Iqbal Quadir Got Me Thinking… How Can a House Be a Cow?

Two nights ago, I had the pleasure of attending the Microfinance Club of New York’s panel with Iqbal Quadir, Founder and Director of the MIT Legatum Center for Development and Entrepreneurship, Firas Ahmad, Director of Emergence Bioenergy, moderator Duncan Goldie Scot, Director of Musoni and Mission Markets, and Audrey Choi, Head of Global Sustainable Finance at Morgan Stanley.

Professor Quadir led with the controversial idea that aid – by making money available to governments and, therefore, less accountable to their constituent populations – corrupts the necessary positive process that entrepreneurship and private activity would normally play. His founding of Grameenphone came further from the conviction that connectivity means productivity – an easy conclusion when you’re working on Wall Street and your internet connection goes out!

The simple inspiration was that women were borrowing to buy cows to produce and sell milk to pay off loans, so why couldn’t a phone be a cow? That is, a cow in the sense of generating income, agency and empowerment, productive activity, property rights, social capital and wealth accumulation, as well as the knock-on effects of improved health and education for the wider household circle.

Why can’t anything be a cow? Aren’t we all in the social enterprise and impact investment space looking for the next big cow or another way of milking the cow or a better way to make really good yogurt and cheese?

So can a house be a cow? Of course, but that requires a shift from conventional thinking. Conventional thinking on the part of conventional and public housing developers in the developing world is that low cost and affordable housing is a sanitary physical space that protects its inhabitants, at a minimum, from exposure to extreme climate and the negative health impacts of vermin, lack of sanitation and poor construction and materials.

How can we think about housing for lower income groups – like a cow – as accruing to the social, economic and physical health of the individual, household and, another important difference, the community? Here are just a few of many points to consider:

- Many new public and affordable housing communities, as in India and Brazil, are built far from city centers and common employment destinations, meaning long commutes via multiple transit modes. The financial and emotional cost often causes these residents to move back to better located slums and rent out their new unit with little concern for the renter’s maintenance of the unit.

- Operating expenses can be a burden over time for lower income families. Water and energy prices are likely to rise in many countries currently enjoying subsidies. Sewage and water treatment can entail higher maintenance costs as modern plant equipment or incorrectly sized pumps add costs.

- Same goes for elevators – many building codes require elevators above a certain number of floors and building height, but elevators can quickly become filthy and non-functional.

- The quality of the building envelope and the choice of materials and finishes should take into account long-term use and maintenance. Walls that crumble and rooms that mildew are a recipe for abandonment and deterioration of value.

- Social and cultural capital can become frayed as residents from disparate locations come together in dense, new communities.

- Families find themselves far from essential services like education and health care, as well as social and cultural institutions.

No one wants to buy a sick cow any more than a sick building, so truly responsive social enterprise models might include the following services:

- Building for energy and water efficiency as well as realistically projecting electricity use over time as families buy TVs, air conditioners and computers

- Choice of water and sewage treatment equipment that entails appropriate technology for lower long term maintenance costs

- Realistic modeling of future maintenance costs, maintenance fees and governance structures for managing up-front maintenance fees

- Transit facilitation to help residents in neighboring communities avoid car use and arrive easily at the nearest public transit nodes

- Anaerobic biodigester technology to generate electricity using household food and local manure as feedstock, to produce fertilizer for green spaces on site and for sale to local farmers

- Social and cultural spaces, as well as social services and community development, to encourage social continuity and stave off crime and dislocations

- Schools, clinics and social services on site or developed in cooperation with other local communities

Housing should help low income residents accrue wealth and build assets, as well as improve their productivity, not just be a safe, quiet box. To be sustainable, low cost housing developers should help ensure that the lower cost of the home isn’t offset by higher social and economic costs elsewhere in the household budget.

From an impact investment perspective, this may mean a lower profitability model or models that are funded by a combination of grants, guarantees, low cost debt and venture equity, as opposed to current conventional financing structures.

If an impact investor makes an investment in actual cows and makes a low single digit return on those assets, no one finds this strange, whereas a real estate investment in a rapidly growing developing country, many multiples greater in size, is supposed to yield upwards of 30% IRRs (conservatively).

So… back to the original question, how can a house be a cow? Maybe a house can be a cow when a social entrepreneur acts on those parallels and an impact investor is willing to finance them the same way.

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