05/06/2015

Developingentrepreneurshipamongtheworldspoorest|McKinsey&Company

BookExcerpt | McKinseyQuarterly

Developingentrepreneurshipamongtheworldspoorest
AcumenFundfounderandCEOJacquelineNovogratzsharesstoriesofsocialsectorentrepreneurship
inanexcerptfromhernewbook,TheBlueSweater.Avideointerviewwiththeauthortakesyoubehind
thebook.
March2009

JacquelineNovogratzbeganhercareerasaninternationalbankerbutsoon,aspiringtochangetheworld,
joinedanonprofitwomensmicrofinancegroupthatdispatchedhertoAfrica.Attherequestofanofficialin
RwandasMinistryofFamilyandSocialAffairs,shevisitedthatcountry,atfirsttoinvestigatethepossibilityof
startingacreditprogramforwomen.Aremarkableexperiencethereinspiredthetitleofherbook,TheBlue
Sweater:BridgingtheGapbetweenRichandPoorinanInterconnectedWorld,whichtellsthestoryofherwork
asanentrepreneurinthesocialsector.Asachildinthe1970s,shehadgiventhecharityGoodwillIndustriesan
old,bluesweater.In1987,joggingthroughRwandascapital,Kigali,shethoughtshesawaboywearingit.Shewas
rightitstillhadhernameonthetag.ForJacquelineNovogratz,thisencountersymbolizedtheideathat
humanityscollectivefuturerestsuponourembracingavisionofasingleworldinwhichweareallconnected,
justasthebluesweaterconnectedher,anAmerican,withakidinRwanda.
JacquelineNovogratzisnowCEOofAcumenFund,anonprofitventurecapitalfirmshefoundedin2001toinvest
insustainablebusinessesthatbringhealthcare,safewater,alternativeenergy,andhousingtothedeveloping
worldslowincomepeople.TheexcerptbelowcomesfromChapter5ofTheBlueSweater.
Video

JacquelineNovogratzonTheBlueSweater

AcumenFundsCEOdiscusseshernewbookandapproachtoventurephilanthropy.

AnexcerptfromTheBlueSweater
IwantedtoseewhatitwouldtaketomakeabusinessworkinRwanda.Honorata[asocialworker]toldmeabouta
projectshedhelpedcreateforsinglemothersinNyamirambo,thesectionofKigaliwherelowerincomepeople
lived.Prudence[oneofthreewomeninRwandas60memberParliament]whisperedinmyearthatthewomen
wereprostitutes.Ishrugged,asitseemedtomethewordwasusedtooeasilyinRwanda.Womenwhodancedlate
http://www.mckinsey.com/insights/social_sector/developing_entrepreneurship_among_the_worlds_poorest?p=1

1/5

05/06/2015

Developingentrepreneurshipamongtheworldspoorest|McKinsey&Company

atthesamenightclubsIdidcouldbelabeledwantonorworse.Iveworkedwiththemforyears,Honoratatold
me.Thewomenhavesuchgoodintentions,andyouwilllikethem.
Thegroup,knownastheFemmesSeulesorsinglewomen,codeforunwedmotherswasoneofmanyorganized
inpartbyHonoratasMinistryforFamilyandSocialAffairs.Thewomen,amongthecityspoorest,wouldgather
fortrainingandincomegeneration.Thisgroupfocusedonabakingprojectandsewingdresses.Inamoment,it
wascleartomethatincomegenerationwasamisnomer.Onlyonewomanwassewing,therestweresittingand
waiting.

Podcast

Therewereabout20ofthem,identicallydressedingreensmocks.Bowingmyhead,I
saidhello:Amakuru.Faceslitup.Inunison,thewomenrespondedImeza,meaning

Developing
entrepreneurship
amongtheworlds
poorest

fine.WhenoneortwobegantalkingtomeinKinyarwanda,IlookedatHonorataand
feltgreatreliefwhenshebegantotranslate.Anysmallefforttocommunicateonmypart
elicitedgraciousappreciation.ThewomenapplaudedwhenIusedsomeSwahili,forat
leastmostoftheMuslimwomenspokethatlanguage.

