Catching on to a bright idea. Photo: Chealion (flickr)

Reuters reports that despite the recession, American consumer spending on products that are considered "green" has in fact been going up.

U.S. supermarket sales of environmentally sustainable or "ethical" products — from energy-efficient light bulbs to organic produce — will rise about 8.7 percent in 2009 to nearly $38 billion

Reasons behind going green range from personal health to global warming, but Scott Bearse, of the financial consulting group Deloitte, thinks there may be more to it. He tells Reuters, "[t]he financial crisis reminded people of the unintended consequences of collective behavior."

Helping or hurting? NATO delivers aid in Afghanistan. Photo: Isafmedia (flickr)

How can you best fight global poverty? Academics, journalists, economists and sometimes even celebrities have been vigorously discussing this question for years, with big names like Jeffery Sachs, William Easterly, Dambisa Moyo, and Bono weighing in on the question of whether or not development aid actually helps the poor.

Writer and well-known humanitarian and development aid advocate Nicholas Kristof succinctly and candidly summarized the debate last week in an essay for the New York Times Book Review. (See my post "What a Marshall Plan Could Do For Africa" for more on the aid debate.)

Acknowledging that all sides have some cogent points, Kristof admits that "doing good is harder than it looks." But he's still an advocate of development aid:

The upshot is that we can now see that there are many aid programs that work very well. We don’t need to distract ourselves with theoretical questions about aid [...]. The new synthesis should embrace specific interventions that all sides agree have merit, while also borrowing from an important insight of the aid critics: trade is usually preferable to aid.

In other words, markets are irreplaceable in achieving certain goals, and humanitarian projects are important for others. Free trade won't automatically build schools, and building schools won't automatically create jobs.

The two can go hand in hand to create a better future.

Malawi's economy has deep roots in the small family farms that pepper its landscape. But farmers often can't earn enough from cash crops like tobacco, sugarcane, peanuts and tea.

The Clinton Hunter Development Initiative (CHDI) hoped to change this when they started working with rural Malawian farmers in 2006. As they explain on their website, they encouraged the farmers to grow soy instead of peanuts, which is more nutritious, gets better yields, and is easier to grow.

In one particularly impoverished district, CHDI also worked with a group of local farmers to build a large commercial soy farm. Collectively, the farmers could get a better deal by buying in bulk, which drove down the price of seeds, fertilizer and irrigation tools. CHDI also used the farm as an informal classroom, showing locals how the different cultivation techniques were used.

After only two full years in the country, CHDI reports that for many farmers, harvests have more than doubled under the new system, with income not far behind. One of these farmers shares her story in the video below.

In a country as poor as Malawi, where an estimated 53 percent of the population lives on less than $1.25 a day, that extra income provides farmers with many opportunities that had previously been out of reach.

Adolescent girls in developing countries miss up to 50 days of school each year because their families can't afford to buy them sanitary pads.

Fortunately, a start-up called Sustainable Health Enterprises (or the cleverly abbreviated SHE) is working to reverse this trend by helping Rwandan women start their own low-cost sanitary pad businesses. SHE is helping girls stay in school and increasing their potential earning power in the process. One additional year of primary school for a girl means a 10-20 percent increase in her future wages, according to a Council on Foreign Relations study.

This short, eye-catching video explains why SHE is doing the work that it does... The music's great, too.

Severe unemployment threatens security gains made in the last few years. Photo: Dogon56 (flickr)

Security in Iraq is undoubtedly improving, but rising unemployment threatens to increase instability and worsen corruption, according to Iraq expert Frank Gunter.

Gunter, who's done two tours in Iraq as an economics adviser, points out in a recent op-ed in the New York Times that 51 percent of the population — and an even greater percentage of young people — is either unemployed or underemployed.

Almost half of the country’s labor force is paid by the government from its revenues from petroleum exports. With the exception of agriculture, legitimate private-sector employment is small — by my calculations, about 6 percent of the labor force. Most of the remainder of the Iraqi labor force is either unemployed or working in the underground economy.

