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The growing demand for sustainable investments has brought a greater degree of scrutiny to the industry, as it attempts to address rising concerns about greenwashing. But as Shaan Madhavji and Anna Helena Chaim at Impaakt point out, many investors still have a lack of knowledge about the true impacts of their investments. They explain how Impaakt’s free “How Sustainable to Me?” tool provides retail investors with transparent impact data that allows them to align their investments with their values.As the world is pressured by the urgency of addressing social and environmental challenges, the role of sustainable finance has become increasingly vital. This can be seen in individual investors’ evolving expectations and priorities, as a remarkable 80% now believe that market rate financial gains can be balanced with a focus on sustainability, with the same percentage also considering a company’s efforts to reduce its climate impact when making investment decisions, according to a recent Morgan Stanley report. This interest is driven by new climate science findings and the strong performance of sustainable investments: In 2023, sustainable funds outperformed traditional funds, delivering an overall return of 12.6%, which is almost 50% higher than that of traditional funds. Yet the growing demand for these investments has brought with it a greater degree of scrutiny and accountability. This contributed to a decline in global sustainable investment assets, as measured by the Global Sustainable Investment Alliance in its most recent report, which found that these assets fell to US $30.3 trillion in 2022, a 15% decrease from 2020. The report attributed this decline to methodology changes made by Alliance member US Sustainable Investment Forum, which tightened its standards regarding what qualifies as a sustainable investment in an attempt to address rising concerns about greenwashing.  These trends reflect a maturing industry that is now demanding greater transparency and clarity around sustainable investments. They also highlight the fact that challenges related to greenwashing present a real threat to the growing momentum of sustainable investing.   The Challenges of Transparency and Greenwashing Investors’ concerns about the transparency of sustainable investments are valid: Many businesses and investors have increased their greenwashing practices, often providing vague or false information about the social and environmental impacts of their operations. For instance, a 2023 report found that 54% of companies in North America, Asia and Europe misrepresented their contributions to greenhouse gas emissions, global pollution and other climate change-related issues. It also found that greenwashing instances by global banks and financial service companies increased by 70% between 2022 and 2023. Investors have taken notice of these practices, with large majorities citing potential greenwashing and a lack of trust in ESG reporting data as major barriers to investing in sustainable funds. The absence of standardized reporting and measurement approaches within the ESG frameworks exacerbates this problem, leading to issues for investors when comparing and assessing different companies’ performance. Further complicating matters, ESG assessments, which essentially focus on financial materiality — i.e., how environmental and social issues can influence a company’s financial performance — are often insufficient for making trustworthy, informed investment decisions. They typically neglect impact materiality, which evaluates how a company’s actions and strategies affect society and the environment at large. Due to these issues, many investors feel inadequately supported in their efforts to invest sustainably. The Morgan Stanley report mentioned above found that a majority of global investors (52%) report having limited knowledge about how to start investing sustainably, while 43% say they lack sufficient financial advice. And these percentages are even higher among investors who report that they’re “very interested” in sustainable investing. It’s clear that there’s a significant need for better guidance and support in sustainable investment decisions, combined with a growing demand for reliable data on companies’ true impacts.  This is precisely the challenge Impaakt is addressing with the launch of “How Sustainable to Me?” (HSTM), a groundbreaking free tool that gives individuals the power to scrutinize the social and environmental impacts of the companies they invest in. In a landscape often obscured by greenwashing and a lack of transparency, HSTM aims to provide a beacon of clarity for retail investors who seek to align their investments with their personal impact criteria. Through HSTM, we’re providing a comprehensive framework to evaluate companies’ genuine sustainability performance and impact, free from the influence of greenwashing tactics.   Impaakt’s Wiki of Sustainability HSTM is driven by Impaakt’s Wiki of Sustainability, an open-source database that relies on transparent research, simplified language and a stakeholder-focused approach to impact measurement, in contrast to traditional impact data models and assessment methodologies. Since 2018, this database has been drawing on the work of civil society and the platform’s 60,000 contributors, to document, analyze and assess the environmental and social impacts of over 5,000 companies. The data is mapped against various frameworks, such as the Sustainable Development Goals, the Investment Leaders Group themes and Impaakt’s Products vs. Processes categorization. A team of reviewers strictly verifies the research to ensure accuracy and reliability.  Drawing upon a diverse array of impact metrics, the Wiki of Sustainability goes beyond ESG data, which often focuses on processes, policies and risk management: Instead, it gathers impact data focused on the most significant impacts a company is making on the environment and society. This open-source wiki provides investors with a nuanced and granular understanding of companies’ sustainability impact, transcending the limitations of “one-size-fits-all” sustainability data.    Empowering individuals to invest in their convictions Building off this wiki, HSTM aims to shake up the sustainable finance sector by giving retail investors (instead of their investment managers) the power to decide for themselves what constitutes a sustainable investment. To generate bespoke sustainability scores, HSTM allows individuals to input their sustainability preferences for six environmental and social topics. Whether one prioritizes climate change, biodiversity or poverty alleviation, to name a few of these impact topics, the tool provides tailored insights that resonate with each investor’s unique perspective. Once investors have specified the importance of each impact topic, HSTM uses a fast, automated process to generate a list of companies that align with their values. They’ll receive a customized list of “heroes” and “villains” — i.e., companies that do or don’t align with their values — to explore. Additionally, investors can scan their existing investment portfolios to highlight the true sustainability impact of their holdings. Whether they actively manage their investments or have a 401K on autopilot, the tool provides investors with actionable insights that enable them to easily build an exclusion list of companies they can send to their investment manager, who can adjust their portfolio accordingly. By enabling informed decision-making, HSTM empowers investors to reallocate their capital towards companies that uphold robust environmental and social standards, thereby driving positive change from the bottom up.   A Call to Action for Business Leaders As stakeholders in low- and middle-income countries (LMICs) continue to navigate the complex interplay between economic development and sustainability, the role of business leaders in driving positive change cannot be overstated. By accessing robust impact data on major companies with full transparency on the impact assessment methodology, LMIC business leaders can also use HSTM to understand their organizations’ sustainability footprints better, identifying areas for improvement and innovation. Anyone can browse HSTM’s impact data, compare it against several frameworks, and identify relevant key performance indicators and impact metrics for a given industry. In addition, the tool allows users to access impact analyses and rankings, to easily identify the best-in-class companies in terms of sustainability, and the ones that still need to make significant improvements.  By enabling access to this comparative data, HSTM catalyzes actionable change within LMICs and beyond — whether it involves enhancing supply chain transparency, promoting renewable energy adoption or fostering inclusive business practices.   Paving the Path Towards Sustainable Finance In an era of unprecedented environmental challenges and social inequities, the imperative for sustainable finance has never been greater. Yet the path to genuine sustainability is filled with obstacles, from greenwashing and soft regulations to the lack of standardized impact metrics. However, we now have access to tools like HSTM that allow people to understand the impacts of their investments, and directly hold companies accountable for their actions. This makes room for a new era of democratized sustainability, where individuals hold the power to drive meaningful change and contribute to a more equitable and environmentally conscious future. By embracing sustainable finance and investing in companies that prioritize social and environmental responsibility, each of us has the opportunity to become agents of positive change. Let’s seize this moment to align our investments with our convictions, knowing that together, we can build a more sustainable, just and prosperous world for generations to come   Shaan Madhavji is the Community and Engagement Manager and Anna Helena Chaim is the Marketing and Communications Analyst at Impaakt. Photo courtesy of Medienstürmer     You May Also Be Interested In:Avoiding the ‘Ick Factor’: Four Easy Steps to Align Your…How to Become an Impact Investor: Five Tips to Align Your…Cashing In on Sustainability: A Blended Finance Program Aims…

