What’s Better for Helping the Poor — Greed or Charity?

Posted on 07. Oct, 2010 by in Uncategorized

What’s Better for Helping the Poor — Greed or Charity?

A recent episode of NPR’s Planet Money opened with the question in the title above: What’s better for helping the poor — greed or charity?

Host Adam Davidson talks with Nobel Prize winner Muhammed Yunus, the “father of microfinance”, and Vikram Akula, the founder of a for-profit micro-finance institution. It’s a fascinating debate on whether greed might actually do good, with Yunus arguing “no” and Akula arguing “yes.”

Yunus says that greed will always hurt the poor. As soon as one begins talking about profit, it’s a slippery slope from a social mission to a commercial mission. Profit-driven interests will always take over social interests, if given the chance.

Yet Akula disagrees. His company doesn’t see a difference between a social mission and a commercial mission. He argues that his company creates greater shareholder value as women move up the economic ladder, creating both development and profit.

Lutheran World Relief obviously works out of a not-for-profit system, providing microfinance loans through our Tripartite model, so that these microloans go directly to, and stay in, developing communities. We hope that our supporters act out of a place of gratitude rather than a motivation of profit.

Yet this debate makes me think of the Lutheran confession that we are simul justus et peccator — simultaneously saints & sinners. Can we do good without selfish motives? Can we help people living in poverty and profit off of them?

Listen to the podcast below, and let us know your side of the debate in the comments:

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is Lutheran World Relief’s Social Marketing Manager and an ordained pastor in the ELCA.

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  • homemadehay

    A very interesting point of discussion! I work in the nonprofit sector because I want to make a difference in the world. But as much as I'd like to believe that we all do good from a selfless place, I must admit that I do it because it makes ME feel good.

    So I can somewhat understand and relate to Akula; however, I have to side with Yunus. It's just not right to profit from the poor and suffering.

  • homemadehay

    Yes, it's a hard call. I certainly don't think profits/wealth are synonymous with greed. I think where I get stuck is what people decide to do with profits/wealth.

  • Serena

    One of my best friends who went to Haiti a week after the earthquake told me something that profoundly touched me: "My pastor asked me to go to Haiti to help set up tents, and I was looking forward to help many of the displaced people, but I was instead asked to take care of the house and cook for some of the aid workers. At first, I was rather disappointed that I did not have the opportunity to go and work on the ground, but then I stopped to think. Wait, am I doing this for my own glory? Just to feel good about myself? I am here to help the people of Haiti, and not make me feel good about myself. Why am I complaining when I can indirectly help the people of Haiti by helping the aid workers who have been working 14-hour-days?"

    Its important to keep in mind the we human beings have this inherent selfish nature, even when we may not be materially profiting off it, we might be spiritually profiting off it.

    At the same time, I have often been amazed at the recent rise of social enterprises and what a great impact they've been having. But that's another debate altogether.

    Whatever the case, non-profit or for-profit, it should be done with the beneficiaries in mind first. Its important to take sanctimoniousness and self-righteousness out of service.

  • Dan Ruth

    It's a tough call. Even though I also tend to side with Yunus, thinking it's a slippery slope from profit to profiteering, Akula is compelling.

    If for-profit institutions can actually do something that helps people get out of poverty, isn't that a good thing? Shouldn't we explore all options to end poverty?

    I think it's more important to focus on the outcomes than on the motivation. I guess I'm just not convinced that, over the long-run, for-profit motivations will lead to positive outcomes.

    It's complicated though. I'm definitely torn.

  • Dan Ruth

    Can a corporation who, by definition, is in the business of making profits, still put the well-being of people living in poverty first?

  • Ryan Collins

    Yunus mentioned how he didn't have a problem with profit so long as outside investors have a restricted return, such as 1 or 2 percent. Presumably that would allow a small amount of personal interest, while still keeping the focus on the beneficiaries.

