How to Profit off the Poor... and Keep Your Soul

How to Profit off the Poor… and Keep Your Soul

7Dec2009 Filed under: Entrepreneure Stories, Entrepreneurs Author: Bikash

Well, this is an initiative which is working in the slums and other poor areas for the poor people and yet this is not a non-profit but a for-profit one.

Children from slums and other poor areas, where not all basic amenities are available leave aside school and other services which are thought to be luxury are learning computers. If you meet one of them, you may be surprised to hear “I know computers quite well.”

Delhi (India) slum kids from families who live on less than $2 a day may surprise you. These kids have been spending several hours of their free time every day playing games and learning English, Math and Science on computers for the last five years.

All these were done by a for-profit Indian company - NIIT and not by a nonprofit or a rich philanthropist or a computer company.

The Start

The effort started in 1999. Sugata Mitra, NIIT’s chief scientist, observed that his kid learn how to use gadgets like a mobile phone faster than tech-savvy adults. This was the time when computer was no so easily accessible in schools. Computer was expensive and requires proper training before handling it- was the general conception. Mitra wondered what would happen if he left a computer out in the open for a group of children to discover.

Mitra literally knocked a hole in the office wall to the slum on the other side and then he shoved a computer in the hole. He also got someone to set up a camera on a tree to record what happened.

What happened?

A 13-year-old, illiterate kid wondered over the computer. He never saw a computer. He however soon found out that he could move the cursor using the touch pad. A group of kids gathered around the computer within 4 hours. This group figured out how they could open Internet Explorer and were playing a game on Disney’s Web site. “All of us were absolutely shocked watching that,” says Abhishek Gupta who heads the program now.

A pilot project soon materialized with the World Bank. The project set up 22 of the “Hole in the Wall ” kiosks around the country from 2001 to 2005. The results were encouraging. It was found that kids left on their own will learn computers. The pilot project was also seen to encourage team-building and social skills because about 200 kids sometimes huddled around one screen. In many cases general academic improvement due to the use of computers was visible measurably.

Next Step

The partnership was over after the scheduled duration. Even though the partnership was over, NIIT didn’t take the project down the non-profit route. It has new high-end university that is run as a non-profit and it is involved in other nonprofit activities but it did not want to take the project to a nonprofit route. They wanted to route entrepreneurial force to eradicate the problem of poverty.

The Business

NIIT now sells the kiosks at between $6,000 and $20,000 to the government. The price depends on the model and number of screens. Government puts these kiosks mostly in schools in India’s poorest areas. There are 500 stations in India and some are in 10 different African countries.

NIIT had to change few things about the system. As the government want administrators to keep an eye on the systems, so the systems are not available when an administrator isn’t there.

Running the business has made sure that the idea survived. It also created cash flows for NIIT which helped it to create content for the kids so that they don’t have to rely on the country’s spotty Internet connections for kids to stay engaged.

NIIT’s “Hole in the Wall” program was allegedly the inspiration for the book “Slumdog Millionaire” which helped in creation of the movie.

Other Startups in this sector

NIIT isn’t the only company which wants to help the poor and eradicate poverty. For profit companies have been providing microfinance loans for years in India. One of the most known is SKS Microfinance . In the initial days it started as a non-profit. Later it became a Sequoia Capital-backed startup. “It’s important to realize the poor have been paying three-to-four times more to the local money lender,” says Surendra Jain, a managing director with Sequoia in Bangalore. “There’s nothing wrong with using the same tools to scale the way other companies scale. The question is: In your heart are you doing the right thing?”

Even non-profits I’ve met over the last two weeks run themselves to rely on revenues not donors. An example is

Another company LabourNet wants to take India’s huge informal workforce into a formal channel. The company creates and matches construction crews, drivers, cooks and retail clerks them with the best employers. How does it reach them? Word of mouth and SMS. So far 7,000 workers are in the system.

Solomon JP. Started LabourNet. His has an umbrella non-profit organization, MAYA . Maya created a self-sustaining company that trains poor youth in making high-value furniture.

CHF International, an international NGO, with a grant from Bill and Melinda Gates Foundation, helps in reducing urban poverty in India. It offers technical and financial support to help LabourNet become a self-sustaining enterprise. “Being poor isn’t about not having money, it’s a lack of capabilities,” JP says.

LabourNet not only help poor people get a job, but also offers access to healthcare benefits, issues ID cards, literacy, helps with bank accounts, and job training too. The worker pays a small fee, and the employer pays LabourNet a higher fee to get the people they need.