The ability to make life-changing purchases — from buying a home to setting up a business — usually relies upon acquiring credit. But as Mansoor Hamayun at Bboxx explains, in many emerging markets, it’s incredibly difficult for the average citizen to obtain a credit score. He explores the obstacles to credit scoring in Africa, and discusses how Pay-As-You-Go financing of solar products — combined with innovative approaches to consumer subsidies — can be leveraged to boost access to credit scores and essential financial services in underserved communities.Wherever you are in the world, the ability to make life-changing purchases — from buying a vehicle or a home to setting up a business — usually relies upon acquiring credit. If you want to get a loan in Europe or the U.S., it’s usually a straightforward process. Even if you have a less than impressive credit rating, you can find an accredited loan provider who will offer you a short-term loan (albeit at an exorbitant interest rate). In these more developed economies, credit scoring systems are well-established, with individuals’ financial histories — both revenues and debts — meticulously tracked. Building a credit score is even seen as a common step on the journey into adulthood, with many “credit builder” credit cards on the market, geared toward younger borrowers without extensive financial histories. This enables much easier access to credit — and all of the life-changing products and services it unlocks. But in many parts of the world — including Africa — it’s incredibly difficult for the average citizen to obtain a credit score at all. And without a credit score to your name, finding a certified lender who is willing to provide you with a loan can be next to impossible. As a result, there is a huge opportunity to transform lives for the better by providing access to the financial services unlocked by credit scores — and these services can be the difference between whether or not African communities are able to become economically self-sufficient. So why is it so difficult for borrowers on the continent to obtain a credit score? And what can we do about it?   The Obstacles to Credit Scoring in Africa One of the main obstacles facing these consumers is that, as of 2021, around 1.4 billion adults remain unbanked globally, with an estimated 105 million adults in sub-Saharan Africa among them. Without a bank account — or credit cards, mortgages or loans — there is no formal credit history for these consumers, and credit rating agencies are unable to compile and assess individual consumers’ profiles. This situation persists because a significant proportion of the African economy is informal and cash-based. While COVID-19 encouraged millions more people in the region to use mobile money payments, most transactions in sub-Saharan Africa still take place using cash, leaving scant paper trails. This is hardly surprising, since the formal financial infrastructure in Africa is limited in its reach, operating primarily within urban areas. But it makes it difficult for the continent’s broader population, which remains largely rural, to access the types of financial products, such as credit cards, that would help them build a credit history. Similarly, financial education is limited, making it more difficult for providers to communicate the value of these products. All this means that many transactions and financial activities go unrecorded, leaving a significant portion of the population financially invisible to traditional credit bureaus. This gap in data not only stifles individuals’ economic potential but also hampers the continent’s overall economic development. Clearly, the African market is different from markets with more developed and widespread financial infrastructure. So it needs a different solution to extend credit access to its consumers.   How Pay-As-You-Go Financing Can Transform Credit Scoring At Bboxx, we have been working across Africa for the past 14 years, initially providing electricity through solar home systems, and more recently expanding into additional essential services including clean cooking, internet access and e-mobility. What makes us unique is the intersection between our Pay-As-You-Go financing model and our innovative technology. For example, by using a proprietary Smart Cooking Valve which interfaces with liquefied petroleum gas canisters, we’re now able to offer Pay-As-You-Go clean cooking solutions that cost less than polluting and harmful traditional cooking methods like charcoal. Many of our customers are based in rural areas, with no formal bank accounts, pay slips or work contracts. Despite this, our Pay-As-You-Go business model enables us to create credit scores for these customers — something which was previously unthinkable in sub-Saharan Africa. We have built a unique system, powered by the data collected from the Pay-As-You-Go mobile money payments of more than 750,000 customers, that allows us to build reliable credit models for each of our customers and, in turn, offer financing to empower them and their families to transform their lives. Our model represents a significant departure from previous attempts to offer solar energy and clean cooking solutions, which relied heavily on down payments — an approach that made these products less accessible to those without credit or formal financial histories. By utilising real-time financial data, combined with our ability to remotely control services based on whether or not a customer has paid, we can offer a broader spectrum of services that can be remotely managed — from electricity to mobile internet. And thanks to these live insights into customer financial behaviour, we can extend credit directly to consumers. This approach not only facilitates greater consumer access to essential services, it also generates novel financial data that reinforces our understanding of our customers’ creditworthiness. The credit score we generate is adjusted based on repayment reliability, weather conditions and other external factors, and customers are advised on how to improve their score. The goal, after all, is to build long-term relationships with our customers. What we have demonstrated is that it is possible to build credit scores which don’t rely on traditional data collection methods or require access to the types of finance and credit-building found in more developed markets. As you might expect, many of our customers are building digital credit histories for the first time. But despite being excluded from mainstream financial services, our data shows that these customers are highly reliable, and no less deserving of credit access than customers outside of Africa. This model can cover any service that can be switched on or off, and can therefore be plugged into products and services offered by third-party providers, as shown by our recent collaboration with clean cooking partner SP. Through our data-driven super platform — which includes data coming from any third-party providers that use it — we are collecting in excess of 10 million data points daily, giving us extraordinary power to predict consumer patterns. Thanks to these second-by-second insights, we know that the main factors that affect credit score are education levels, postal code, gender and age. However, as I revealed in an article last year, the single greatest external factor in whether a customer defaults is the weather — a reflection of the profound impact of environmental conditions on economic stability in sub-Saharan Africa, and the power of data to inform economic decision-making. Beyond its impact on customers, access to real-time data on energy consumption patterns has the added benefit of helping investors to identify the most promising clean energy projects, including off-grid solar projects in rural areas, and energy efficiency and e-mobility initiatives in urban centres. Having live data on repayment rates and credit scores also enables investors to assess the viability of loan-repay services across the continent — all of which benefits African consumers. In markets lacking centralised financial infrastructure — which include much of sub-Saharan Africa — finance accessed in a decentralised manner, like mobile money, must necessarily be part of the solution. Data shows that the lack of a mobile phone is a common reason cited in sub-Saharan Africa for not having a mobile money account, and that’s one of the reasons Bboxx is partnering with telecommunications companies across Africa (including MTN) to extend internet and mobile money access. But Bboxx is only one small part of the puzzle. As we have shown, extending access to credit and other financial services is possible even in challenging markets — it just takes a little ingenuity. And that innovation doesn’t have to be limited to tech companies with access to on-the-ground data: Similarly innovative approaches are also needed to enable businesses in Africa to reach previously excluded customers — including through creative new subsidy models.   Innovative Approaches to Consumer Subsidies Credit scores dramatically improve credit access. If we’re serious about inclusive economic development in Africa, it’s essential to rethink the metrics we use to determine an individual’s ability to repay their debts. But subsidies can also play a key role in enhancing credit access, by providing targeted financial support that can enable more customers to afford these loans. To help provide that support, as of last year, Bboxx has access to a World Bank subsidy through the Development Bank

