Key Messages
How To Give Money Away Efficiently: Introducing The Dignity Of Self-Reliance In Development Aid
The Blue Sweater tells the story of Jacqueline Novogratz, a former Wall Street banker who went to Africa to try and help people suffering from poverty.
While she was there, she quickly discovered that traditional aid approaches don’t always work–instead of helping people, it can often end up going to the wrong people, or be squandered on ill-conceived projects.
What she found is that what people in developing countries really need is not handouts, but rather real opportunities to create income and develop their own enterprises so they can lift themselves out of poverty–and be held accountable for it.
When this kind of approach is adopted, development aid has a much better chance of making a positive difference in these communities.
By reading The Blue Sweater, you’ll gain insight into why traditional charity approaches are failing and what can be done about it.
You’ll also learn why giving away your money efficiently is more difficult than earning it in the first place, how a man named Innocent was anything but innocent, as well as how development aid can be made effective with proper safeguards.
Jacqueline Novogratz And The Power Of Female Empowerment To End Poverty
It has become increasingly clear that local women play a vital role in eliminating poverty in developing countries.
Across the world, it is these women who are generally responsible for deciding how a family should spend its money, and therefore know where and how best to direct aid.
This was a realization made by Jacqueline Novogratz when she wanted to help the poor in Rwanda – she found success with Duterimbere, a micro-credit company which makes small loans to those not eligible for traditional bank loans.
These often women-run enterprises, such as selling vegetables like tomatoes and onions, turned out to be very successful.
Credit was given directly to the local women instead of being managed by ‘experts’, overturning the traditional top-down approach.
Even with this success though, Duterimbere faced difficulties trying to get their borrowers accountable for loan repayments – but Jacqueline found a solution in creating accountability among the borrowers that led them further away from poverty.
No matter what methods are employed in aiding developing countries, it is undeniable that recognising the importance of local women’s knowledge and understanding of their communities is key to tackling global poverty – giving them the aid they need most and trusting them to decide how it should be spent will effectively lift large communities out of poverty.
The Power Of Accountability: How Duterimbere Improved Loan Repayment Rates For The Poor
In order to lift people out of poverty, you have to make them accountable for their actions.
This is the lesson that Duterimbere learned when it began offering micro-creditors in Rwanda.
In the beginning, borrowers didn’t take their loans seriously and had little motivation to pay them back because they assumed that rich Westerners weren’t going to miss a small loan from an individual.
However, once the company implemented policy changes such as insisting that any borrower who fails to make payments can no longer receive a loan – there was a marked change in attitudes towards loan repayment.
For example, one rice seller who initially claimed her rice was stolen quickly changed her tune when she heard about the new rules and repaid her loans in full.
By taking accountability seriously, Duterimbere showed borrowers that this wasn’t some naive Western charity; rather, it was a serious financial institution dedicated to helping people lift themselves out of poverty.
This mindset shift has been key to the company’s success and proved that providing poor people with an opportunity alone isn’t enough – making sure they are held accountable is also necessary for long-term success.
We Can Learn From The Failures Of Traditional Aid Programs: Empowerment And Accountability Create True Dignity And Self-Reliance
If we want to truly help people in poverty, simply throwing money at them is not enough.
Instead, we need to give them the chance and the dignity to work their way out of poverty.
This was no better demonstrated than by the Blue Bakery in Kigali set up by the Rwandan government and supported by two charities.
At first, the project made continuous losses of $650 a month while paying its 20 female employees only 50 cents a day – nowhere near enough to get them out of poverty.
However, when Novogratz stepped in and decided that each employee should be held accountable for costs and sales through a base wage plus commission on total sales, something amazing happened: Suddenly, the women felt like they had a stake in the success of it – because they did!
With the improved motivation and sense of ownership that came with it, their incomes quadrupled from two dollars a day – allowing them to gain their own financial stability without relying on charity all together.
This is testament to how integrating dignity into aid programs can empower those who are living in poverty to break free from it.
