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Mar 10 / Tony

Flying toilets a problem? Get a Peepoo

Flying toilets?  That’s right — I’m not making this up.  Prior to last week I’d never heard of them either, but apparently in some parts of Africa, particularly Kenya, flying toilets are a real problem.

Kibera sidestreet

Kibera, the second largest slum in Africa and home to over 700,000 people

Leave it to Wikipedia to save the day.  Flying toilet:  ”a facetious name for the use of plastic bags for defecation, which are then thrown into ditches, on the roadside, or simply as far away as possible.”  While lack of sanitation services is a problem throughout much of the developing world, there is an alarming prevalency of flying toilets in Kibera, the largest slum in Nairobi and second largest urban slum in all of Africa.  The situation is compounded by the population density of Kibera:  while no exact population count has been conducted, officials estimate that roughly 700,000 people live in less than one square mile.  That’s less than 6 feet x 6 feet of space for every human being. Something tells me one or two of those people aren’t getting appropriate sanitation access.

While agencies around the world recognize the need for sanitation improvements in Kibera, there is still the trouble of culture.  In Kenya today, it is considered taboo for politicians to discuss issues related to human waste.  As highlighted in a United Nations report from 2006, “issues dealing with human excrement tend not to figure prominently in the programs of political parties contesting elections or the agendas of governments.”  As a result, policies and programs to improve the country’s sanitation services are infrequently discussed or implemented, particularly in the notoriously forgotten Kibera slum.

Why should we care about sanitation?

Lack of access to sanitation services is a huge global problem.  While I have highlighted the situation in Kibera above, unfortunately it is not unique.  More than a third of the world’s population, approximately 2.6 billion people, have no place to go to the bathroom.  This inevitably leads to about a billion people using water contaminated by human feces for drinking, cooking, and washing clothes.  A host of illnesses and diseases associated with unclear drinking water — diarrhea, cholera, typhoid, trachoma, and parasitic worms — plague countless people through Africa, Asia, and South America.  In fact, roughly 2 million children die each year from sanitation-related diseases.

pie-chart-waterFortunately, this situation can be greatly improved… for a price.  The same UN report from 2006 estimates that for approximately $10 billion, access to safe drinking water could be increased by 50% worldwide through the use of pit latrines.  However,  there are two main detractors from this approach:  pit latrines are 1) costly and 2) outside the usage norm of many of the world’s poorest.  While the first point is obvious, these second is often overlooked.  Even if pit latrines were to be built and made fully accessible throughout Kibera, would they be used?  Would people change their habits to begin using pit latrines and stop using flying toilets?  The answer isn’t so clear; convenience, culture, and (ironically) personal safety are major concerns.  Is it really safer for a young woman to use a communal pit latrine at night?  Will people use a pit latrine even it means waiting in line for 30 minutes (or paying a fee)?

The point is this:  the best development solutions are those with the most impact and least barriers to adoption.  While it’s clear pit latrines would have a significant effect, they don’t seem to be the best option.  However, Anders Wilhelmson may have developed the key.

The Peepoo:  an elegant solution to a pressing problem.

Peepoople:  makers of the Peepoo

Makers of the Peepoo

Every once in a while an idea comes along that seems so simple and straightforward, you can’t help but wonder why it wasn’t invented years earlier.  Peepoo is one of those ideas. Rather than replace flying toilets with pit latrines or another form of waste management, Peepoople (a Swedish social enterprise) simply created a better bag.

Traditional flying toilets are thin plastic bags, often leaking or ripping and producing an unsanitary and foul-smelling situation upon use.  The soil becomes contaminated wherever the bag is ultimately deposited, and research on the Peepoo website indicates the pathogens found in human feces remain harmful for up to two years.

