Reducing poverty with the guidance of the poor

Never underestimate the power of an old blue sweater - even one with a cheesy design of two zebras in front of Mount Kilimanjaro. Maybe especially one with zebras and a mountain.

That very sweater launched Jacqueline Novogratz's career as an international social investor, and it is the inspiration of her recently published book, The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World (Rodale, $24.95).

Novogratz, a 48-year-old New Yorker, spoke yesterday at Comcast Center during a meeting of globalislocal, a partnership of individuals and family foundations from the Philadelphia region that invests in poverty-reduction projects around the world.

Globalislocal doesn't look for profit in return, just progress in struggling countries. In 2006, globalislocal gave money to the Acumen Fund, launched and led by Novogratz.

"Acumen understands that traditional aid more often than not is unsuccessful . . . and that markets alone as they traditionally exist also don't reach the poor," said Elizabeth Wallace Ellers of Haverford, globalislocal's founder and managing partner. "It seems to us [Acumen is] a very reality-based approach to what people need."

What does a blue sweater have to do with reducing extreme poverty in countries so distant from Philadelphia?

"The story of the blue sweater has always reminded me of how . . . our actions and inaction touch people every day across the globe," Novogratz writes.

Novogratz's Uncle Ed gave her the sweater when she was a child in Virginia. After she outgrew it, the sweater went to Goodwill Industries.

Years later, in 1987, Novogratz was jogging in Kigali, Rwanda, where she was doing economic-development work, when a boy walked toward her wearing what looked like her old sweater. She asked to see the tag on it, and sure enough, she says in the book, her name was still there.

That coincidence of global proportions made Novogratz see the world's interconnectedness. Her missteps as a young foreigner trying to use her financial experience to help Rwandan and Kenyan women taught her to respect and listen to the people for whom projects are aimed.

"Dignity is more important to the human spirit than wealth," she told the globalislocal partners yesterday.

With that advice and other lessons learned from stints in international banking and at nonprofit development organizations, Novogratz explored the space between those two poles - a space known as social investing.

The result was Acumen, which Novogratz launched in 2001 as "a nonprofit venture-capital firm for the poor." Drawing on what Africans had taught her, she focuses investments on businesses that build access to water, housing, income-generation, and other basics. Acumen provides some technical guidance, but the work mainly rests with the local entrepreneurs who get the fund's money and other support. Those businesspeople also must show a good return on the investment.

That method, Novogratz said, is more effective than charity, which cultivates dependence and treats poor people as victims to be saved.

Novogratz's book chronicles her evolution from investment banker to naive do-gooder in Africa, to working with the Rockefeller Foundation, and finally, to her stature as a highly regarded social investor. It also describes how the best-designed efforts to boost the poor can be upended by unforeseen events.

Novogratz was deeply involved in a microloan bank and a bakery business, both run by women in Rwanda, before the 1994 genocide. In that massacre, Hutu militants and ordinary people killed as many as one million Tutsis in 100 days.

Many of her friends from those two projects were caught up in the genocide - as victim and as perpetrator.

"I spent four years going back trying to understand their stories," she said yesterday. "How could one have been killed in the first 10 minutes? How could one have been a major planner" of the bloodshed?

She learned that the survivors who lived and worked on the street near where the bakery had been had no memory of that business or the women behind it. The book gave her a chance to tell their stories and to engage a broader audience in supporting her approach to poverty reduction.