISA
saw the potential of microfinance and determined that FINCA
had a similar corporate structure. FINCA brought 20 years
of lending experience to developing countries, while VISA
contributed cashless payment technology. VISA sought to
improve developing economies and expand their market. VISA
and FINCA are in the process of piloting a prepaid credit
card by which clients can access loans. Having money in
the form of this prepaid credit card increases the security
between FINCA and their clients and protects client-vendor
transactions. The five phases of the pilot project are:
1) developing partnerships with the local member VISA banks;
2) researching and developing solutions to FINCA’s
constraints; 3) pilot testing; 4) replicating; and 5) capturing
lessons learned and sharing them with the rest of the developing
community.
The partnership allows FINCA to lower transaction costs
and interest rates for clients, increase speed, and reduce
losses from fraud and robbery. The partnership was also
a victory for the financial sector—VISA was able to
showcase the electronic method of payment in an emerging
market, build electronic payment infrastructure, and reach
additional customers, deepening and broadening relationships
with member banks. In return, the world’s poor gained
greater access to loans at a reduced cost; control over
personal resources; lower opportunity cost; and an increase
in acceleration of local purchasing power.
Robert Ainslie
Robert Ainslie, Regional Director for Latin America Johns
Hopkins Bloomberg School of Public Health Center for Communications
Program, represented the GDA Safe Drinking Water Alliance.
The Alliance is a strategic public-private partnership that
designs and develops innovative approaches for ensuring
safe drinking water at the household level. The Alliance
is made up of five partners: Procter and Gamble (P&G),
Population Services International, CARE, Johns Hopkins,
and USAID. The mission of the Alliance is to increase access
to safe water through discovering and marketing new technology
in water treatment in order to increase the number of products
available on the market.
The partners came together to test the following three
models for this technology:
1. The commercial setting. P&G have taken the lead using
their existing marketing and distribution channels in Pakistan.
2. The social setting. To be tested in Haiti, the commercial
market may not be as strong.
3. The emergency model. A relief package will be put together
and tested in an emergency situation. This model was originally
targeted for Sudan, but fell through due to the embargo
there. The program was relocated to Chad and Ethiopia.
Each of these models included a research component associated
with behavior change, and is very important as behavior
in the area of water treatment has not changed in 40 or
more years.
Because P&G was the partner that brought the technology
and marketing and packaging of the product to the table,
each of the allied group worked with the company in a different
way. However, it was through the GDA that they were able
to come together to test the aforementioned models.
As for P&G’s technology itself, each packet is
a product of the reverse engineering of municipal water
treatment and treats ten liters of water. Most importantly,
the contents of these packets clean turbid water (from which
toxins are harder to remove, e.g. arsenic). Ainslie demonstrated
the effectiveness of the PUR® water purifying packet
during his discussion with much success. He simply poured
the packet into dirty water and stirred. Within minutes,
the dirt components of the mixture solidified and fell to
the bottom. The product is not only effective in removing
viral and bacteria forms, but also hard metals found in
tube well water. The flocculation removes virus and parasites.
After pouring the water through a cloth into a clean pitcher,
the water is drinkable twenty minutes.
The importance of finding innovative ways to improve access
to clean drinking water is evident in the 1.1 billion people
who lack access to clean water. Low cost solutions can dramatically
improve this. Water-borne diseases are the leading cause
of death among children in developing countries. In addition,
new marketing schemes are expedient as water treatment is
often episodic—people cease to treat the water from
which a detected water-borne illness has departed.
Question and Answer Session
Why are for-profit corporations so willing to
give cash donations, intellectual capital and technology?
Runde: If you look at the annual report
of a consumer company like Proctor and Gamble, they’ve
basically penetrated the market for people buying shampoo
in the U.S. and Europe. There can only be slight additional
penetration. So, if they want to expand their product line,
they must go to emerging markets so that the future of the
revenue of their company is in emerging markets. Alliances
like the GDA allow companies a way to introduce themselves
to these new markets, understand the different contexts
in which they are doing business, find different ways to
provide services to the world’s poor, and fulfill
their corporate responsibility, as well.
This project presents a good opportunity for the
Bureau of Global Health to work with the GDA Secretariat
on an issue that is becoming an important issue in the Bureau
of Global Health’s portfolio. I’m excited to
see the lessons learned from the program and apply them
to their own programs, especially their child health programs
and HIV/AIDS programs.
All of these alliances presented us with a both
a theoretical and practical dilemma which centers around
to what degree do you use taxpayer’s resources to
benefit a particular private company that does have real
market interest.
Kirt Reisman, a Foreign Service Officer at AID from
the GDA Secretariat: This question has sparked
much debate. The best response to this question is that
the GDA attempts to structure the alliances in such a way
that there is a broader benefit, as in the case of PUR®.
We’re focused on the sort of research on the behavioral
change aspect as well as comparing where this technology
fit in comparison to other water purification technologies,
especially those technologies which are much cheaper than
PUR®’s technology. We’ve heard the concern,
“Are we giving poor people a Cadillac, when a Volkswagen
will do?” and we are attempting to address these concerns.
From the Portal and FINCA standpoint, there’s
a whole other side of this where you need your hardware
and infrastructure for your systems to work because there
has to be a lot of communication. Are you selecting science
because it’s there, it’s part of the alliance?