With the global artificial intelligence market expected to grow to almost $830 billion by 2030, the impact of AI on employment in emerging markets is a topic of growing interest — and concern. Wendy Gonzalez at Sama explores the advantages and disadvantages of different types of AI work, and argues that the industry must build ecosystems that can support not just low-paid, crowdsourced contract jobs, but stable, formal employment if it hopes to generate lasting economic growth in regions like East Africa.The impact of artificial intelligence (AI) on employment in emerging markets is a topic of much speculation. Though many analysts have concerns about its potential to make some professions obsolete, others point out that AI and other tech jobs that support remote work can also be a source of new, stable jobs for many in the Global South — especially in rapidly growing countries in Africa, home to many of the world’s fastest-growing economies. For example, new jobs are likely to be created in the AI supply chain, as data annotators and other data service roles will be needed to shape the datasets that AI models require to operate effectively. With how quickly AI is developing, these jobs may look like a great opportunity: The global AI market is expected to grow to almost $830 billion by 2030. However, not all AI jobs are created equal. If we want to build a future where AI lives up to its full potential, we must embrace AI practices that are both responsible and ethical. While these two concepts are similar, responsible AI evaluates a model based on its entire lifecycle, including whether workers involved in its development are fairly paid, while ethical AI is focused on a model’s alignment with specific values, such as whether or not it produces unbiased content. When developed responsibly and ethically, an AI model will be based on the work of fairly paid workers with a broad set of perspectives, which can help mitigate the problem of unwanted biases in the data, and refined by testing to ensure that the model is behaving according to social and legal expectations. To create this future, companies and governments need to work together to build ecosystems that can support not just AI jobs, but AI employment — the kind of employment that provides pathways to progress and real economic growth.    The Advantages and Disadvantages of Different Types of AI Jobs Data annotation is the work done by humans to categorize and label data to make it easier for computers to understand, and it’s a key part of training an AI model — and a key source of AI jobs. There are two main approaches to AI data annotation: crowdsourcing it or hiring dedicated annotation workers.  Working for a crowdsourced data annotation platform may seem like a good starting point to build the necessary skills for a career in AI. However, the drawbacks of the job can sometimes outweigh the benefits. For example, this kind of job is often “piecework,” in which workers are paid a fixed rate for each task, regardless of the time it requires. For a data annotator, this work can be as simple as labeling photos — but it can also involve more complicated tasks.  For instance, LiDAR annotation, a way of translating 2D images into 3D data, is particularly critical in the development of autonomous vehicles, as it allows the AI model that’s driving the car to know how close it is to other vehicles or objects. These tasks can take up a lot of time, and they may not have the same payouts as completing multiple, less-complicated tasks in the same amount of time. Adding to this challenge, crowdsourced data annotation work frequently lacks formal training — or it may offer training that is confusing, or that doesn’t fully prepare workers for the tasks they’re expected to perform.  At its core, crowdsourced annotation work is contractor work, with all the disadvantages that often entails. Just like gig workers in the U.S., data annotators working for these platforms don’t get benefits and (as mentioned above) they are paid per completed task. But though these workers may get used to earning a certain amount per task, coming to depend on that consistency, pricing for these tasks can be extremely volatile — depending on the number of workers and tasks available, as well as the typical rates clients who contract these platforms pay for these projects as a whole. And these contracts are often made through a “reverse auction” process, in which there is one client buying, and many platforms are trying to lower their pricing as much as possible to secure the contract. So one platform may undercut another, directly affecting how much they receive from the client — and how much they pay out to the workers on their platform.   Moreover, these workers are often remote, so they have to pay their own expenses when it comes to equipment and internet access — which can quickly add up. Yet if they decide to save money by using public internet, which can be easily breached, for their work tasks, this can represent a security risk: The data these workers are annotating can be extremely sensitive and valuable to the clients who are paying the platform for these annotations, and an AI model requires high-quality data to perform to expectations. And naturally, if the platform decides to shut down suddenly, these workers are out of luck — comparable to what happens when Uber or Lyft exit a market, causing their workers’ income to disappear from one day to the next.    The Value of Stable Formal Employment in Africa’s Tech Sector Financial instability can be a major factor in a person’s ability to lift themselves out of poverty, in part because it divides a person’s attention. To reduce poverty, governments need to invest in the infrastructure, policies and regulations that can support the growth of stable work, especially since most employment in Africa (about 86%) is informal.  The data annotation work we discussed above is only one part of the AI supply chain, but it’s both time-consuming and critical. Up to 80% of a data scientist’s time is spent merely managing data, not analyzing it, and Sama has found similar ratios in our work with clients who contract us to annotate the datasets used to train their AI models. It’s estimated that up to 87% of these kinds of data science projects never make it into production, and a lack of sufficiently representative data is a major factor in their failure. Even if an AI model does get deployed, flaws in its training data may cause it to behave incorrectly. A self-driving car, for instance, may not be able to confidently recognize a motorcycle if it hasn’t learned from well-annotated data. In other words, there will always be a need for data annotation, and there will always be a need for similar digitally focused jobs — and this need could help generate the kind of stable, formal employment that can reduce poverty and drive lasting economic growth.  A growing number of countries are already capitalizing on these AI job opportunities as part of their ongoing digital transformations, many of them through long-term plans. For example, Madagascar’s Digital Strategic Plan has already resulted in its digital sector generating 2% of its national GDP as of late 2023, totaling €365 million, and that number could be as high as 6% by 2028. Uganda, one of the countries where Sama operates, released its own Digital Transformation Roadmap last year and noted that Information and Communications Technology (ICT) already makes up 9% of its GDP. And other East African countries, like Ethiopia and Mozambique, are even collaborating with international entities in the pursuit of their digital transformation: The EDISON Lighthouse Countries network and the World Bank, respectively, have provided input and support for these countries’ plans.  Clearly, these countries all have a desire to work towards a brighter digital future. How then do we as companies act as good partners?  Kenyan president William Ruto has perhaps the clearest explanation of African countries’ current response to that question: “We as Africa have come to the world, not to ask for alms, charity or handouts, but to work with the rest of the global community.” The governments of Africa are asking countries to move beyond the “patronizing” idea that the continent needs aid. They want to present their countries as ready and willing to meaningfully participate in the digital global economy. This may seem like an insurmountable task, but companies can play a huge role in advancing this paradigm shift.    How Tech Companies Can Foster Development in Local Communities At Sama, our work focuses on AI model evaluation and data labeling; for many of our employees in our offices in Kenya and Uganda, working at Sama is their first formal job with a living wage. We have learned from our work with these countries’ governments that companies that take the time

