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Traditional philanthropy constituting mainly of grants, lacks clear measures and accountability therefore it is very frustrating to try and implement changes based on charity. Patient Capital on the other hand takes a middle path between market options and traditional philanthropy. Investors are wary of putting money into projects that have no return. But Patient Capital asks enterprises to invest in basic needs of the poor with financial as well as social returns. Novogratz created a venture capital fund which was accumulated from charitable donations and then invest equities, loans and grants in entrepreneurs who were working to improve the life of lower income communities. This way the recipients did not lose their dignity as recipients of charity and on the other hand would improve their social standing in society with access to basic healthcare, safe water and housing etc. The biggest difference was to invest in entrepreneurs who had vision enough to change the lifestyle of the poor and needy.
Novogratz was trying to change and improve the life of women in Rwanda and though she was in many ways mainly a banker dispensing funds to the poor she was well connected with them. This understanding of the personal needs of her beneficiaries was always first in her mind. In the example where she asked the women what color would they like to paint the bakery that she had financed, they replied positively in unison to her suggestion of blue only to later realize that green was more suitable. Therefore, Novogratz recounts that it is very important to be patient with the recipients of funds and build a relationship so that the funds help them to the maximum.
The toughest challenge before the fund was which entrepreneur and idea to invest in. They were looking for ideas that improved basic healthcare services to the lower income communities in India and East Africa. Dr. Govindappa Venkataswamy represented much of the funds vision and ideals. He had opened the Aravind Eye Hospital in Madurai, India to help people rid themselves of unnecessary blindness. His hospital performs 280,000 cataracts every year to people needless of their capacity to pay. It was the tough discipline coupled with powerful compassion that finally convinced Novogratz that they had found the entrepreneur who would be the first one to receive their donations for whatever innovation he might need.
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Acumen Fund’s vision is to support social entrepreneurs who are dedicated to helping the poor in improving their lifestyle. Novogratz established the fund to help in removing global poverty with the help of a few social innovators. The fund invests capital and management support in entrepreneurships that help in providing the poor with safe drinking water. Secondly the fund’s main objective is to reduce costs borne by lower income communities in accessing health care. They invest capital in enterprises that provide products and services at a very low rate to the poor. Thirdly it invests in businesses that make housing and financial innovations accessible to the poor. Their other investment is in enterprises whose objective is to help small holder farmer’s access to agricultural amenities and equipments.
Novogratz main motivation for starting the Acumen fund was to help in improving global poverty that was faced by her grandmother Stella. She left her very high paying job at Chase Manhattan to help with a non-profit organization working on women’s issues in developing countries. She recounts her encounters with the women of Africa who reminded her of her Grandmother who was herself very determined not to live on charity but work hard for her money. Her Grandmother had a tough life, growing up in foster homes and not getting any affection and compassion from any quarters. Novogratz herself came from a family of strained finances and worked very hard to finance her education. The financial security that she knew she had after her graduation was something she wanted all women of lower incomes to find.
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