26 August 2009 ~ 2 Comments

Lesson Learned: Why we shouldn’t give things away (or sell them for cheaper than they really are!)

I just read this post “9 Reasons Not To Give Things Away” and I agree with it. It relates back to my earlier post discussing how a group working in the same area as us in Cambodia subsidized water filters and thereby destroyed the market for the product (and negatively effected water filter use/health).

I would argue for, as much as possible, charging the market value for the product. (I do realize there are many cases where the discrepancy between the ability to pay an the actual costs are irreconcilable, but in many cases one of these strategies can be used.)

“But what about the really poor people who can’t afford to pay the market value?” some ask.

1) Even in the poorest areas there are wealth discrepancies (even though from a distant overview those changes are slight). In Cambodia at least, when “the poorest of the poor” are given something directly from the outside world (NGOs, corporations, etc), the “slightly less poor” often no longer want that thing. It has a stigma, people don’t necessarily trust that those people coming into their village to “help” are indeed giving quality products, etc. By selling the product to those who can afford it, it creates a demand for the product. The “richer” people have it, so those with less start to put value on it and may start to save for it.

2) “But the poorest of the poor need it NOW! We can’t wait until the market has been flooded, the price comes down, and the poorest of the poor have saved up to buy it!” OK, OK, valid point! But that doesn’t mean WE need to resort to giving things away nor subsidizing the product. I speak from a Cambodian perspective, but perhaps some of these lessons and patterns can apply to other areas. In Cambodia, on the village level, leadership and local community groups know who the “poorest of the poor” are, and are used to coming together to support those people at different times. THEY could subsidize it for those people, choose to have a common good shared among the few who can not afford it (depending on the product and maintenance needs which might demand “ownership”), etc.  This IS different than the outside group subsidizing the product, as the local community recognizes their part in this, and the product still retains its true value.

3) Make a re-payment plan.  I have seen a great model for this here in Cambodia is at rdic.org. They sell rope pumps to families, sometimes a group of families who have come together to buy the pump. At a few dollars per month over a monthly two year repayment period, each family can afford to purchase the pump. In addition, this allows the RDIC team to visit monthly and check that maintenance is being done well and that other factors leading to water-born illnesses are addressed. During one payment pick up they might talk about hand washing, another using toilets, checking on the families in-home water filter’s proper use, etc. When I last checked, RDIC had 100% repayment and they are indeed  targeting the “poorest of the poor” in the areas where they work.

Rather than giving things away to “the poor”, or subsidizing, we can create markets and provide education along the way, if we invest our time, not just our money. By going through local power channels we can continue to support local community responsibility. By investing time (with human time being very affordable in the areas where we work) in collecting on a repayment plan, we can build a sense of ownership which is not gained when we get something for free.