Without Accountability For Acts Of Corruption, Donor-Funded Projects Are Likely To Fail
When it comes to developing countries, corruption can be a major problem that stifles progress and holds them back from achieving their true potential.
At the heart of this issue is accountability; if there is a lack of accountability and no one is watching where the money goes or how it is being used, then someone is likely taking advantage to benefit themselves.
This was something that Novogratz discovered first-hand when visited Kenya to write a report for UNICEF on women’s groups funded by foreign aid.
There she encountered rampant corruption which was stemming from the fact that the Kenyan government had been given absolute power over which projects were funded.
Instead of these funds going towards productive projects, those in charge were asking for ‘fees’ of 20 percent in order to secure their bid and pad their wallet at the end of the day.
The effects of a lack of accountability are clear; bad services, because money intended for project funding winds up being skimmed away and no one feels responsible enough to ensure that these projects are seeing through in an effective manner.
Furthermore, donor-funded projects often fail overall due to ineffective management or lack of resources or competence – as seen with maize mills across Africa lying idle due to there being simply not enough fuel or people qualified to fix them.
All in all, having those involved accountable could go a long way in making sure earnings return on investment and projects have the intended impact they were set out with.
Where there is a lack of accountability, corruption will be allowed to impede growth and ensure continued economic struggle – defeating the purpose completely.
In Developing Countries, A Lack Of Trust Creates Major Hurdles For Development
Trust is incredibly important when it comes to building a better society.
Those living in the developed world may take trust for granted, as they are able to assume that their rules and regulations are being respected and enforced, while laws provide an avenue of recourse should they not be followed.
However, in places such as Rwanda—where Jacqueline Novogratz experienced this lack of trust firsthand with the betrayal of her guard named Innocent—the criminal justice system fails to protect and deliver accountability.
In turn, this undermines levels of trust between RWandan citizens, who have been heavily monitored by their government for years without fail.
This mistrust has tangible effects, as evidenced by reluctance from the public in slum areas in Karachi, Pakistan—one half of the population live in slums yet remain hesitant about signing onto affordable housing projects due to fear of being taken advantage of again, similar to experiences from past housing developers.
Charisma from one manager on such a project had to build trust with locals by simply living on the construction site they all were watching closely.
It is clear that a lack of trust can inhibit development and growth within nations or communities; however this can be countered through initiatives designed to cultivate trusting relationships over time.
The Benefit Of Patient Capital: Combining Philanthropy And Investment For Greater Social Impact
Patient capital combines the best of both traditional aid and business investment.
It allows investors to invest larger amounts of money into projects over longer periods of time, with the understanding that returns may be less than what is seen in traditional investments.
This approach focuses on developing and supporting an enterprise over quick-win solutions.
At the same time, it avoids handouts with no accountability by expecting to see returns from the funding provided.
Patient capital takes a unique approach, however, in that it entrusts funds to local people instead of allowing outsiders to decide where money should be spent.
This allows those most familiar with the problems they face to make decisions on how to invest their funds and get the best possible outcome for their community.
For example, in Pakistan Acumen invested in a housing project headed up by local man Tasneem Siddiqui who had specialised knowledge of his community and was able to guide which land should be developed as well as help build support in the local area – something an outsider could never do as effectively.
This example shows perfectly how patient capital is a winning balance between traditionally aid and business investment; it allows local experts to take ownership over deciding how and where money is used whilst at the same rewarding them financially for any successful projects.
Wrap Up
The Blue Sweater Book provides a thoughtful summary on the good and bad of traditional development aid.
It argues that often times, traditional aid is ineffective because recipients cannot be held accountable and local people are not given enough power to decide how the money should be used.
The book offers an alternative: patient capital – an investment-focused philanthropy model with potential to solve many of these issues.
Ultimately, the book’s main message is that whenever we strive to help others, whether through philanthropy or aid, we should prioritize understanding them first – putting ourselves in their shoes so that we can make well-informed decisions about what they need and want.
With this approach, we can hope for much more effective and lasting outcomes from any development or philanthropic initiatives.