Peepoople has addressed these issues by creating a bag with four main characteristics:

Self sanitising
Biodegradable
Feriliser after use
  1. Single-use
  2. Self-sanitizing
  3. Biodegradable
  4. Fertilizer after use

Like its traditional counterpart, the Peepoo is a single-use bag with which people can go to the bathroom.  However, the Peepoo contains both a thicker outer bag lined with urea and an inner gauze.  The bag and gauze combine to absorb urine and retain both solid and liquid waste after use, while the urea works to neutralize harmful pathogens in only 2-4 weeks (from 1-2 years for untreated feces).  Furthermore, the bag is made of biodegradable plastic, 45% of which is produced using renewable materials (and the team has plans to increase that to 100% in the near future).  Because the bag itself is no longer a pollutant, the Peepoo and contained waste can be used or potentially sold as fertilizer.

peepoo-howto

How the Peepoo works

Does the Peepoo provide a sanitation solution that meets the needs and norms of people in Kibera today?  Absolutely.  The only remaining issue is cost, but Peepoo delivers here as well.  The expectation is that the bags will be sold for a price comparable to traditional flying toilet bags (2-4 cents).  Because the Peepoo provides consumer improvements to the standard flying toilet design — most notably a cleaner and better smelling process — in addition to better sanitation, it should be expected that the new bag will be able to compete in the existing flying toilet market (even if it is priced at a slightly higher cost).  Morever, because the Peepoo solution involved no infrastructure costs, the cost of the individual Peepoo bags could be offset by local government or foreign aid subsidy.  $10 billion in aid to produce dramatically better sanitation?  Try $0.

The Peepoo meets both cultural and developmental needs, doing so both cheaply and practically.  It’s no wonder that Andrew Wilhelmson, the founder of Peepoople, was selected as Sweden’s first Ashoka Fellow just this past November.

peepooThe first 20,000 Peepoos were distributed as part of a pilot initiative in Kibera in October 2009, while the startup is expecting to begin full-scale distribution in Fall 2010.  There’s no doubt we’ll be hearing more about this exciting innovation in the months to come.

Learn more about the Peepoo at www.peepoople.com.

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Mar 8 / Tony

Husk Power Systems, the latest Acumen Fund investment

Last week Acumen Fund announced a new $375,000 investment in Husk Power Systems, an innovative Indian startup creating an “off-grid” system for generating electricity from rice husks.  The rice husks, generally a waste product during the harvest process, are converted to combustible gases to drive an electricity-producing generator.  The process is simple, clean, scalable, profitable, and is beginning to provide thousands of rural Indian families with affordable electricity.

Husk Power Systems:  rural electrification from rice husks

Husk Power Systems: rural electrification from rice husks

The problem

While electricity usage rates have continued to grow steadily over the past 30 years, and 92% of urban households currently use electricity as a primary source of lighting, the usage rate is only 53% in rural India.  The rate is even lower in more remote parts of the country, and most regions still suffer frequent blackouts from lack of sufficient supply.  The electricity that is available is generally produced from coal, and families without burn kerosene and run diesel generators.  In short:  the existing electricity supply is lacking, of poor quality, and is destructive to the environment.

Enter Husk Power Systems.  The goal of HPS is to provide rural Indian families an affordable electricity supply.  Beyond affordability, HPS’s system is localized (and thereby less prone to supply-driven blackouts) and provides a new supply of jobs and income for local workers.  Additionally, electricity generated by burning rice husks is better for the environment (no longer requiring the use of fossils fuels), the ash by-product can actually be used as fertilizer, and farmers can now earn an additional revenue stream themselves by selling their previously discarded rice husks.  It’s really a win-win for all parties involved, and that’s exactly why Acumen made its investment.

By the end of this year, Husk Power Systems plans to have 50 plants up and running, providing about 125 villages with electricity.  And they’re not finished there; the startup plans to scale to 2,000 plants in the next few years, eventually serving over 20 million people through their off-grid system.

Who are the folks behind HPS?  I did a little digging and found an article first mentioned in Fast Company in December 2008.  Two University of Virginia business school grads, with two additional contacts in the field, started the company in March 2008 while they were still in school.  About two years later, the company’s up and running with investment to last for the foreseeable future.

Just another great example of a business succeeding while still doing good.

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Mar 2 / Tony

Is increasing the minimum wage good for poor Americans?

Anyone that knows me will tell you I love to learn.  Now that I’m done with college, I’ve found I actually miss lectures and have been looking for ways to fill my “learning void.”