Gunter further laments that any business faces either the inefficiencies of the underground economy or the corrupt ministries that regulate them. (Iraq was just listed among the top five most corrupt countries in the world.) The process to register a new business is expensive and complicated — a license costs $2,800 and requires approval from 12 different ministries.

"The potential for private sector job growth is great," Gunter writes. So what needs to be done? The number-one thing, Gunter says, is to make it easier and less expensive to register a new business. He also recommends that provinces, rather than Baghdad, set rules for regulating businesses.

But whatever is decided, the government of Iraq is running out of time. It must either end its hostility toward private businesses — or accept that a sharply growing mass of unemployed will nullify the progress of the last three years.

A homemade drip-irrigation system. Photo: Care of Creation (flickr)

Flood irrigation: that's how poor farmers in developing countries usually water their crops. It's wasteful and too water-intensive to work in the dry season, but until recently there haven't been other viable options — a traditional drip irrigation system could cost thousands of dollars.

But social entrepreneurs like Paul Polock and the California-based company, Driptech are working to change this by helping poor farmers set up low-cost drip irrigation systems. Driptech can sell their irrigation system for $30 in places like India, China and Ethiopia, because they use cheaper materials and have developed a new (top-secret) method for punching the holes in the irrigation tubes, according to the San Francisco Chronicle.

As Business Week notes, the technology could be transformative:

Experts say low-cost irrigation could alter the economics of food. Subsistence farmers may be able to grow excess crops they can sell. Countries that rely on food imports could see their dependence on outsiders decline.

The innovation has allowed poor farmers to save "water, labor, and time — all while growing a valuable dry-season crop that greatly increased their annual income," boasts Driptech's website.

Driptech plans to relocate their manufacturing facilities to the countries where their products are sold. The company's blog notes that this "will help support the local economies while cutting out transportation costs and headaches."

Selling redesigned products to the poor can be a profitable business model, as some companies in India have also discovered. (I wrote about this phenomenon in "Selling to the Poor, On Terms They Can Afford"). In line with this trend, Driptech expects to make money while helping poor farmers start to turn a profit of their own.

Unemployment is already high in Mexico. It could be even higher if Mexican workers in the U.S. went back. Photo: Aneas (flickr)

Mexican workers often come to the United States to earn money and send it to their relatives back home. But NPR reports that as the U.S. economy has gotten worse, some of these worker's families are sending them money from Mexico.

It's a phenomenon that could have a positive economic impact: These reverse remittances, as they're called, allow the migrants to keep searching for higher-paying work than they could get in Mexico, explains an NPR report. These reverse remittances may also prevent a flood of returnees from further devastating Mexico's economy and increasing unemployment.

When the U.S. economy rebounds, these workers are well-positioned to start sending remittances back to their families again.
These remittances play a big roll in Mexico's economy — they're the country's second-largest source of foreign income.

Still, the total dollar amount of reverse remittances remains small in comparison to the traditional southward flow of cash and there is no reliable data about its overall volume, points out a World Bank report.

As one Mexican father of a migrant worker told the New York Times, “We have an obligation to help them [until they find work again]. They’re our sons. It doesn’t matter if they are here or there."

Transparency International's 2009 Corruption Perception Index is out. Where does your country rank?

Iraqi women are caught in the crossfire between military troops and insurgents. Can dairy farming help bring peace to Fallujah? Photo: .ash (flickr)

Here's an innovative way to expand economic opportunity for Iraqi widows and reduce the threat of terrorism: give the women a dairy cow and teach them how to take care of it.

The U.S. Marine Corps is actually trying this in Fallujah, says the LA Times. They enlisted the help of Lockie Gary, a dairy-farming expert for Land O' Lakes. Gary is working with a group of 50 women — many are widows of insurgents — teaching them how to care for their cow. The women can earn a small income from selling products made from the cow's milk. But according to Gary, an added benefit is that in the long-term, this program might reduce the number of terrorist attacks in the area. He explains why in Farmer and Rancher Magazine:

If the cow could be made to produce enough milk beyond the family’s needs, then cheese and yogurt could be produced as well and the widow might be able to hope for a brighter future. The intent of the program is not entirely altruistic, however. With a source of income and a glimmer of hope, widows may be less inclined to be recruited as suicide bombers and that could save lives.