Asolid,affablelookingwomannamedPriscastoodinfrontofthegroup.WhilePrisca
andIspokeFrench,thewomenstared.InRwanda,childrenoftheelitesweretaughtFrench,butthepoorlearned
onlyKinyarwanda.Mostofthesewomenhadspentonlyayearortwoinschoolatmostandcouldntspeakaword
ofFrench.Theyseemedtorangeinagefrom18totheirlate20sandcarriedthemselveswithanairofinnocence
andsimplicity.Theirdressescouldhavepassedforprisonattire.
IaskedPriscatohelpmeunderstandthebakedgoodsproject.Itssimple,shesaid.Eachmorning,several
womencomeveryearlytopreparethedaysselection.Itisalwaysthesame.Iwouldcometoknowthatselection
betterthanIwantedto:beignets(friedlumpsofdough),batonnets(thesamedoughmoldedintosticksandfried),
samosas,tinywaffles,andhottea.Thewomenwouldtakethegoodstothegovernmentofficesinthemiddleofthe
morningandsellthemfor10francseach.Theydthencomebackwithwhatevercashtheydearnedandgiveitto
Prisca.
Inconcept,Ilikedtheidea.IknewfromexperienceatUNICEFthatpeoplewouldgethungryby10:30or11:00in
themorningbecauseeveryonearrivedatworkat7:30anddidnthaveabreakuntillunchtime.Therewerenolittle
storessellingsnackfoods,andpeoplerarelybroughttreatsfromhome.HowcanIbeofhelp?Iasked.Prisca
answered,Thewomenaretoopoor.Theyearntoolittlemoney.Theyworkeveryday,buttheprojectislosing
money.
Howmuchdothewomenearn?Iasked.Fiftyfrancsaday,Priscaresponded50cents.Andmostareraising
multiplechildren.Howmuchdoyoulose?Priscatookouttheledgerinwhichsherecordedeveryfrancspent,
earned,andpaidtothewomen.Onaverage,theprojectwaslosingabout$650amonth.Whocoversthelosses?I
asked.Twocharities,Priscasaid.ButIdontknowhowlongtheywillrenewourfunding.
Sixhundredandfiftydollarsamonthtokeep20womenearning50centsaday.Youcouldtripletheirincomesif
yougavethemthemoney.Itwasaperfectillustrationofwhytraditionalcharitytoooftenfails:wellintentioned
peoplegavepoorwomensomethingnicetodoandsubsidizedtheprojectuntiltherewasnomoneyleft.Thisisa
nofailwaytokeeppeopleinpoverty.Iwonderedaloudwhythecharitiesdidntgettiredofkeepingtheenterprise
going.Howwouldthissurviveinthelongterm?Howwouldthewomenchangetheircircumstances?Prisca
shrugged.Peoplegetby.
http://www.mckinsey.com/insights/social_sector/developing_entrepreneurship_among_the_worlds_poorest?p=1