Funders in the social impact space and founders of social ventures depend on one another to drive positive change at scale, so their relationship must be built on trust and alignment. But as Fan Gu at 100x Impact Accelerator explains, these partnerships are often marred by complex dynamics that threaten their success. She shares some of the key ingredients to effective partnerships between these two crucial players in the social impact sector, based on insights from 100x’s community of funders, entrepreneurs and non-profits.Funders in the social impact space and founders of social ventures depend on one another to drive positive change at scale. The journey to scaling impact is non-linear, multifaceted and rife with challenges. Therefore, building trust and alignment between these two crucial actors is imperative for fostering effective relationships that combine the right balance of expertise and resources. However, the relationship between these “doers” (founders) and “supporters” (funders) is often opaque, marred by complex dynamics that threaten the success of the partnership. So what are the key ingredients to a successful and effective partnership between these agents of change? 100x Impact Accelerator unpacked this question through a candid panel discussion and working groups conducted with our community of philanthropic funders and founders of social enterprises and non-profits during this year’s Skoll World Forum in Oxford.  I’ll share some of their insights below.   A Hard Truth for Funders “Some funders are clingy and micromanaging and some are not, and the ones that truly make the difference are the ones who understand that [founders and their teams] are as equally motivated, if not more, to get the job done, and they will figure out how to do it while the [funders] sit patiently — even for 10 years.” – Haroon Yasin, Co-founder and CEO of Taleemabad The hard truth for funders to hear is that ventures primarily need space and trust from them. Often, funders overestimate the role they should play in supporting ventures, and as a result they end up unintentionally burdening them. Instead, funders should look to strike a balance between a trust-based approach that gives founders room to focus and adapt, and a “tough love” approach, characterised by rare but deep, impactful interactions in which funders ask critical questions that add rigour to the venture’s strategy and impact. For instance, Taleemabad has worked with various funders, including 100x Impact Accelerator, to refine their “end-game” strategies for scale and to gain clarity on where to prioritise resources and efforts for long-term impact. However, funders should exercise caution when providing advice, and avoid positioning themselves as “experts” in these interactions. To achieve real impact, they need to engage with and respect the expertise of those who understand the local context and are working to generate impact on the ground. It is this humility and willingness to learn that will foster effective collaboration. Misplaced expertise that is not rooted in local context can be counterproductive and even dangerous, in some cases leading to undesirable outcomes amongst the venture’s end users. On the other hand, founders should recognise that those working at funder organisations often navigate internal governance challenges that require strong advocacy for the ventures they are seeking to fund. So building that trust with individuals who will champion them is important. Founders can build trust with funders by showcasing their deep expertise in the field and rooting their claims in data and evidence. Demonstrating intimate knowledge of the problem at hand — whether through proximity to the challenge or lived experience — enhances credibility, a quality that funders consider important when making investment decisions.   The role of active, flexible and patient capital “When we are confident that we have met a founder we want to partner with for the long term, we can attract other forms of capital and create a market for it.” – Nalini Tarakeshwar, Head of Programs and Impact Transparency, UBS Optimus Foundation Social ventures often struggle to access the right kind of capital needed to scale their impact. This involves not only the availability of the funding but also the kind of funding on offer. Funders can help ventures scale by offering flexible, patient capital that’s sustained over a long timeframe. At an earlier stage, this fluidity in funding gives founders enough runway and flexibility to refine and test their model. At later stages, it provides them with the capacity to attract larger and more sustainable types of investment that will enable the implementation of audacious end-game scaling strategies based on solid evidence — the type of strategies that will carry a venture to where it wants to be in the long term. For instance, some of UBS Optimus Foundation’s investments aim to support a venture throughout its growth journey, starting with grants for the early-stage design phase. These grants help social entrepreneurs to test and validate their models. This initial support is followed by patient equity investment spanning five to 10 years, which could later grow into open-ended, low-interest loans. Additionally, the Foundation provides governance support and facilitates the involvement of more investors and partners for follow-on funding. An example of this phased and flexible approach is Chancen International, a venture that is also part of 100x’s portfolio. Chancen was funded by UBS Optimus Foundation to provide innovative financing that enables young people from low-income backgrounds in Africa to access tertiary education. This partnership started out with a small design grant from the Foundation, which evolved into an equity investment to support the establishment of a blended finance vehicle. UBS made this follow-on investment into the blended finance vehicle as an anchor equity investor, thereby attracting other investors. The Bill & Melinda Gates Foundation also adopts a similar approach, offering grants to de-risk capital and provide time for social ventures to prove their model before receiving larger equity investments.   Patience on capital vs. patience on impact “As a strategic impact-first investor, we are patient with capital but impatient optimists on impact. We recognise the time impact takes, but we’re laser-focused on progress towards those goals, what companies are learning from market feedback along that journey, and what the data shows.” – Archana Srivatsan, Head of South Asia Venture Capital at the Bill & Melinda Gates Foundation. We’ve discussed the need for trust between founders and funders, but the currency that buys this trust is evidence. Whereas funders can be patient and flexible with capital, they still require early evidence of impact. This is why most funders cannot afford to be completely hands-off. This evidence can be in the form of quantitative data or qualitative insights from customers that demonstrate impact from the onset. When founders lack clarity, rigour or customer insights, it complicates investment decisions for funders.  However, funders need to be willing to fund research to obtain this kind of data, which can lead to a Catch-22: Impact data is the fundamental thing social ventures need to acquire larger, more flexible sources of funding, but funding is needed to do the research that provides that data itself. For many very early-stage founders, obtaining that funding can be a huge challenge.   Proactivity and Transparency: Crucial Parts of Founder/Funder Relationships “Something I would urge funders to do is really look deep and beyond the people who are sitting next to them, because you never know where the next social unicorn could actually be hiding.” – Safiya Husain, Co-Founder and CIO of Karya In the early stages of their funding journey, founders typically face the burden of navigating through various funding options, and they often must contend with unclear or limited information provided by funders in their public calls for applications. Transparency is crucial at this stage, and it’s important for funders to widely share available opportunities and clearly communicate their selection criteria and processes. Operating in a dual mission sector where profit and impact are both prioritised often leaves a lot of grey areas in terms of who qualifies for funding, and whether impact or profit is the funder’s primary objective. Certain funders may have a slight preference for either profit or impact without fully disclosing it, which leaves entrepreneurs guessing. This lack of openness slows progress and bars some potentially highly impactful ventures from entry altogether. Funders can play an important role in levelling the playing field by making their processes more transparent and accessible, and by funding a diverse range of ventures beyond their usual networks. A key takeaway from 100x’s breakout sessions at the Skoll World Forum was that it may be time to rethink the conventional funding model. Currently, the burden of seeking funding lies with the founders, which could be described as “impact seeking money.” What if we were to flip this to “money seeking impact”? This alternative, somewhat radical idea would allow founders to concentrate on achieving impact as prospective funders proactively reach out to them.   Power dynamics: tackling the elephant in the room “The best donors treat doers as partners, and gratitude flows in both directions. That’s how it should be, because donors and