The program is still fairly new, and the women can't earn enough to support their families by selling the milk and cheese from a single dairy cow yet. But according to Gary, their high-quality milk and cheese should fetch better prices over time.

A photo of what is believed to be William Kamkwamba's first windmill. Photo: whiteafrican (flickr)

When I was fourteen, I was busy going to drama rehearsals, shopping at the mall and fighting with my brother. But when William Kamkwamba was fourteen, he built a windmill to bring electricity to his rural village in Malawi by studying pictures in a library text book and using whatever materials he could find.

Watch this video, from Yes! Magazine, for his truly inspiring story:

You can follow William's current projects on his blog and and support his work in Malawi by donating here.

Economist Glenn Hubbard argues that aid targeting local African business development would help the continent more than infrastructure projects like roads. Photo: Stefan Gara (flickr)

Foreign aid has failed to end poverty in Africa because it often funds the wrong kinds of projects, says economist Glenn Hubbard. As he explains in a recent podcast interview with NPR's PlanetMoney, Africa remains just as poor as it was 50 years ago, despite the $1 trillion in foreign aid that developed countries have spent since WWII.

How to fix this? Hubbard argues that funneling aid money directly to local businesses is the most effective way to promote growth and end poverty, an idea he expands on in his book The Aid Trap. He contends in an interview with Columbia University Press that Western governments could model such an initiative on the Marshall Plan, the foreign aid program that the United States used to rebuild Europe after WWII:

Everyone in aid recognizes the Marshall Plan as the most successful aid program in history. What few realize is how the Marshall Plan actually worked. It made loans to Europe’s private businesses, who repaid them to a national fund, which spent the money on commercial infrastructure like ports and roads.

Hubbard believes that this aid model can also be applied to Africa, since small-to-medium sized business are the engines of any economy. "There is a collective amnesia among prosperous countries about how they themselves rose from poverty: their local business sectors," he writes in an article for CNNMoney. By contrast, large multinationals doing business in Africa rarely impact local poverty levels.

"We can do [this plan] without spending new money," Hubbard says to PlanetMoney, explaining that he just wants to restructure how aid is given. He also believes that "we have a moral imperative to act" to end poverty through aid, in contrast to the prominent economist Dambisa Moyo, who argues that Africa would be better off without any aid at all (see Manasi Sharma's "Is Foreign Aid Helping or Hurting Africa?"). Hubbard tells Columbia University Press that not all aid money should go to business either, since humanitarian aid and microfinance programs are both successful and necessary for the poor.

Hubbard admits to the PlanetMoney team that the idea has some risks, such as the possibility that local elites could siphon off many of the benefits without improving the lives of the poor. However, he says that it's even easier for them to do so under the current system. "The traditional aid has definitely strengthened the elites," he explains.

Despite possible drawbacks, as Hubbard points out to PlanetMoney, it's clear that when one aid plan has already failed, we shouldn't try to duplicate it for another sixty years — we should move on to something new. And as he tells Columbia University Press, "It’s not that business hasn’t worked in poor countries, it’s that business never had a chance in poor countries. Let’s provide that chance."

A new, low-cost water filtration system will make it easier for poor Indians to access clean drinking water. Photo: Jackol (flickr)

Here's some conventional marketing wisdom: People who live on less than $2 per day simply aren't a worthwhile target demographic.

But recently, some Indian companies are challenging such ossified thinking with innovative products designed to fit the needs of India's poor, reports The Wall Street Journal:

Such inventions represent a fundamental shift in the global order of innovation. Until recently, the West served rich consumers and then let its products and technology filter down to poorer countries. Now, with the developed world mired in a slump and the developing world still growing quickly, companies are focusing on how to innovate, and profit, by going straight to the bottom rung of the economic ladder.

