FOOD AND FUNDS

What We’re Learning: Creative financing can attract the private sector to help lift people out of poverty and improve health.

In the developing world, most families must contend with a series of interlinked problems. Because they’re poor, they are undernourished. Because they’re undernourished and can’t study or work, they’re poor.

Last year, Groupe Danone, in partnership with Grameen Bank (the microfinance institution founded by the Nobel Prize winner Muhammad Yunus), launched a sophisticated project in Bangladesh to address both health and poverty. We are involved in the project through the Global Alliance for Improved Nutrition, which is providing technical assistance to Danone and Grameen Bank and studying the project’s effectiveness.

Here’s how the project works: Grameen Bank gives loans to women in Bangladesh to help them purchase special hybrid milk cows that produce five times more milk than the non-hybrid cows, along with common vaccinations and micronutrients to include in their feed. Danone promises to buy any milk the cows produce, which helps the women pay back Grameen and build assets for their families.

Danone then uses the milk to make yogurt, which is fortified with vitamins and minerals essential to growth and development. Then Danone hires local women to sell the yogurt for a small profit in communities throughout Bangladesh.

In the developed world, Danone uses massive factories and distribution networks to take advantage of economies of scale. But that model doesn’t work in Bangladesh, where poor roads limit distribution to a 25-kilometer radius around each production facility. The dispersed model works well in Bangladesh, where the milk producers and yogurt sellers are scattered throughout the country.

Through this approach, the milk producers and yogurt sellers increase their incomes significantly while large segments of the Bangladeshi population, particularly children, get improved diets. And though the project is not yet profitable enough to be self-sustaining, Danone is confident that it will be.

The project is new, but Danone has made some adjustments already. For example, the company discovered that it was considered culturally inappropriate for young women in Bangladesh to be far away from their homes, which made them inappropriate salespeople. So it has started recruiting older women for those jobs. In addition, Danone has decided to increase its investment in advertising to build its brand among consumers. The fortified yogurt now has a kid-friendly logo, a smiling lion flexing its muscles.

Danone hopes that in 10 years, the project will create 25,000 farm jobs and up to 100,000 sales and distribution jobs while improving the health of more than a quarter of the Bangladeshi population. Moreover, the model that Danone and Grameen Bank are developing could very well be adapted to other countries and other products.