Enter The Teaching Company, my latest obsession.  Since reading a recent glowing review by Bill Gates, I have been listening to a Teaching Company lecture series by Prof. Robert Whaples titled “Modern Economic Issues.”  In the past 18 lectures, Prof. Whaples has walked through the economic advantages and disadvantages behind many of the major political issues today:  unemployment, trade imbalances, budget deficits, social security, health reform, pollution, and poverty.  I listen to these 30 minute lectures every day – one on my way to work, and another on my way home – and have been very impressed so far.

Today we discussed the reasons behind the minimum wage, and how it affects the US economy.  As someone interested in poverty reform, I have often thought of the minimum wage as an effective tool to provide more workers with a “living wage.”  That is, by increasing the minimum wage more workers will be able to earn an income above the poverty line.  However, it seems my inclination may have been short-sighted.

minimum-wage-takes-effect

US minimum wage increased to $7.25 in 2009. Good or bad?

The two major arguments in favor of increasing minimum wages are that it 1) increases the take home pay and standard of living for the poorest workers and 2) does so while encouraging employees to work hard at their jobs (an argument often used against traditional welfare programs).  Arguments against minimum wage laws cite a subsequent reduction in the number of available low-income jobs and lower profit margins for small businesses.  The logic goes that if businesses have to pay higher wages, they’ll either hire fewer workers or increase prices for end consumers to offset their higher labor costs.

Which group is right?  Are minimum wage laws an effective way to reduce US poverty?

Economists are basically split 50/50 on the issue.  Research conducted by Whaples in 2006 (also discussed in his audio lecture) found that while 37.7% of members of the American Economic Association supported an increase in the minimum wage, 46.8% were in favor of its elimination.  Other research, most notably the work of Card and Krueger in 1992, have found increases in the minimum wage has little to no negative labor effect on workers (while obviously increasing employee incomes); in other words, business owners don’t hire fewer workers.  Yet this research has come under much scrutiny recent years, and the debate continues to rage on.

The most damaging evidence I’ve found against raising the minimum wage is the fact that an increase in minimum wages only affects a small minority of poor families.  Looking at Census data from 1996, researchers have found that poor families constitute only 20.9% of the minimum wage workforce, and only 11.7% of minimum wage workers are the only breadwinners in their families.  In fact, a 2007 analysis by the Congressional Budget Office (CBO) found that raising the minimum wage from $5.15 to $7.25 (the current national minimum) would provide an additional $1.6 billion in wages to workers, but only 15% of those workers would be from poor families.

In short, current evidence indicates that:

  1. It’s unclear whether increasing minimum wages are overall beneficial or harmful for the economy, and
  2. Raising the minimum wage, if anything, benefits a majority of workers who are NOT poor.

Given this background, I don’t feel comfortable speaking to whether raising the minimum wage is overall good or bad economic policy.  However, it does seem clear to me – particularly because of point #2 above – that minimum wage laws are probably not the best way to provide assistance to poor people.

Is there a better way to provide higher incomes to poor families?  Yes. How?  The Earned Income Tax Credit (EITC).

Originally enacted in 1975, the EITC is a refundable income tax credit designed to encourage low-income workers while offsetting the burden of US payroll taxes.  Based on the number of dependent children in the family, claimants receive a several thousand dollar additional tax refund each year.  And because this is a tax credit, as opposed to a deduction, claimants don’t have to itemize their deductions (a task not often done by individuals below the poverty line) and can receive a credit regardless of their income.

The EITC is a huge program, providing almost 21 million American families with over $36 billion in refunds in 2004.  While there are certainly complaints about the program, most notably that it requires a large amount of taxpayer funding, it’s much more effective in targeting poor families than any minimum wage law (remember, only about 20% of minimum wage earners are from families below the poverty line).  And while tax dollars are required, that same amount would likely have been hidden in increased costs of goods sold by business trying to maximize profits and offset rising labor costs.  Those cost increases would ultimately be paid by consumers.

