Making Money off the Poor: Business Models in the Developing World

In the heart of rural India, local farmers plow their land with the help of oxen, abide by tradition, and follow a local ‘sarpanch’ who arbitrates law and order. The villagers do not earn much selling their produce and are distanced from infrastructure where they might spend their earnings. Yet businesses such as Healthpoint and for-profit lenders thrive in this environment, to both their benefit and the benefit of the community. The business model of these companies is well-integrated into the community and work to serve community-specific needs.

Healthpoint was started by Dr. Allen Hammond, a strong believer in market-based solutions to development issues, as a method by which to provide healthcare to the rural poor in India. Healthpoint focuses on striving to achieve the UN Millennium Development Goals, particularly Goal 4 regarding reducing child mortality. Healthpoint, like many businesses, cites its values as being “Customers come first,” “Culture of respect,” and “Continuous improvement.”

Because sanitary water plays a large role in maintaining good health, Healthpoint provides both sanitary water and consultations with medical professionals. Each Healthpoint unit contains both a water-cleansing facility and a video conferenced medical facility. Villagers visit daily to obtain clean water at a low cost of approximately $1.50 per month. Because of the facilities’ proximity, it draws a large majority of villagers. The medical consultations at a Healthpoint clinic function much like those of a regular clinic; a patient is checked in to a clinic and escorted to a private room. In each room, there is a video conferencing screen which allows for patient-doctor communication. A facilitator in each room mediates conversation between the doctor and patient: translating, retrieving equipment to conduct small tests such as blood pressure, and serving other patient needs. Succeeding the visit with the doctor, the patient visits a pharmacy located within the clinic to obtain medication. If clinical testing is necessary, it is conducted by lab technicians within the clinic. Testing for most diseases costs approximately 20 more cents, and medicine costs the same. The consultation itself costs around 40 cents, a nominal fee.1

For their investment, this company’s returns are substantial. Presently, it has $3 million invested as capital. Going forward, Healthpoint is aspiring to prompt innovators to imitate its successful business model. Currently, it has expanded itself to Latin America and the Philippines to see if a different audience will react similarly to this service. Healthpoint’s partners include Airtel, the Calvert Foundation, and Procter & Gamble, as it spans across for-profit and non-profit sectors for assistance.

Healthpoint’s business model has four central tenets: democratization of healthcare, sustainability (with a focus on economic returns), replicability/scalability, and innovation. First, Healthpoint intends to democratize healthcare by involving the local citizenry in healthcare systems. This interrelates with their sustainability model: Healthpoint actively works to provide jobs for local community members in order to ensure the future sustainability of medical checkpoints. A unit typically provides between 5 and 6 community members with employment. Healthpoint aspires to ensure that their model is replicable and scalable by charging for their services. In this manner, Healthpoint’s customer base determines the appropriate size of the business and the business can appropriately and specifically address their needs. Finally, Healthpoint focuses on innovation and new methods to improve healthcare.2

A group of women gathering in a slum to learn how to jointly apply for a loan.

The Calvert Foundation, one of Healthpoint’s partners, capitalizes on such returns for investment. It specifically takes investments and provides them to poor people attempting to rebuild their business after a catastrophe has prevented them from continuing. Loans the Foundation provides are limited to 10% of the company’s assets. The Calvert Foundation, though, differs from Healthpoint in that it is a non-profit organization. Instead of implementing market-based solutions themselves, they empower other people and organizations, including microfinancing organizations, to do so.2

Healthpoint takes one approach to for-profit social enterprise: providing services. Another very common approach is providing small loans or grants, termed microfinance. A prominent for-profit microfinance institutions is SKS microfinance founded by Vikram Akula in 1998. SKS distributes loans ranging from $46 to $260 to urban and rural poor women in India. It uses a model in which the women guarantee each other’s loans and large loan amounts can only be obtained through the collaboration of multiple women. The loans are collateral free, and there are weekly meetings held in the slum communities or village centers for women who are borrowers. Furthermore, SKS standardizes its loan packages to, according to SKS, better cater to their customers. In the case that customers do not have the financial literacy to make the best use of the loans, SKS provides training to run an income generating enterprise and to manage assets through its Ultra Poor Program.3

This business model is very similar to the business model of many non-profit microlending agencies. However, SKS turns a profit of approximately 1,270 crore rupees from 7307 members. It is the largest microfinance organization in India, operating in 19 states. SKS is so successful that it has even attracted investment from other corporations, including Bajaj Allianz, an insurance company.3

Muhammud Yunus, known as the ‘father of microfinance’ for his work with Grameen Bank in Bangladesh, has expressed doubt towards SKS and similar for-profit microfinance institutions. Yunus critiques that for-profit, public organization like SKS inevitably must focus on their investors rather than the poor they are helping. He states that going public implies to potential investors that there is an opportunity to make money from poor people. Akula counters that for-profit enterprise is the only way in which to raise sufficient funds to finance all those in need and that SKS has not yet lost sight of its ultimate mission.4

Healthpoint and SKS microfinance represent successes in the world of social enterprise. Their work is similar to charitable organizations with similar goals, but they are able to turn a profit while achieving noble goals. Their business models indicate that the key to creating successful for-profit social enterprises is to engage the community by providing them with employment or by ensuring that there is regular contact with community members.

References

  1. “Transforming Rural Health Care,” E Health Point, last accessed February 28, 2012, <http://ehealthpoint.com/>.
  2. John Ydstie, “Selling Water, Health Care In The Developing World.” National Public Radio, November 22, 2011, accessed February 28, 2012. <http://www.npr.org/2011/11/22/142184691/selling-water-health-care-in-the-developing-world>.
  3. “Know SKS,” SKS, last accessed February 28, 2012, <http://www.sksindia.com/prospective_employees.php>.
  4. “SKS Microfinance,”Angel Broking, last accessed March , 2012.  <https://docs.google.com/viewer?url=http://indiamicrofinance.com/wp-content/uploads/2010/07/sks-ipo-angel-broking.pdf&pli=1>
  5. Image (CC-BY-NC): Todd Gehman, “consulting,” Flickr, September 23, 2009, accessed April 9, 2012. <http://www.flickr.com/photos/pugetive/4065331223/>
  6. Image: Dhrooti Vyas.

Dhrooti Vyas is a second-year majoring in political science and possibly biology. She is very interested in social entrepreneurship and international development, particularly new ventures in global health. Follow The Triple Helix Online on Twitter and join us on Facebook.

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