Mini-grids offer a proven, low-cost solution to bring energy access to hard-to-reach communities. But as Nathan Sermonis and Liam Murphy at Vittoria Technology argue, mini-grid projects need to start small and grow alongside customer demand for optimal sustainability. They explore why smart mini-grid design requires expandable, right-sized systems with “modular” finance and technology, and discuss how recent innovations in batteries and other solar technologies can enable this change in the sector’s approach to system design.The role of mini-grids in advancing universal electrification and other associated SDGs is well established, with the World Bank stating that mini-grids offer the best (and lowest-cost) solution to connect many hard-to-reach communities that are presently unelectrified — including 380 million people in sub-Saharan Africa. Toward this end, the mini-grid sector continues to grow and mature, with innovative use cases like e-cooking, e-mobility and other Productive Use of Energy projects harnessing distributed renewables to improve lives and livelihoods. These efforts focusing on demand stimulation are crucial for achieving mini-grid sector growth, with sustainable site revenues, operation, maintenance and (most importantly) community impact. However, beyond pilots, scalable replication of such demand-side innovations requires time and patience for community uptake. Thus, smart mini-grid design requires expandable right-sized systems with “modular” finance and technology that enable these systems to start small and grow alongside demand. Yet while operators and advocates recognize the importance of this design philosophy, it is not presently common practice due to various hurdles. Fortunately, new efforts in the sector are beginning to offer solutions. We’ll discuss some of these solutions below, exploring how they’re leveraging modular finance and technology to address persistent challenges to the growth of mini-grid access in Africa.   A Financing Gap for Sustainable Mini-grids Expandable “right-sized” mini-grid design is key to efficient capital expenditure (CAPEX), affordable customer tariffs and long-term sustainability in the sector. Put another way, constructing mini-grids that aren’t used to their full capacity has a cost. Sometimes, that cost is absorbed by the operators, which are already working with thin margins — or even negative ones, depending on grants, subsidies or other support to fill the gaps. Other times, the cost is passed on to users, reducing affordability and shrinking the customer base. We find that this reality is widely recognized among the sector stakeholders we’ve engaged over years of academic and commercial research at our clean energy innovation company Vittoria Technology, based in South Africa. Yet mini-grid systems today are still often oversized and underutilised. This is largely due to a lack of modular finance and technology options promoting expandable, right-sized systems that can grow at the same pace as customer demand. That is a fundamental obstacle to building the 160,000+ mini-grids the World Bank has estimated are necessary to achieve universal energy access across sub-Saharan Africa. Furthermore, modular finance and technology are also critical to maintaining each existing system’s reliability, as equipment capacity degrades and community demand increases over time. These needs are particularly vital to consider when looking toward the future uptake of Productive Use of Energy appliances and the growing adoption of practices like electric cooking, agro-processing, cold storage, e-mobility and other exciting uses of renewable energy. The persistent reasons for mini-grid oversizing — despite the clear rationale against it — include funders’ preference for large investments (grant, debt and equity), overly optimistic demand projections, and the technical complexity of system expansion. The outcome is overpriced, underutilised mini-grids. As most mini-grids developed today are funded by a mix of grant, equity and debt capital — alongside select government and co-op models — this practice has significant long-term financial ramifications. Oversizing a mini-grid means that project is over-financed, and paying back investors is a challenge when the operator’s mini-grid is not generating the projected revenues needed. The battery component is of particular significance to this problem, accounting for up to 30% of CAPEX, according to the U.S. National Renewable Energy Laboratory and mini-grid developers we have interviewed. This is the single largest capital expenditure, despite declining cost trends in battery production. Reducing the size of this component alone would drastically lower the project development cost, while better matching immediate customer demand. However, expanding battery banks over time to meet demand growth is technically difficult, as new and old batteries don’t work well together. This combination of high cost and technical complexity is what we call the “battery barrier.” Addressing it will help build a sustainable mini-grid ecosystem.   Addressing the Battery Barrier in the Mini-Grid Sector Batteries are a vital component for clean energy mini-grids, enabling 24/7 electricity — even when the sun isn’t shining — and replacing diesel back-up generators, reducing CO2 emissions and environmental impact. If they’re viewed as long-term scalable systems, with sustainable funding for ongoing upgrades, batteries can be more affordable and lower maintenance than diesel generators. But off-grid industry experience has proven that getting this wrong — for example, choosing non-scalable technology or failing to provide funds to upgrade batteries over time — causes reduced reliability, lower customer satisfaction and, ultimately, may lead to customer defection from the system entirely. The recent IEA report “Batteries and Secure Energy Transitions” sums up this risk: “Today, for instance, developers focus on capital expenditure and make inadequate provision for maintenance. This contributes to the unnecessarily large number of off-grid systems that fail prematurely and permanently. For a variety of reasons, batteries are often the root cause of these failures.” A case of such mini-grid customer fallout over run-down batteries was highlighted by a critical 2022 article in Bloomberg, which cast doubt on the reliability of solar mini-grids in Indonesia due to inadequate battery maintenance and funding. The article makes clear why, from a developer’s perspective, in the absence of reliable financing and technology for upgrades, oversizing mini-grid systems — even with the financial gamble this implies — is better than risking an under-capacity scenario. This is one of many reasons why demand stimulation initiatives have become prominent in the sector. Aside from their social benefits, these initiatives (in theory) allow developers to address the problem of unused capacity in an oversized system. However, our research with mini-grid developers has revealed that in practice, early, active appliance and training programs within a new mini-grid community are often premature — with limited sustainable success. Again, this suggests the best approach is building expandable systems that are right-sized for immediate modest demand, then growing their capacity alongside a community’s journey up the “energy ladder” over time. Our work has shown that mini-grid developers — a frugal lot by necessity (and often by nature) — are ready to adjust their design practices to improve sustainability and adaptability, but are looking for signals and tools that will support a shift to expandable, scalable systems. Vittoria Technology’s Battery Bank Africa (BBA) model leverages both modular technology and modular finance to offer this support for battery systems — the most expensive and, arguably, most complex part of a mini-grid. Through this software-enabled “Storage-as-a-Service” battery leasing platform, we provide expandable Li-ion battery products at affordable monthly rates. In addressing the battery barrier, BBA combines affordable blended finance offered at smaller, scalable terms with faster turnaround compared to traditional finance sources available in the market. By supporting retrofits (in which old batteries are replaced with new ones), the construction of new mini-grids, and even lead-acid battery system upgrades (adding Li-ion expansions via custom technologies), BBA aims to help mini-grids achieve lower levelised cost of energy and cost per connection, greater adaptability, and better long-term sustainability. Through our approach, operators can more easily navigate this common challenge, replacing failing batteries or adding additional capacity as those needs arise. One BBA case study is the model’s ongoing pilot in Rwanda, in which we’re leasing lithium iron phosphate batteries to a local mini-grid operator, enabling the expansion of a maturing system’s lead-acid battery bank. Through innovative technology and blended finance, BBA is supporting this mini-grid’s battery upgrade, aiming to curtail the system’s reliance on back-up power sources (originally diesel, now intermittent grid) within the refugee community it serves. Our intervention has enabled the mini-grid to improve service while avoiding large upfront CAPEX, instead shifting costs to a manageable operating expense fee. Further BBA pilot projects will be coming online this year in Rwanda and other markets.   Beyond the Battery Barrier: Other Key Needs for Scaling Mini-Grids Batteries are obviously not the only component of a mini-grid system. They also need scalable solar photovoltaic modules, inverters and grid network components, among other equipment. But these are more straightforward than batteries, with less technological complexity involved in their expansion and replacement over time. Financing those equipment upgrades, however, is indeed difficult — akin to what’s required for battery upgrades — and modular finance solutions are also needed. Thus, mechanisms like CEI Africa’s “densification” grants present an exciting development. Launched in 2023 in response to mini-grid operators’ feedback, this modular results-based financing approach provides mini-grids with up to $300 per connection for adding new customers and equipment upgrades to existing systems. These grants are a great start,