Other solutions to provide higher incomes to poor families are available and currently being pursued by the US today.   However, few economists doubt the ability of the EITC to directly and efficiently provide poor Americans with income assistance, much more so than an increase to the minimum wage.

To answer the question of this post, is increasing the US minimum wage a good thing?  Maybe.  And then again, maybe not.  What is clear is that it is not the most effective way to increase the incomes of poor Americans.

Minimum wage infographic from BillShrink.com

Minimum wage infographic from BillShrink.com

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Mar 1 / Tony

ProInspire: Matching young business professionals with amazing nonprofits

In my recent quest for new and exciting opportunities in the social sector, I recently came across ProInspire, a new startup that connects young business professionals with nonprofits in year-long fellowships. In only its second recruiting cycle, the Washington DC-based organization has already matched five driven young professionals (from an applicant pool of 120) with orgs in the DC area, and is planning to expand to a class of 15 this year.

ProInspire logo

Expanding the movement of people working for social impact by recruiting and training business professionals to work for nonprofits

Why is ProInspire – or, more specifically, the Inspire Fellows program – so exciting? First, ProInspire helps innovative nonprofits tackle pressing business strategy and analysis problems they’re experiencing today, similar to other consulting services (see Taproot Foundation). Second (and at least as important), it’s the first org I’ve come across to target young business professionals with only 2-5 years of experience as the social sector leaders of the future, equipping them with the training, mentoring, and hands-on experience they’ll require to address the needs of nonprofits in the future.

From my own career search, I’ve discovered a definite lack of non-profit opportunities available to young people in business. It seems most non-profits have plenty of volunteer/unpaid positions, providing a great way to get started in the social sector. However, for Millennials trying to make a difference and establish a non-profit career in business, opportunities are lacking. You need 5+ (if not 10+) years of experience, or it’s filing papers and answering phones.

Another great aspect of ProInspire is its transparency with nonprofit salary. One of the challenges highlighted on the startup’s website is the “lack of clear information about compensation ranges in the sector.” It seems many nonprofits assume they won’t be able to recruit business talent without matching salary. I think what Millennials really want is a clear salary expectation, coupled with the knowledge that while the salary is lower, they’ll be impacting an organization and cause they’re passionate about. If you’re wondering, Inspire Fellows are compensated with a $40,000 annual salary, much lower than their peers in banking, consulting, or any major corporation. Yet the 120 applicants last year weren’t turned off, and neither was I.

Me? Yep, you heard right. I just submitted my application to the 2010 Inspire Fellows program last Friday. I’m extremely excited about the work ProInspire’s partner organizations are doing and would love to be a part of it; my fingers are crossed for the next few months!

ProInspire is addressing a growing and previously unmet need of today’s generation of future business leaders. Regardless of how my application process turns out, I’ll definitely keep my eye on this startup (or, more importantly, its fellows).

Follow ProInspire

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Sep 4 / Tony

Student-run microfinance organizations in the US: An overview

I’ve recently started volunteering with ACCION USA, the largest microfinance institutition (MFI) in the US.  While the main ACCION offices are in New York and Boston, so far I have been able to virtually contribute to two consulting projects:  researching green loan products and student-run microfinance organizations in the US.

Before I go on any further, I should probably quickly define microfinance and microenterprise (I’ll be sure to expound upon these terms in a separate post later).  Microfinance, as defined by Wikipedia, refers “to the provision of financial services to low-income clients, including consumers and the self-employed.”  These services can take many forms, including credit, savings, and insurance; microcredit — the concept of giving small loans to low-income entrepreneurs — has arguably received the most press and is oftentimes confused with the broader “microfinance.”  However, most microfinance professionals will be quick to point out that microcredit alone is not enough to help clients without also providing a way to save money and (somewhat less importantly) insurance for those assets purchase with loaned funds.

A microenterprise, again using the all-knowing Wikipedia, is “a type of small business that is often unregistered and run by a poor individual.”  The vast majority of microenterprises have no employees, and by definition (according to USAID) have less than ten.  The initial capital required to start a microenterprise is also generally small, up to $35,000.