As the Wall Street Journal explains, Indian companies started to change the way they looked at impoverished consumers after they snapped up low-priced cell phones. Then companies began to design products that they hoped would find a similarly huge demand. Soon, Tata Motors released the Nano car, a small $2000 vehicle that made car ownership a possibility for a whole new slice of Indians since it sold for less than half the price of the next-cheapest car on the Indian market. Tata plans to export a more luxurious version of the Nano to Europe — providing an example of how the goods designed for local markets could increase global competition between Indian and Western companies.

There are several other examples of products redesigned with the poor in mind. Cheap battery-powered refrigerators are a huge help to families without electricity in their homes. The solar-powered cell phone base station won third place in The Wall Street Journal's Technology Innovation Awards earlier this year. And the introduction of mobile banking is revolutionizing banking and money transfers in rural areas via cell phones in many poor countries.

It's a newer way of thinking about poverty, and one driven by bottom-line concerns: How can firms sell the poor what they need now, rather than waiting until they have the money to buy what others already have?

October's comment of the month comes from James in Portland, Oregon. James commented on our story Poverty Isn't Always Ugly. He reminds us that poverty rears its ugly head in many forms — not just monetarily. For his efforts, we will make a $25 donation to a project of his choice on Global Giving.

There are definitely a few issues to consider and discuss relating poverty. In reading Muhammad Yunus' book "Creating a World Without Poverty". He felt, and I agree, that the definition of poverty isn't going to be the same from country to country. For Bangladesh the Grameen Bank developed there own definition of poverty for their internal purposes and to measure impact over time.

Many organization attempt to place a dollar amount of income/day to determine poverty, we've heard the $2.00 per day used frequently. Income isn't a solid method because it doesn't factor variables outside of money. Location and access to natural resources for instance are variables that change the need for money, or an individuals dependence upon it.

Bottom line, I think it's important to realize that poverty can't be defined the same way in every community we visit. Poverty includes physical need and extends into the mindset of individuals and how they view the world around them. It's also important to be culturally sensitive when working with people around the world. Sure, we have it pretty good here in the U.S. but we have problems too. We shouldn't seek to cookie cut our cultural values everywhere we go.

Keep writing in and share your though-provoking comments for a chance to win $25 towards the well-deserving charity of your choice!

* Lest anyone think $25 is not a lot, consider these figures from our affiliate Mercy Corps: $25 delivers clean, safe drinking water to 50 people in one of eastern Congo's sprawling displacement camps. $25 provides seeds to farmers in cyclone-devastated areas of Myanmar to plant five acres of rice. $25 gives traumatized children in Darfur 12 weeks of activities and psychological care to help them heal.

A Mercy Corps small business loan helped Najeeba expand her successful baby cradle business in Kabul, Afghanistan. Photo: Cassandra Nelson/Mercy Corps

Over the past decade, Mercy Corps’ microfinance services have lent more than $1.5 billion, reaching more than one million people. Twelve Microfinance Institutions (MFIs) founded and supported by Mercy Corps operate all over the world, with 270,000 active clients — 65 percent of them are women. To better serve those excluded from formal financial services, Mercy Corps is working with these MFIs to develop and offer savings, remittances, and micro-insurance services as well.

I recently sat down with Zhanna Zhakupova and Jim Anderson who were in town for a microfinance conference hosted by Mercy Corps, to find out more about Mercy Corps microfinance programs and how the global economic crisis is impacting microfinance loans. Zhanna is the Executive Director of the Asian Credit Fund (ACF), headquartered in Almaty, Kazakhstan. Jim is Mercy Corps’ Financial Services Manager and works from UlaanBaatar, the capital city of Mongolia. Together, they have experience working in countries as diverse as Uzbekistan, Vietnam, Japan, Bosnia, Poland and Afghanistan.

Haley Dillan: Jim, tell me a little bit about Mercy Corps’ use of Microfinance.

