Technologies that have the potential to transform life for the poor in developing countries are often slow to take hold. Yale SOM’s Mushfiq Mobarak talks with three practitioners about learning what works for the poor.
Many existing technologies and practices, among them crop insurance, clean-burning cook stoves, water treatment systems, and insecticide-treated bed nets for malaria prevention, have the potential to transform life in developing countries. But the adoption of such technologies is often slow. Why do poor consumers turn away from an innovation that will more than pay for itself through increased productivity or improved health?
Mushfiq Mobarak, a development economist at Yale SOM who has worked in Asia, Latin America, and Africa, studies the decision-making environment in such countries, conducting field experiments to learn about constraints and preferences in the various markets. What are the rational barriers to adoption? What are the psychological hurdles?
In a recent conversation with three practitioners working with the poor in developing countries, Mobarak highlighted three key constraints among the many factors affecting technology adoption: information failure, cost, and risk aversion.
Andrew Youn YC ’00 is the executive director and co-founder of the nonprofit One Acre Fund, which is working to bring more effective techniques to farming families in East Africa. “We distribute a suite of solutions that surround the very simple technology to make it actionable for farmers,” he said. The suite includes microfinancing that allows the purchase and delivery of hybrid seed and fertilizer to remote farms, as well as training in best planting practices. “If we are realistically going to move someone to success, then we simultaneously have to solve all of these problems,” Youn said. “That’s why we move toward holistic solutions.”
Part of the organizations’ task is to help farmers understand the benefits of its products, through a mix of education and marketing. But the information flow isn’t one way. “It’s incumbent on us in the field to really have humility and learn directly from the people we’re serving,” Youn said. The organization continually gathers data and pilots improvements to make their offerings more effective and relevant. Quick growth suggests they are succeeding. After two consecutive years of 50% growth, the goal is to scale to 1,000,000 families touched by 2020.
“The full price” of a new technology, Mobarak pointed out, “is not just the monetary cost of the product, but it could also include time costs, convenience costs, etc.”
Lindsay Stradley YC ’03, a co-founder of Sanergy, a social enterprise focused on providing market-based hygienic sanitation systems, says that she starts by understanding the realities of the communities she is working in. “Obviously if you develop a product or service that doesn’t have your customer in mind, first and foremost, it’s probably going to fail,” she said. “There are more than 8 million people in the slums in Kenya who lack access to hygienic sanitation,” she said. She added that the number grows to four billion people worldwide. The need is obvious. And there are cost-effective technologies available.
“The biggest part of our challenge is not developing new technology for the user but better understanding how to get market uptake,” Stradley said. Sanergy is building a network of sanitation centers which are run as businesses by local micro-entrepreneurs. In this case uptake involves both franchisees who buy and operate the toilets and the users of the toilets. “We have both levels in mind with everything we do,” she added.
The toilets cost the franchisees $500 each. For those who need financing, Sanergy takes advantage of existing technology to offer a no interest one-year loan option. Business owners make loan payments on their phones through a mobile banking system. The entrepreneurs, in turn, set the price that clients pay—typically about five cents. Some 35,000 people use the network every day.
The waste is collected and transported to a central processing facility where it is converted into fertilizer, providing an additional stream of income and helping to make the business sustainable in the long term. That, in turn, is key to franchisees making the decision to invest. “They need to know we are a legitimate partner that is here to stay,” Stradley said. “We need to convey permanence.”
Behavioral economics has shown that losses hurt more than equivalent gains feel good. So all of us tend toward risk aversion—preferring lower returns and certainty over uncertainty and a potentially large payoff.
Brian LoBue ’08, founder and managing director of Kokoa Kamili Limited, buys cocoa from 2,600 small-holder farmers in Tanzania and sells it to gourmet chocolate makers. While most buyers purchase dried cocoa beans, Kokoa Kamili buys them “wet,” at an earlier stage in the process—allowing the company to standardize processing and get a better price.
Nevertheless, change is a significant hurdle. “A farmer doesn’t want to buy in on a new concept,” he said. “They are more concerned with level payments and not taking on any risk.”
Kokoa Kamili is slowly overcoming farmers’ reluctance to do things differently. “The fact that we always do pay on time, that we hand out receipts, that we are very transparent with the farmers and we’re not trying to play them off one another…that has really helped,” LoBue said. In addition, the company buys earlier in the production process, thus reducing risk to the farmers. “That’s a key selling point, not just that they get their money earlier, but that they don’t have to worry about rain keeping them from drying their cacao properly.”