The Blue Sweater : Bridging the Gap Between Rich and Poor in an Interconnected world | Book Notes #1

The title of the book is a tribute to the idea that all of us are connected. About how our actions — and inaction can touch people we may never know and never meet.

The book is in some ways eye-opening not only to the problems of the destitute and but also to the solutions that actually help them rise out of poverty.

Novogratz takes us through her fantastic journey of the last few decades, from starting as a corporate banker to the richest of the rich in the barren greys of New York City to serving as a micro-finance consultant in the lush green lands of Rwanda, Novogratz touches us with tales of enormous suffering among the people and of equally triumphant transformation in the same people as a direct result of the opportunities provided to them.

Novogratz observes the systematic exclusion of the poor from access to loans that prevents them from helping themselves out of poverty. The poor remain poor because they are poor. She observes that instead of handouts, a more effective way of helping the poor would be to enable them to come put of poverty on their own. This means providing them with access to capital and resources from which most of them are excluded primarily because they are considered very high risk clients.

Through her experience in Africa in building Duterimbere, Rwanda’s first micro-finance institution, Novogratz has seen first-hand the benefits of lending to the poorest members of society. Through her story of the Blue Bakery we learn of the change brought about among women who initially would not dare make eye-contact, but would later go on to create one of Kigali’s finest bakeries!

“Money is freedom and confidence and choice. And choice is dignity”

Part biographical in nature, part informative, the pace of the book is slow at first, picks up after the first few chapters but ultimately feels like a bit of a drag towards the very end. Regardless, I found myself engrossed in the stories of the people and would’ve loved to read about them a bit more in-depth.

Overall I learnt three important things from the book.

1) Handouts are not necessarily the best option to eradicate poverty
Novogratz lists several examples of well-intentioned plans gone wrong like providing women with maize mills to improve productivity but failing to teach them how to repair them in case of failure, or setting up schools for the poor but failing to account for the cost of hiring and retaining teachers which ultimately renders the schools as wastelands.

Handouts create an inherent dependency and when things go wrong, the people are not equipped to solve the problems on their own leaving them vulnerable and dependent on further aid.

In addition to that, handouts usually don’t have accountability measures built in to check efficient usage of the provided resources. While well intended, this ultimately results in a failure to achieve the primary objective i.e to help those who need it the most.

Another often ignored problem of handouts is that it fails to take into account the dignity of the receiver. No one wants to be dependent on others for survival, and handouts don’t do much to address this aspect of human pride.

“Individuals don’t want to be taken care of — they need to be given a chance to fulfill their potential.”

2) Philanthropy needs to create self-sustaining models that will outlast their founders
Many philanthropists focus on using their money for the greater good, and to some extent they succeed in doing so. However, in order to bring lasting change, the funds deployed by them need to create systems that will outlast the very funding that started them. This means instead of one-time handouts or temporary relief, we need to equip those in need with the skills and capabilities to sustain the systems once the initial push has ceased.

Novogratz explains how building sustainable solutions to the problems of poverty is probably the only way to move people out of poverty and keep them out!

And this brings us to how this can be done…

3) Investing in for-profit businesses, which focus on social-impact are our best bet in eradicating poverty on a global scale

We read about Husk Power systems, started by Gyanesh Pandey, along with 4 friends, a for-profit company that now provides electricity to more than 200,000 people in some of India’s hardest-to-reach villages. Had this private venture not been started, most of those villages would still be living in darkness as the government was unable to direct its resources to these villages. Moreover, this was being done in a profitable manner, and the benefits provided to the villagers as a result of the electricity were immeasurable!

We also read about how some aid-programs exclude the needy in favor of high risk categories. In Africa, an aid program provided mosquito nets to children and pregnant mothers, but given the specifics program it meant that if a father wanted to buy the nets to protect his family he could not do so. Surveys found that the people were even willing to pay up-to $4 to buy the nets. Acumen fund invested in A to Z Textiles and helped it acquire the technical expertise to manufacture the net at a fraction of the original cost and sell it to people in a profitable manner.

Having a mosquito net makes a world of difference in a continent where 300,000 people die every year due to malaria and 150 million work-weeks lost due to the sickness!

This teaches us that in the fight against poverty, technology and distribution networks play a vital role.

The solution to eradicating poverty therefore is not just more aid programs or only investing in businesses with a social bottom-line. It is a combination of the two approaches that will ultimately help us in eradicating this global danger.

I’d recommend this book to everyone who wants to know more about Africa, the problems faced by the poor and how together we can devise solutions to solve them.

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