How are you going to overcome that particular obstacle?
Mitchell: FINCA has a loan management processing
system called the CM and we have this installed now in all
of our programs around the world. So one of the prerequisites
in the negotiations that we had with Visa was that whatever
system we developed would have to work hand-in-hand with
that system. So we already had some system in place and
this is just going to be lying on top of it.
Weidner: We already had existing technology
resources at internet cafés or schools. In Nicaragua,
there was no internet access until recently. AED leveraged
this technology thanks to GDA.
In Latin America, there is a White House initiative
on teacher training. Have you thought about linking up with
them on that particular initiative to further expand international
teacher exchanges?
Weidner: Great idea. No, not yet.
It appears to me that in many of the countries
where you’re operating, there is good cell phone coverage
and cell phone penetration. Shop keepers have leased that
there’s actually a pre-paid credit system where people
go to small shops and buy small quantities of minutes. Have
you had any interactions with pre-paid phone cards to help
you manage your loans?
Weidner: No, not yet. Good idea. We are
interested in introducing new products that would help our
sales force of entrepreneurs. The remittance program we’ve
been talking about that we’re doing is similar. As
the remittances are transferred over to the developing countries
where we are working, they can be placed right on a pre-paid
card; maybe that can end up being a pre-paid phone card.
Eventually, we would like to help build the infrastructure
at all of the merchants so that our clients can use our
products at the merchant’s place. The infrastructure
is not there yet. We’re going in that direction.
How user friendly is this card? Could you walk
us through how they use it?
Mitchell: We are in the process of developing
our partnership with the local bank. We have not yet implemented
the card due to the diverse logistical details of the individual
local banks. We want to develop an individual loan product.
Because our goal is to build wealth within our clients,
they often grow with us requiring larger loan amounts. In
Guatemala, our more successful clients are asking us for
an individual credit product. There are many ways in which
we could meet the needs of our client in this respect. One
is to work with the local bank to produce the credit card
for the individual client. We would load the $200 loan on
the credit card. This card would then be distributed to
her at the local village bank meeting. The person could
then go to any ATM or local store and pull out as much or
as little as she wants. We are also in the process of discussing
how our clients will go about making payments, given that
clients cannot make deposits at ATMs. One of the great aspects
of our alliance with Visa is that, through their influence
with the banks, we’ll be able to change the infrastructure
of the ATMs to accommodate these needs.
When you were initially establishing alliances,
was the process competitive?
Runde:
Our programs are open to all comers. There has not yet been
a situation where more than one company vied for the partnership.
If companies are offering us a product that we feel is particularly
important to our development mission, we definitely take
a good look at it. There is no implicit agreement of exclusivity.
Weidner: There is tons of competition.
What really played into the Sun/USAID/AED partnership was
timing. It was a question of open source natured companies,
like Sun, versus companies which were more proprietary in
nature at the time, like Microsoft.
Mitchell: Visa spent a lot of time researching
the microfinance industry. There are hundreds of companies
out there. They chose FINCA among many others; the competition
was there. Our companies have very similar structures and
we had the reach that they were looking for.
Ainslie: We came together naturally; there
wasn’t much competition.
I’m excited about the alliance. I’m
hopeful for small business subgroups to soon play a part
in these alliances. I look forward to new alliances which
include universities and small entrepreneurs. I am concerned
about any design to have an alliance and not have the checks
and balances for using the taxpayer’s money to subsidize
what might be an industry direction in which they are already
headed and were in the development scheme.
I work in education. I just started an alliance
with GDA Secretariat in order to seek out educational employment
opportunities for youth. We are struggling to adapt technologies
in our education and employment environment. How do you
turn a technology-driven, supply-driven agenda of the corporation
into a development or demand oriented approach?
Weidner: The partnership is mutually beneficial
rather than mutually parasitic. Partnerships take time to
develop. The technology company was an ancillary bid. They
wanted to know what they could give to us. You should think
of an education schema and solicit corporations which you
think can help you and make it known that you can teach
them, as well.
Mitchell: It involves a lot of education
and is a very slow process. We would take the corporation
to the field. You have to learn what each of you has to
offer.
Ainslie: In our case, we were looking
at behavior change. We wanted to create a market for public
health goods, especially water treatment technology. It
has to be demand driven.
Your companies have learned from one another. Do
you see any changes within your own organizations? What
new areas might you be embarking upon?
Ainslie:
We’re looking to see where we can expand in development
and public health. We’re looking at collaborations
between different groups. Not just cash, but technology
exchange.
Mitchell: Upper level management was originally
very skeptical of private corporations. It took much education
for the upper level administration to have them be more
open to working with for-profit organizations. Now FINCA
understands how important it is to operate like a business.
They grasp the benefit that private businesses bring by
making it so that FINCA does not have to re-invent the wheel.
Weidner: I agree with what Rob and Cheri
have just said. The whole concept of the GDA and public-private
partnerships was totally new for AED. Our president was
so committed to this approach that he committed AED resources,
not just project resources, to the GLP and the GDA. It is
imperative to understand that those risks may take three
to five years to come to fruition. However, we’ve
learned that it will pay more than the original investments
in the end.
Back
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