In the pursuit of last-mile electrification in Africa, both businesses and NGOs/non-profits are pursuing different pathways to scale. In a recent NextBillion article, Aneri Pradhan at New Energy Nexus argued that market-led approaches are ill-suited for remote communities, and that philanthropy should focus more on scalable non-profit models. But according to Yariv Cohen at Ignite Power, when it comes to serving these communities at scale, businesses offer advantages that non-profits and NGOs cannot match. He explores why the private sector’s role is critical for addressing energy poverty across Africa.In the pursuit of increasing energy access in Africa’s most remote regions, where millions lack reliable electricity, discussions often revolve around the effectiveness of different approaches. That was the topic of a recent NextBillion article titled “Private Business Alone Can’t Bring Energy to the Last Mile: Why Philanthropy Should Shift Its Focus to Scalable Non-Profit Models,” in which Aneri Pradhan at New Energy Nexus argues that funding non-profit models with a proven ability to scale is a more effective way for philanthropy to address this challenge than subsidising untested private sector approaches.  It’s commendable to explore diverse approaches to energy access, and non-profits and NGOs — along with their philanthropic funders — have made some encouraging progress in boosting electrification across the continent. But they’re not the best solution for reaching excluded African communities: The private sector’s role is not just important — it’s critical for establishing lasting, scalable impact. Companies offering off-grid solar solutions have made significant inroads in Africa, accounting for most of the estimated 150 million solar kits that have been distributed across the continent since 2010. While the sector has faced a number of challenges and setbacks, due to reasons that range from lack of on-the-ground experience in Africa to unviable business models, it has matured significantly over the past decade and a half. These companies are increasingly able to operate sustainably in the hardest-to-reach locations, as demonstrated by our work at Ignite Power (where I serve as CEO): We’re bringing extremely affordable products to these last-mile communities thanks to our unique technology, various consumer financing schemes and support from development finance institutions — and we’re not the only business that’s doing so.   Why Philanthropy and non-profits are small-scale solutions to energy poverty Acknowledging the importance of philanthropy and non-profit models in achieving universal electrification is paramount. However, dismissing the effectiveness of businesses in addressing energy poverty overlooks the remarkable progress made by numerous enterprises in electrifying remote regions in Africa. While non-profits have made valiant efforts and some have gained traction, history shows that most have struggled to achieve scalability. This is because — despite its noble intentions and occasional successes — the inherent limitations of the non-profit model often hinder widespread replication and sustainability. Conversely, energy businesses have demonstrated an unparalleled ability to scale operations and deliver impactful solutions. And though many of these companies initially focused on urban and peri-urban locations where it is much easier and more profitable to operate, the falling prices of solar technology combined with the growing focus on energy access in development budgets across the continent are encouraging more companies to expand to the last mile. The profit motive drives these businesses to continuously innovate and improve their products and services, optimise their operations, and extend their reach — motivated by the knowledge that only the most effective businesses will survive the growing competition across the sector. This relentless pursuit of efficiency and innovation ensures that private companies can deliver more effective and sustainable energy solutions at greater scale. NGOs, however, may lack the same level of motivation for efficiency and innovation, as their primary goal is often service delivery rather than financial performance. Private companies also have the advantage of mobilising the significant financial resources necessary for large-scale projects. They can attract investment from various sources, including venture capital, private equity and debt financing. This capacity for raising capital allows them to invest in the necessary infrastructure and technology to deliver energy solutions at scale. In contrast, NGOs often rely on limited philanthropic funding, which can be sporadic and insufficient for large-scale, long-term projects. And this challenge will persist even if — as Pradhan advocates — philanthropic funders shift more of their focus to the non-profit sector. This financial flexibility extends to customers, as private energy businesses also possess the critical ability to leverage innovative consumer financing mechanisms, such as pay-as-you-go (PAYG) systems and microfinance. These options enable businesses to democratise access to energy while ensuring affordability for even the most marginalised communities. By empowering end-users and providing ownership and agency over their energy consumption, these market-driven approaches enhance scalability and sustainability. When they’re looking to expand their operations, private companies have another key advantage over NGOs, because they become more efficient as they grow due to economies of scale. As businesses grow, they can reduce per-unit costs through bulk purchasing, streamlined operations and optimised logistics. This efficiency is crucial for making energy solutions affordable for consumers. On the other hand, NGOs, while effective in smaller projects, often face challenges in maintaining efficiency and effectiveness when attempting to scale up. This is due in part to their bureaucratic and administrative costs, which can lead to resource wastage, limiting their scalability.   The Challenges Facing Energy Businesses in Africa However, despite these advantages, the journey for energy businesses working in Africa has been fraught with challenges. Some companies have faltered due to flawed models, prohibitive costs, inadequate market research, inappropriate technology choices and insufficient understanding of local contexts. Moreover, the high upfront capital required for infrastructure development in remote areas has often deterred potential investors. In response to these challenges, partnerships between businesses, governments and civil society — including the philanthropic funders Pradhan urges to shift their focus away from these companies — are crucial for fostering scalability and sustainability. These types of collaborative efforts can facilitate knowledge exchange, resource sharing and policy advocacy, creating an enabling environment for businesses to thrive. By aligning their interests and leveraging their complementary strengths, these stakeholders can amplify impact and accelerate progress toward universal energy access. Additionally, the market landscape facing these businesses has evolved significantly over time. Many of these businesses have refined their approaches, learned from past failures and leveraged emerging technologies. They’ve also benefited from the growing trend of market consolidation, leading to a more mature market where companies can establish robust, scalable models to tackle energy poverty head-on. In the coming years, this trend is likely to result in a solar sector led by a small number of larger companies that are able to successfully serve even the most isolated communities. We’ve seen this trend in practice at Ignite Power, a climate-technology platform specialising in developing, deploying and operating clean infrastructure solutions across emerging markets. Among our products are solar home systems that bring electricity to Africa’s hardest-to-reach communities. Since our founding in 2014, we have successfully developed highly efficient and replicable operations, a strong reputation, and a capable team, making us the continent’s most competitive solar solutions provider: In three of the countries where we currently operate, we offer PAYG solar home systems for as low as $1 per month. We have been an active participant in the market consolidation I mentioned above, as Ignite successfully acquired two solar companies during 2023, allowing us to increase our reach from four to nine African countries. Thanks to the efficiencies this has enabled — and the affordability, scalability and profitability of our business model — we’ve been able to impact more than 2.5 million people with our products and services, and we’re aiming to reach 100 million by 2030.   Moving Toward a Collaborative Approach to Energy Access in Africa  But Ignite Power is just one of many energy businesses gaining traction on the continent. In recent years, the majority of solar installations in Africa have been driven by private companies. These enterprises have been able to leverage their ability to mobilise capital, innovate and scale operations more effectively than their counterparts in the non-profit sector. In light of these advantages, the argument that NGOs are inherently better at addressing energy poverty reflects a non-mature viewpoint. This perspective often stems from the belief that aid and non-profit models are more ethical or effective ways to address development challenges. However, our experience reflects a very different reality: Establishing a profitable business in the hardest-to-reach communities shows global investors that these markets are worthwhile, leading to more investments and more companies entering new sectors in the region. Given the vast need for energy services in Africa, tapping private business and investment capital is not only the most effective option, it’s the only option that can hope to reach that sort of scale. Relying primarily on philanthropy and non-profits for last-mile and deep-rural electrification will only perpetuate dependency and fail to foster sustainable development in these communities. Instead of seeing NGOs and businesses as opposing forces, a more mature view recognises the need for a collaborative approach where the strengths of each