As mentioned in the About section, I’m currently in the process of starting a nonprofit focused in the student-led microfinance/microenterprise sector.  In the past several years, particularly since Muhammad Yunus won the Nobel Prize in 2006, US interest in microfinance has sky-rocketed.  This trend has not been lost on college campuses, and microfinance interst organizations — and now actual loan funds — have sprung up around the country.  In fact, nearly every major university I’ve run across generally a “Microfinance Club,” or similar entity.  While it’s unclear what the majority of those clubs actually do, at minimum we can say there is interest.

My research with ACCION has led me to focus on those organizations interested in promoted domestic microfinance.  While microfinance originally had it’s start in the 1970s with Dr. Yunus’s work in Bangladesh, it was slow coming to the US; it wasn’t until the 1990s that ACCION first established its presence domestically.  To be sure, a number of nonprofit and government small business or microenterprise development organizations have existed for decades, providing mentoring and training for business owners.  However, not until recently has the focus been on early-stage low-income entrepreneurs just starting their businesses, and providing them with loan funds.

Like the US as a whole, college campuses have also been slow to embrace domestic — as opposed to international — microfinance.  While literally hundreds of student groups exist to combat global poverty through microfinance, a select few focus on their own backyards.  Research conducted by FIELD (a program of the Aspen Insitute) and myself have yielded the following list of student organizations seeking to employ microfinance domestically:

  1. Bentley Microcredit Initiative, Bentley College
  2. BR Microcapital, Cornell University
  3. Cambridge Microfinance Initiative, Harvard University
  4. Capital Good Fund, Brown University
  5. Center for Holistic Microcredit Initiatives (CHOMI), Stetson University
  6. Community Empowerment Fund (CEF), University of North Carolina
  7. Duke Microfinance Leadership Initiative, Duke University
  8. Intersect Fund, Rutgers University
  9. Lehigh Microfinance Club, Lehigh University
  10. Loyola Microfinance, Loyola University
  11. Microfinance Alliance, University of Minnesota
  12. Penn Microfinance Club (Penn MC), University of Pennsylvania
  13. Streetbank, Georgetown University

All of the organizations above are led exclusively by undergraduate and graduate students, and are in various stages of either raising loan funds, partnering with existing domestic MFIs, or lending capital to clients.  I have already started interviewing students leaders at several of the clubs, and will summarize my findings and their organizations’ progress in future posts.

Student-run organizations are extremely beneficial to the US microfinance community for a number of reasons.  First, they’re extremely low cost; with no staff salaries to pay and most facilities and supplies provided by the university, student organizations are viable candidates for finance sustainability.  Second, the ability and capacity of top university students to deliver quality training is high.  By leveraging both their own skills and education, as well as the resources of the university, students can mobilize a large training effort.  And third, the ability of student orgs to engage the community (both university and local) and develop future leaders passionate about domestic poverty is great.  A number of groups have won grants or business plan competitions to raise initial seed funding, and nearly every organization has a significant base of student volunteers eager to participate.

The drawbacks to student-run microfinance oganizations are 1) their potential for scale and 2) their capacity to manage loan funds and make underwriting decisions.  In terms of scale, all students by definition have major commitments to the university (class, other clubs, etc) that take up a large chunk of time and energy.  Additionally, students are constantly transitioning into and out of the organization every few years.  These two factors produce a leadership team and volunteer pool that is short-term and strapped for time, making it impossible to determine how large these organizations could scale; most are engaging with only a dozen or so clients annually.  As for the loan funds, most (if not all) students are new to loan underwriting and organizations have been forced to experiment to determine appropriate loan criteria.  The several year loan terms of several clients also makes the management of loaned funds an increased difficulty, given the short-term nature of the student body described above.

In short, students are perfectly positioned to leverage resources and provide technical and business training to potential entrepreneurs, but it is not clear whether most students organizations should also be in the business of providing actual financial services.  I have several thoughts on potential hybrid solutions that may work, but that’s for another post.  Suffice it to say that the current atmosphere on college campuses concerning microfinance is an exciting one, and we will almost defintely see an increase in similar organizations in the coming terms.

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