Giving Compass' Take:

• Market-creating innovation is a strategy that can address poverty through a transformation of products that were previously expensive to affordable and simple for consumers to understand.

• How is COVID-19 exacerbating poverty and straining aid solutions? How can donors support innovative strategies during this time?

• Read how COVID-19 could push more people into poverty and what philanthropy can do now. 

With potentially half a billion people falling into poverty as a result of COVID-19’s spread, it’s never been more important for the international community to work together and help poor communities recover. But decisive action shouldn’t come at the expense of a broader conversation regarding poverty alleviation. Let’s start that conversation with one idea many will agree upon: programs that perpetuate dependency do little to create lasting prosperity. Consider food relief programs.

In response to the coronavirus, the United States Agency for International Development (USAID) Food for Peace program in Tajikistan, in collaboration with Avesto and Resource and Policy Exchange, Inc., has delivered nearly 60,000 kg of food assistance to aid health and social protection facilities and vulnerable Tajik households. While providing direct assistance like this may be helpful and even necessary during an acute crisis, this approach to food assistance could be detrimental. How will low-income countries like Tajikistan develop productive, robust systems for agriculture, food processing, distribution, sales, and so on at home if they’re continually sent free food? Local farmers will find it increasingly difficult to develop market-based solutions that are critical to becoming prosperous.

In our research studying the causes of prosperity, it has become clear one of the surest avenues for sustainable, inclusive growth is what we call market-creating innovation. Market-creating innovations transform previously expensive, complicated products into ones that are simple and affordable, such that new populations of people can begin to consume them. In so doing, these innovations build new markets. And in contrast with donated solutions, the innovations supported by these new markets are inherently sustainable, since both the producers and consumers have a vested interest in ensuring the market succeeds and continues to function in the long term.

Read the full article about fighting poverty by Lincoln Wilcox at Christensen Institute.