The Indian state of Kerala recently approved a State Design Policy — the first of its kind in the country. As Manoshij Banerjee and Mohammed Shahid Abdulla explain, design policies aim to increase citizens’ quality of life by providing guidance to help optimize the design of everything from infrastructure to government policy. They share examples of strategic design choices that have made a major impact on businesses, governments and the communities they serve, and explore how Kerala’s design policy could lead to new opportunities for public-private partnerships in India. The Indian state of Kerala recently approved a State Design Policy (SDP) which is the first of its kind in the country. Though India ratified a National Design Policy in 2007, its objectives were broadly restricted to promoting Indian design through regulatory and institutional backing and aligning Indian design education with international standards.  Kerala’s SDP, on the other hand, is closer to design policies the United Nations has consistently advocated, which have been adopted most notably by the European Union. Between 2012 and 2016, several EU countries, including Denmark, Estonia, Finland, France, Ireland and Latvia — as well as the European Commission — adopted dedicated design action plans or policies. These policies provide a comprehensive framework for incorporating good design principles into government activities spanning across all sectors. By focusing on end-user experience, they aim to increase the well-being and quality of life of these countries’ citizens by providing guidance that can help optimize the design of everything from infrastructure and public services to government policy.  Kerala’s SDP heralds growing opportunities for public-private partnerships in India, through which design firms and businesses can collaborate with the government to create effective design interventions that address social or sustainability challenges. The policy recognizes that design goes far beyond just aesthetics: As stated in the government order, design is “the process of converting existing situations into preferred ones.” It’s about envisioning optimal solutions to complex challenges through a human-centric lens.  Good or bad design can have a major impact on people, whether it involves everyday objects like cutlery and furniture, or large public infrastructure like transportation, urban planning and tourism. Below, we’ll explore the value and significance of design by sharing several examples of strategic design choices that have made a major impact on businesses, governments — and the communities they serve.    Design in daily use In his book  “The Design of Everyday Things,” pioneering design researcher Donald Norman argues that a well-designed object should be intuitive and easy to use, with features that communicate its function. Think about the frustration of pushing a door that’s meant to be pulled. This seemingly simple interaction highlights Norman’s concept of “affordances,” which are the inherent clues an object offers about how it can be used. Ideally, the design of a door (e.g., its handles, signage and visual cues) should communicate the action you need to take — for instance, a door with a horizontal bar tells you it opens by pushing, while a vertical bar suggests that it opens by pulling. In contrast, a poorly designed door offers no such clues, leading to confusion and wasted effort.  Simple tweaks in design can make experiences better for users. To take one example, in 2016, Dr. Reddy’s Laboratories, an Indian multinational pharmaceutical company, collaborated with IDEO to redesign its syrup bottles and blister packs and make them more convenient for patients, especially the elderly. The new blister packaging came with stubs at both ends mentioning the medicine’s name, dosage, and manufacturing and expiry dates — ensuring that this key information would remain readable even after the pills had been popped out of the strip. The new syrup bottles had easy-to-hold measuring cups and necks to reduce spillage. A similar approach was taken by the laundry detergent companies Ariel and Tide, whose detergent bottle designs incorporate an innovative cap that functions as both a measuring cup and a no-drip pour aid. Other companies have leveraged cognitive principles in their product design, aiming to improve user experience while establishing or strengthening their brand. For example, IKEA’s do-it-yourself proposition is based on the simple principle that people tend to value an object more if they make (or assemble) it themselves — something that has come to be called the IKEA effect.  Expanding the scope to large-scale product and service design, in 2016, the design and technology services company Tata Elxsi collaborated with Kochi Metro Rail Ltd., a rapid transit system serving the Keralan city of Kochi, to design various elements of the metro system — including stations, train coaches, way-finding signage, branding, ticketing solutions, a mobile app and accessibility features. Further exemplifying participatory design approaches, Kochi Metro Rail engaged the public in 2023 to co-create the architectural and signage designs of the new metro stations planned for the transit system’s second phase corridor expansion.    Design in road safety  However, the impact of design extends far beyond consumer products and buildings. Take a look at road safety in India, for instance: Almost half a million people were hurt in road accidents in 2022, and over 168,000 tragically died (a jump of 9.4% from 2021, and an all-time high). Road crashes cost India a whopping 3-5% of its GDP annually. A 2023 report by the Transportation Research and Injury Prevention Center at the Indian Institute of Technology, Delhi highlighted that India’s current motor vehicle laws are biased towards attributing road accidents to human error, resulting in 80% or more of these cases being recorded as the fault of drivers. This limited view ignores the potential role of poorly designed vehicles, roads and surrounding infrastructure in causing crashes.  This is unfortunate since road design plays a crucial role in highway safety. Elements like superelevation (the raised outer edge of curves), degree of curve (the “bend”), and shoulder width (the space on the side of the road for regaining control or stopping) can significantly impact crash rates. Studies on a four-lane highway in Tamil Nadu showed that minimizing horizontal curves helps maintain safe driving speeds and improves safety. Traffic calming measures — such as speed humps, chicanes (also known as S-bends), and scientifically-designed road narrowings — have been found to reduce traffic accidents by over 30% and injuries by up to 50%. According to the World Resources Institute (WRI), pedestrian safety can be significantly improved through the implementation of pedestrian crossings, foot overbridges and vehicle-restricted zones — important measures in a country like India, where over 19% of road death victims are pedestrians.  A number of initiatives have worked to leverage these design features to address the issue of road safety in India. For instance, the Delhi Gate Junction, previously identified as a high-risk area for accidents, underwent a redesign in collaboration with WRI and the Global Designing Cities Initiative. This project resulted in a 70% reduction in traffic-pedestrian conflict areas and a 33% decrease in pedestrian crossing distances. Additionally, the project reclaimed 2,500 square meters of refuge islands, which are raised areas in the middle of roads that provide a safe haven for pedestrians while crossing busy streets. Similarly, SaveLIFE Foundation launched the Zero Fatality Corridor (ZFC) model in 2016. Partnering with the Maharashtra State Road Development Corporation and automaker Mahindra & Mahindra, ZFC implements a “safe systems approach” tailored to India’s specific conditions. This model has seen remarkable success, achieving a 52% reduction in fatal crashes on the Mumbai-Pune Expressway. However, speeding remains an unsolved problem that worsens the outcomes of poor design in India’s road infrastructure. It is important to note that studies have shown that the probability of pedestrian fatality is estimated to be 5% at impact speeds of 30 kmph, while it increases to 90% at 80 kmph. Other countries have addressed similar issues through road design interventions: For example, in collaboration with the Behavioral Insights Team, San Francisco launched the Safer Intersections Project to tackle the issue of deadly left turns near crosswalks, which accounted for 40% of the city’s road deaths in 2019. The project combined community outreach with center lane redesigns, resulting in wider turns, 17% slower speeds and a 71% reduction in the likelihood of vehicles turning left at high speeds (over 24 kmph). Indian intra-city roads are in dire need of such interventions.    Design thinking in policymaking Public policies are made by governments to change aspects of a society’s behavior at large, or to meet a specific end or purpose that is deemed beneficial — e.g., getting citizens to pay their taxes on time, or reducing dropout rates among girls in schools. Ultimately, these are behavioral changes, so policy decisions can be more effective if they leverage design thinking. By taking the characteristics of all stakeholders into account and iterating solution prototypes developed with input from small groups of subjects, consultancies can help policymakers develop more inclusive policies that actually work. However, policymakers may lack the flexibility to incorporate an iterative approach without regulatory sandboxes where they can conduct live, small-scale tests of innovative solutions within a controlled environment before broader implementation.  This testing process is important, because disregarding the behavioral tendencies

