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November 23, 2011 / compassioninpolitics

Is it ethical to profit from the poor?

Is it ethical for social entrepreneurs to profit from the poor (at the base of the pyramid)?

Paul Polak recently answered this question which is at the core (potential) dilemma for social entrepreneurs:

What are the common features of initiatives that have truly helped extremely poor people move out of poverty?
1. They begin by thoroughly listening to poor customers and thoroughly understanding the specific context of their lives.
2. They design and implement ruthlessly affordable technologies or business models.
3. Energizing private sector market forces plays a central role in their implementation.
4. Radical decentralization is integrated into economically viable last mile distribution.
5. Design for scale is a central focus of the enterprise from the very beginning.
It is clear that all of these factors are integral components of a business system, but this takes us back to the original question: should it be a business system that enhances the livelihoods of poor people without making a profit for outside investors? Or should it make a profit for investors as well as the poor people who are served by it?
To me the answer is obvious. The only way for a business to help at least 100 million poor people move out of poverty is to follow the laws of basic economics, which means providing an opportunity for both poor and rich investors to earn what they consider to be an attractive profit from their participation.

You can read the full article on Paul Polaks blog here.

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