Jim Anderson: Microfinance is an integral part of what we’re [Mercy Corps] doing as an agency. Mercy Corps works with a group of well-established MFIs to complement other programming. All these MFIs provide loans to individuals and small businesses, and in Mongolia and Indonesia our MFI affiliates also offer deposits. Many support agriculture and offer consumer loans for purposes like tuition payments and health care costs. A micro-loan can range from $65 to a Guatemalan woman raising chickens or piglets, to $7,000 for a Kazakh businessperson.

Microfinance is a great tool because, when managed correctly, it is sustainable. Projects can be established and continue on a sustainable basis: they don’t require ongoing injections of donor money. As the NGO, you create the legacy, and then it often continues independantly.

Haley: Why are the majority of loans extended to women?

Jim: Typically, women are the more common borrowers. From a broad source of statistics, women are more reliable borrowers. They invest their business profits to support the family — educating, feeding, housing, and providing health care for their children. As of this June, Kompanion in Kyrgyzstan had over 91,000 clients, of whom 98 percent were women. What’s the percentage for Asian Credit Fund, Zhanna?

Zhanna Zhakupova: About 93 percent of ACF loans are to women.

Jim: Yes, and the XacBank in Mongolia has over 63,000 clients, and women comprise about 55 percent of that. However, in certain countries, it’s not always clear that just because the borrower is a woman, she’s the one in charge of the money. In Afghanistan, for example, a female borrower may just give the loan money to her husband, and it’s hard to track that.

Zhanna: Also, men are less interested in small loans. When they think about business, they think about “big.” And after the global economic crisis, group lending has grown significantly, and women dominate group lending. Men are more reluctant to join groups.

Haley: What other impacts has the global economic crisis had on microfinance? Have you changed your lending criteria? Has it affected the ability for applicants to repay their loans?

Zhanna: As I mentioned, our portfolio has shifted towards group lending since 2008. So, yes, the global economic crisis definitely caused a shift in our lending. In Kazakhstan, the crisis has been quite severe. The GDP growth was averaging about 8 percent annually since 2000, from oil and mineral resources. A pretty strong middle class had emerged, especially in the two largest cities Almaty and Astana. The economic crisis really affected this middle class; the crisis led to a sharp decline in real estate and that hit a lot of people. It seemed like everyone had loans that were secured by real estate… and when the real estate bubble burst, MFI loans were under water.

The banks stopped lending, because real estate was the key piece of collateral for most people, and it has continued to fall in value. No one had sufficient assets to meet tougher bank requirements, and so couldn’t qualify for loans after the global economic crisis. Lenders accumulated loan repayments, but refused to relend that money, sitting on it instead of pumping it back into the economy. No liquidity — no lending — no economic development — falling living standards.

In the rural areas, lending was completely frozen. When I recently visited rural areas served by ACF, every village asked us to open a branch. Small loans were in big demand but no one was lending. Now, Asian Credit Fund has about $1 million dollars in group loans, with the average loan size at around $500 per person.

Haley: What's the difference between non-profit and for-profit microlending? Does Mercy Corps work with for-profit lenders?

Jim: Actually, microlending is for-profit in most areas of the world, particularly Latin America and Central Asia. Non-profit lenders are more often located in places like India and Bangladesh. So most of Mercy Corps' microfinance work is with for-profit MFIs, many of which source funding from for-profit socially responsible investors (SRIs).

If these SRI lenders were to calculate the true risk of the loans they’re extending to MFIs, the interest rate would be so unmanageably high — possibly 60 or 70 percent in places like Tajikistan or Afghanistan. But the individuals who invest with SRIs are willing to forgo a certain amount of return because they want to encourage social improvements by lending to developing countries. As a result, SRIs can lend to MFIs at affordable interest rates.

In order to help MFIs attract capital to expand and serve more clients, Mercy Corps utilizes various sources of investment, including equity and debt, typically with SRIs.

Haley: Is there an idea or sentiment that you are taking away from the conference?

Jim: At the conference participants included a diverse group of organizations, culturally, geographically and in terms of business models, yet we all face similar challenges and issues, and it’s great that we have an opportunity to come together and talk about that.

Zhanna: Yes, everyone was talking about development, and long-term goals.