Who has the power in impact-focused enterprise? Many believe that this question lies at the heart of social enterprises’ work, and that localizing power should be a core goal of the sector. But as Andrea Nelson Trice explains, this approach remains discouragingly rare among Western businesses and investors in emerging markets. She explores why it’s so difficult for Westerners — and particularly Americans — to empower others, and shares solutions based on interviews and case studies with 90 American and Global South leaders working in the development space.Who has the power in impact-focused enterprise? In 2018, Galen Welsch, co-founder and CEO of the Africa-based social enterprise Jibu, wrestled with this question in a widely read NextBillion article, which readers voted as one of the most influential articles published on the site that year. He argued that we ask the wrong questions when we evaluate impact: It’s not about which consumer segment is served or how profitable the enterprise is. Instead, the key question should be how an enterprise localizes power. As a program evaluator, I couldn’t agree more. Yet this attitude and approach remains discouragingly rare among Western businesses and investors working to make an impact in emerging markets. Why is it so challenging for Westerners to empower others? I’ve conducted research on this question for over two decades. It’s easy to point fingers and declare wrongdoing when Westerners don’t share power, but it’s far more useful to understand why it’s difficult for us to do so. The impact investing and broader social business space is filled with people who are driven to make a positive difference in others’ lives. But for many Westerners, and for Americans in particular, the work of truly empowering vulnerable people goes against several deeply ingrained cultural norms. I recently published “Strong Together: Building Partnerships across Cultures in an Age of Distrust,” a book that delves into the question of how to empower others. It’s based on interviews and case studies that I conducted with 90 American and Global South leaders working in the development space. I limited my focus to Americans, rather than exploring attitudes across other Western countries, because I wanted to consider culture’s influence and needed to limit the scope of my research to do so. So what exactly makes it hard for Americans to empower others? I’ll share seven reasons, and discuss some solutions, in the article below.   Why Americans Struggle to Empower Others 1. We work fast. Americans view time as a scarce commodity that must not be wasted. Our fast pace makes us less likely to share power with those we hope to help, because collaboration requires a significant investment of time. With our focus on tight timelines and rapid results, our natural approach doesn’t pair well with the slower work of empowerment that entails deep listening, trust building and shared decision making. 2. We work alone. The U.S. is the most individualistic culture in the world. Our natural bent is to work independently, to value leadership more than membership, to rely on no one. This approach reflects our love for freedom, but it often leads us to hold onto the power in our interactions with others. 3. We’re insulated. The great majority of psychological studies have been conducted in WEIRD societies — Western, Educated, Industrialized, Rich and Democratic. Faculty often tap their students for participation in these studies, making the pool of participants even narrower. These research results have become the norms we believe describe human nature — not understanding that many studies’ skewed results ignore important cultural differences across world regions. Americans often don’t know what they don’t know, in part because of this intellectual insulation. A Ghanaian social entrepreneur I interviewed for my book emphasized the implications of Americans’ insulation: “Unfortunately, you have many Americans who think they know the world, but their life is concentrated on the U.S. of A. Americans have diversity — geographic, racial. There’s no reason to travel anywhere. If you want to experience a hot climate, you go to Florida. There is a superiority complex that’s instilled, a ‘Mr. America’ complex. When they come in, they have the answers. They come to do what Superman would do. It becomes difficult to even have a conversation.” This insulation also makes us less likely to recognize cultural differences in how people politely try to say no or express concern about a proposed program — critical aspects of empowerment. 4. We keep our distance from those we’re trying to help. Bryan Stevenson, founder of the Equal Justice Initiative, speaks often about Americans’ need to get “proximate” to those who are suffering or marginalized if we hope to effect social change. “We cannot change global injustice today if we isolate … ourselves in places that are safe and removed and disconnected. To change the world, we are each going to have to find ways to get closer to people who … are living on the margins of society.” A Ugandan social entrepreneur expressed his frustration with Americans’ tendency to keep our distance during an interview for my book: “There are two kinds of expats living here. I am not a fan of one type — the type that comes in to work with a big multinational corporation. They live on a hill with big SUVs. I don’t know how they get to know what they need to learn by not living on the ground. You need to have a love for the local people. Look at them as people, as human beings. Have conversations with them and treat them as normal friends.” Keeping a distance is efficient time-wise and it allows us to work alone — both of which are deeply held American values. But distance also keeps us from feeling the impact of power differences and from remembering that all people have a desire to make their own decisions. 5. We focus on a distinct problem that needs to be solved. Americans, as strong individualists, are goal-oriented people who tend to focus on distinct problems. People from collectivist societies, which describes much of the Global South, tend to look more holistically at the challenges facing a group. Americans I interviewed tended to focus on a distinct, perceived need they could address — like clean cookstoves or solar power. Global South leaders spoke more often about complexities facing communities, and saw community leaders as essential players in any effort. They were also more apt to focus on building community members’ skills rather than solely addressing a perceived need in people’s lives. 6. We approach problems from a place of presumed strength. The U.S. has had the world’s largest GDP for over a century. Our economic strength is a significant part of our national identity. Why wouldn’t we want to share our business expertise to help others? But because we often don’t get proximate to understand vulnerable people’s personal priorities, and because — as was the case with many of the American entrepreneurs I interviewed — we tend to focus narrowly on whatever economic problem we want to solve, we often assume that we have the answer to these problem on our own. Our tendency to assume self-sufficiency is further encouraged by our tendency to overestimate our abilities — whether that’s our driving skills or our work performance. This is a trait that is almost nonexistent in some cultures. While we may assume that our marketing techniques and our business strategies are best, those I interviewed from the Global South pushed back strongly against this assumption. 7. We prize innovation and disruption of the status quo. Americans value personal initiative. We push for ways to innovate, to move beyond the status quo. As one measure of our innovation, the U.S. has only 4% of the world’s population, but it has produced around 40% of the world’s Nobel laureates (though around 35% of them are immigrants born in other nations). What I heard from Global South leaders, however, highlighted a different reality: the fact that innovations generally offer both costs and benefits. The potential benefits are usually obvious to Americans, but the costs to the user are typically far less so.   How to Approach Empowerment in the Global South Americans are phenomenal at innovation, but we struggle to empower vulnerable people, for all the reasons listed above. How can an American entrepreneur working in emerging markets correct for these tendencies? It starts by considering what empowerment looks like from the perspective of people in the Global South. Here are three simple examples highlighted by the leaders I interviewed: Enterprise leaders should demonstrate respect for existing local systems by engaging with school, church and/or local government leaders as they begin work within a community. Entrepreneurs should engage local people in defining the problem to be solved. Customers and locally-based employees should regularly be asked to provide feedback about the enterprise, and to help its leadership understand the significance of their feedback. When receiving this type of advice, it’s natural for American entrepreneurs to say, “Okay. Based