    I don't see the harm in this, so long as it is sustainable. The benefit of the profit-driven model is the speed with which it can be set up: more investors means more beneficiaries. But the more money is involved, the greater the potential for the shift in focus to switch. It does not necessarily mean that it would happen, but there needs to be great vigilance. What do you say when a potential investor tells you, "Yes, let's open up to this exceedingly needy area, and I will give you $500 million for that, but if I were to get a 4% return instead of a 2% one, I'd be willing to invest $10 billion, and we could do the whole country." More people served, right, but a slippery slope develops. How do you preserve the integrity of the model? How do you say no when all the investors are asking for a 1% increase? Can personal interest be kept in check? If you can, then great. But I doubt most people can. And if one executive director can do so, how can you be sure that the success of the institution won't attract a successor who can't keep the focus?

    Obviously, it's a case-by-case issue, and that’s what makes it tough to say. If there were some way to make iron-clad limits on returns, that could help, but I don’t know if that’s possible.

    My other worry is that predatory lenders could somehow work off of this. Here in America, we have so many agencies that give what are essentially microloans and then charge higher interest than the mafia, and it’s perfectly legal. It horrendously exploits people in poverty, and I’m sure that people would love to do this to foreign poor countries. How do you arm people with the knowledge of what is a predatory lender, and what is an honest one? It don’t know that it will always be easy to get that clear. I don’t think this is an issue that should prevent people from going forward with lending to impoverished communities, but it is something to bear in mind.

  • Dan Ruth

    Really great thoughts, Ryan.

    "How do you say no when all the investors are asking for a 1% increase?"

    In my opinion, this is where the proverbial slope gets incredibly slippery and the door to predatory lending gets opened.

    One of the things your post made me think about is trust and relationships. It seems to me that not-for-profit organizations can better foster long-term relationships that build trust among both borrowers and lenders.

    How important do you think trust is?

  • Hope Kolly

    What a great post and thought provoking session of Planet Money. I work for Equal Exchange, a for-profit and mission driven company dedicated to Fair Trade who is also Lutheran World Relief's partner for the LWR Coffee Project. We do get folks asking us why we’re a for-profit business, so this is something I find particularly interesting.

    I don't think we have to choose between greed and charity – we can use the positive aspects of a for-profit business as a tool (not an end) to achieve a social mission and instead of profiting off the poor, share in a mutually beneficial relationship between equals. I think there are some key things that need to be built into a business that serves a social mission: keeping the mission as your bottom line, knowing your stakeholders and transparency.

    Keeping a social mission as the bottom line is what shapes decisions in all organizations that are dedicated to a cause. At Equal Exchange it informs who we hire, how we measure success, what we do with our profits, our relationships with our producer partners, how we interact with our customers and just about everything else we do.

    Knowing who your stakeholders are and setting up your business to serve their needs can also keep greed in check. The folks who started Equal Exchange thoughtfully structured our company to benefit our farmer partners, workers, customers and the larger Fair Trade movement rather than just investors and shareholders, like most large corporations.

    We have long term relationships with our farmer partners that are about more than just trade, although the trade relationship is very important to both parties. We share valuable industry information, we go and visit them, we bring farmer representatives here for speaking tours and quality seminars, we join with our allies like LWR in relief and development efforts and we’ve shared a lot of ups and downs over the years.

    Equal Exchange is worker-owned which means that after a probationary period everyone who works here becomes an owner and shares in the profits or losses of our business. We literally have a stake since each worker owner buys one share (and has one equal vote) when they become an owner.

    We know that our customers complete our mission and it’s essential that we serve their needs. People may come to us because of our mission but they also demand quality products and reasonable prices. We also try to provide resources for education, involvement and connection with our farmer partners through delegations, speaking tours and information sharing.

    Equal Exchange also belongs to several organizations which are part of the Fair Trade movement like the World Fair Trade Organization and the Fair Trade Federation. Every year we donate 10% of our profits to organizations in the Fair Trade movement and if the worker-owners ever decide to sell out any money left after paying off our obligations has to be donated to other Fair Trade organizations.

    An important principle of Fair Trade and, I think, of a mission driven business is transparency. This keeps our cooperative business accountable to all of these stakeholders, which helps us live up to our own ideals. We publish an annual report every year with our financial information which is also made available to our farmer partners, we go through several certifications for our products and trade practices and we share as much information with our customers as most can handle via newsletters, our website, blog and social media.

    Why shouldn't business be a tool that serves humanity instead of the other way around? I think that trade can be used to bring people together and we've let the greed of the few and powerful make us think otherwise.

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