2/5

05/06/2015

Developingentrepreneurshipamongtheworldspoorest|McKinsey&Company

Prisca,thatsnotenough,Isaid.No,shesaid,visiblyembarrassed,itisnt.Iwasfoolishtostartwith
criticism.ThisiswheresomanyWesternersfail:afteraquickappraisal,werereadytotellpeopleinlowincome
communitiesnotonlywhatswrongwithwhattheyredoingbutalsohowtofixit.Iapologizedandtriedagain:
Couldyoubesellingmore?Couldyoucutcosts?Theyalreadyhad,Priscaexplaineditiseasiertofindmore
peopletobuythantocutcosts.Illmakeadealwithyou,Isaid.Ifwedropthecharityandrunthisasa
business,Illhelpmakeitwork.Iheldoutmyhand.AreyouOKwiththis?
Priscaliftedherlefteyebrow.Whenshetookmyhand,sheemphaticallyrespondedSana,meaningverymuch
inSwahili.Ourgoalswouldbethoseofanybusiness:toincreasesalesandcutcosts.Wedstarttomorrowandturn
thisprojectintoarealenterprise.
Istartedearlynextmorning.Thewomengreetedmewarmly.Withoutacommonlanguage,wecommunicated
throughgesturesandsprinkledwordsofFrenchorSwahili.Whilethewomenpreparedforthemorning,I
reviewedthebooksmorethoroughlythanIhadthepreviousafternoon.Thebakeryhadalongwaytogo,butthe
feelingofstartingsomethingthathadachanceofchangingpeopleslivesinvigoratedme.Theworldhadwritten
offthislittlegroup,yettheyhadachancetodosomethingimportantforthemselves,andmaybetheywould
changeperceptionsofwhatthepoorestwomenarecapableofaccomplishing.
Becausewestartedwith20women,itmadesensetoexpandourrevenuesquicklytocovercosts.Ratherthan
convinceourfewcurrentcustomerstobuymoredoughnuts,weneededtoincreasethenumberofpeoplewe
served.TheonlywayIcouldthinkofachievingthiswastotargetagenciesandinstitutionswithenoughemployees
tomakeitworthourwhiletovisit.
IaskedPriscatotranslate:whowillvolunteertocomewithmeandspeakwithambassadorsandagencydirectors
toseeiftheywillofferourbakeryservicestotheiremployees?Twentyfacesturneddownward.Dontworry,I
said.Illdothetalking,butyouneedtolearntomarket.Nomovement.Consolatamadethemistakeofglancing
up.Ichoseher.Whatdoyounormallysaytopeopleintheofficeswhenyouwanttoselltothem?Iaskedher.
Normally,Idontsayanything,shenearlywhispered.Ijustwalkthroughthegovernmentagenciesand
everyoneknowswhatImcarrying.
WevisitedfiveembassiesandmostUNagenciesthatfirstlongday.ThoughConsolatasaidlittle,wemade
progress.AftertheFrenchEmbassyagreedtoinvitethewomentotheirofficesthenextmorning,Igavehera
stronghugand,afteramomentofshock,shehuggedmeback.WearrivedatNyamiramboexhausted,bothofus
contentwehaddoubledthenumberofcustomers.
Thenextmorning,Ifoundthewomenhardatwork,cookingdoughnutsinatraditionalwoklikepotoveranopen
fire,producingalovelymelodytoaccompanythecrackleofhotoilshimmyingasthelumpsofdoughhitthepan.
By8:00AM,othersbeganarrivingtoclean,helpwithcooking,andorganizethefreshlymadegoods.Iwatched
Josephaandtheotherschoosetheirselections.Theywouldwalkintothestreetanddisappearintoacrowded
minibus.Foratleastsome,thenewdaytookcourage,fortheyweregoingtoembassiesandotherplacestheyd
neverbeenbefore.
Salesjumpedinthefirstweek,butnotasmuchastheyshouldhave.Somethingwaswrongwithourinventory
accounting.Wedidntmakeenoughmoneyinrelationtowhathadbeenprepared.Whenthewomenreturnedand
gaveusthecashtheydearned,PriscaandIcouldntaccountformorethanathirdofthegoodsproduced.My
heartsankwiththeknowledgethatwomenwerestealing.Wewereputtingsomuchgoodwillintothisintothem.
Didnttheyoweusaccountability?
http://www.mckinsey.com/insights/social_sector/developing_entrepreneurship_among_the_worlds_poorest?p=1

3/5

05/06/2015

Developingentrepreneurshipamongtheworldspoorest|McKinsey&Company

Notfromtheirperspective.Onewomanhadtoldusshedsold10products,butbyourcalculationsshehadtaken
23.Shewaseatingalotofdoughnutsorsellingthemandkeepingthemoney.IwascrushedPriscawasmore
sanguine,remindingmethatanumberofwomenwerebeingcompletelyhonest.
Thewomenweretestingmymettle.Wecouldntcountontheirbeinghonestoutofappreciationalonetheyd
seentoomanylikemecomeandgo.Thebiggerquestionwashowtofixtheimmediateproblemandthencreate
therightincentivesforthebusinesstosustainitselflongafterIdleft.Theexistingbookkeepingsystemlacked
accountability.Noonenotedhowmanygoodseachwomantookinthemorning.
PriscaandIstayeduplatecraftingasimplesystemthatwouldensureaccountabilityandrewardindividual
behavioraswellasgroupsuccess.Inthemorning,wedeliveredasterntalkabouthowwewereallinthistogether.
Iftherewereprofits,everyonewouldshareinthem.Iftherewerelosses,everyonespaywouldbereduced.The
womenwouldbepaidabasewageandearnacommissiononsales.Thesuccessofthisventurewouldbecomethe
responsibilityofthewomenthemselves.
Westillhadworktodoinbreakingthecharitableprojectmentality.EveryFridaywegatheredforacombination
ofBusiness101andpeptalk.OftenIwouldaskthewomentoplayroles.Consolata,Imsittingnexttoyouonthe
minibus,feelinghungry.CanyousellmesomethingbeforeIgetoffthebus?WhenPriscatranslated,theroom
eruptedwithgiggles.Priscasmiledherohpooryouwhohavesomuchtolearnsmile.Why?Iasked.Because
womendonotjustaskstrangerstobuythingsonbuses,shesaidwithanairofexasperation.Whynot?The
womenburstoutlaughingagain.Priscaexplained,Becauseitisnotpoliteaeuphemismforitisnotdone
here.
Priscasaidkindly,softly,Jacqueline,youaresoAmerican.Here,womenwontlooksomeoneintheeye,wont
talktosomeonetheydontknow.Youhavetoacceptit.Iknowthat,Prisca,Ido,Isaid,exasperated.Ijustwant
togivethewomenachance.Ihaveneverunquestioninglyacceptedthestatusquo,sowhyshouldwedothatin
Rwanda,wherechangecanbegood?Iunderstandyou,Priscasaid,butchangeisslowhere.Youhavetogive
thewomentime.
OK,watchthis,Isaid.Grabbingabucketfilledwithlittledoughnutsandwafflesandsamosas,Imarchedupto
thestreet.Standingoutfront,Italkedtothepeoplepassingbyandinnotimesoldtendoughnuts,morethansome
womensoldallday.ThenIturnedaroundwithaflourish,marchedintotheroom,andtookabow.Thewomen
clappedandchortled.Priscaheldherfaceinherhandsandshookherhead.Jacqueline,noonewillsaynotoatall
AmericangirlsellingthemthingsonthestreetsofNyamirambo!
ButIwouldnotacquiesce.Toincreasesales,Irancompetitionstoseewhocouldsellthemost(noonewould
participate).Iheldtrainingsessionsonhowtotreatcustomers(theresponsewastepidatbest).Icontinuedthe
peptalkseveryFridayandremindedthewomenthatweweregoingtocreatearealbakery.Priscawouldtranslate
andthewomenwouldsmilepatientlyandsalesbegantoimprove.Finally,somethingwasworking.
Withinseveralmonths,theprojectwasprofitable.Thewomenwerecomingtoworkontimeand,thoughtheystill
werententhusiasticsalespeople,moreandmoreinstitutionssignedupfordeliveries.Thewomenbegantosee
forthefirsttimeintheirlivesacorrelationbetweentheefforttheyputintoworkandtheincometheyearned.
Theybegantobelievetheorganizationcouldsucceedandthattheywouldplayakeypartinthatsuccess.
Still,foreverytwostepsforward,therewasoftenoneback.Oneafternoon,Ireceivedacallfromafriendwhohad
expectedthewomentodeliveranorderforapartynothinghadarrived.Priscainformedmethatnoneofthe
womenondutyhadshownup.Welearnedtheydallgonetothefuneralofafriend.ThatFriday,wecalleda
http://www.mckinsey.com/insights/social_sector/developing_entrepreneurship_among_the_worlds_poorest?p=1

