Profit is key to alleviating global poverty

Profit has become a dirty word in some quarters, often lazily associated with greed and rapacious corporate power. But in developing countries across the world, people don’t have the luxury of denigrating profit.

For farmers in Malawi, there is no welfare safety net to catch them when their crops fail (and no food banks to help out should state provision be inadequate).

These entrepreneurs rely on the market for survival. What they can grow and sell is the platform on which their survival and prosperity is built. That is why charities, philanthropists, and impact investors that care about the world’s poorest should turn their attention to using local market mechanisms to tackle poverty.

Whether it is training people to sharpen their business skills, ensuring supply chains are available to small scale producers, or helping individuals to get the latest price information, making well-functioning markets should be a central part of to their work.

Globalisation may have its critics, but international markets have helped Malawian farmers find buyers for their goods.

The humble pigeon pea, a lentil-like legume that is high in protein, is in demand in India. One might think that producing a crop popular among India’s growing population would be a sure route to endless riches, but sadly that is not the case.

Changing weather patterns are making it harder to grow and harvest and this precarious position makes smallholder farmers easy prey for middlemen who take advantage of this desperation, cutting deals at the farm gate. The lack of storage facilities means growers have little leverage, because if they don’t sell, the crop will spoil. Illegal buying scales are also common among traders, driving prices down further.

Frank Zulu, a farmer in Malawi’s Mwanza district, earned only £100 from his pigeon pea crop last year – not enough to feed his family, send his kids to school and fix his crumbling home.

He said: “It is very pathetic, as a father, to feel helpless like that, to feel like you cannot provide food for your children, and that there is nothing you can do to make them better when they are crying. Children depend on you and it gave me great pains to think of it. Even now, it is hard to think about for very long.”

However, a new project being run through Christian Aid is helping farmers to squeeze more out of their crops and boost profits. These techniques are the basic rules of good business, familiar to effective firms across the world: cut waste, increase efficiency, improve information and diversify.

Farmers are being taught how they can add value to their produce through vertical integration, grading and sorting their peas before sale, and about the benefits of warehousing to allow storage when prices are low, all of which strengthen their negotiating power. They are provided with new tools and more resistant seed varieties.

Waste is being reduced, with the pigeon pea leaves and hulls being used for livestock feed and the plant stems for fuel wood. Savings and loans groups for farmers are also being set up to help generate longer term capital investment opportunities.

Most of the world’s poor do not want handouts, they just need an opportunity to deploy their ingenuity and hard work without the cards stacked against them. Once some of these obstacles are removed, people’s entrepreneurial potential flourishes, driving productivity. This then becomes a virtuous cycle with healthier incomes allowing expansion and diversification.

This kind of development work is also more sustainable in the long run. The investment of training and tools are like priming the pump of human potential which can lead to self-sufficiency and an economy that delivers for people all along the supply chain.

Such poverty alleviation programmes may even redeem the concept of profit in the eyes of its critics, and encourage more people to see the potential for markets to change lives for the better.

First published in City A.M.