4/5

05/06/2015

Developingentrepreneurshipamongtheworldspoorest|McKinsey&Company

meeting.Wetalkedaboutpromisesmadeandkept.Werenottellingyounottogotothefuneral,Priscatoldthe
women,butthereareenoughofusherethatyoucanfindareplacementforyourselfifyoucantwork.Thisis
yourbusiness.
OnemorningIwalkedintotheofficesatUNICEFandwastoldbyafranticofficeassistantthateveryoneinthe
cityissufferingfromeatingthebakedgoods.Whatdoyoumeanbysuffering?Iasked.Youknow,hesaid,
theyarehavingpainsintheirstomach.Icalledtheembassiesandgovernmentofficestoapologizeandpromised
totakecareoftheproblem.
Iapproachedthewomencooking.Everyoneissickwiththeruns,Isaid.Didyoudoanythingdifferently?They
shooktheirheads.Iaskedtoseewhattheywerepreparing.Thesmellwasstale,sour,rancid.Whendidyoulast
changethecookingoil?Iasked.Oh,never,Josephaansweredgleefully.Wehavebeenaddingjustalittlemore
eachday.Wearekeepingcostslowsowecanhavemoreprofit.Nextlesson:qualitycontrol.
Despitethebumps,withinafewmonthswehadcorneredthesnackmarketinKigali,expandingbeyondfried
dough.Istilldidtoomuchofthemarketing,butintimethewomengainedtheconfidencetoventureintostoresto
replenishorders.Withineightmonthsorso,thewomenwereearning$2aday.Fewpeopleearnedthatkindof
moneyinRwanda,certainlynotwomen.Forthefirsttime,theirincomesallowedthemtodecidewhentosayyes
andno.Despitethefailuresandsetbacks,thelittlebakerycontinuedtoflourishunderPriscasleadership.It
operatedforalongtimeafterIleftuntilthegenocidedestroyedsomuchofwhatwasbeautiful.
Thestoryofthebakerywasthetransformationthatcomeswithbeingseen,heldaccountable,succeeding.Ihadthe
privilegeofwatchingthewomenacquireasenseofdignityoncetheyweregiventoolsforselfsufficiency.I
discoveredthepowerofcreatingabusinesswithrealaccountability.AndIlearned,maybemostimportant,to
listenwithmyheartandnotjustmyhead.

http://www.mckinsey.com/insights/social_sector/developing_entrepreneurship_among_the_worlds_poorest?p=1

5/5