Monthly Archives: March 2013

The Hult Prize: Food Security in Urban Slums

A few weeks ago, I competed in a social enterprise business plan competition called the Hult Prize.  The competition is ambitious in scale and scope, giving a broad mandate to competitors and rewarding the best ideas with the chance to win $1 million in seed funding.  This year’s challenge was developing a solution to the problem of urban hunger by 2018.

The catch is that the business needs to be scalable and financially sustainable.  The product or service needs to be culturally relevant enough to be useful, while culturally agnostic enough to work anywhere.  It needs to address the root cause of urban hunger, facilitating access to nutritious food at affordable prices.  With those marching orders, we went to work.

My team consisted of some seasoned industry veterans.  Aleem Ahmed spent three years at LEK Consulting before moving to Western Kenya to implemented a clean water program for Innovations for Poverty Action, and later Ethiopia to work with the Agriculture Transformation Agency.  Ahmed El Mahi had a stint as a trader in London before sourcing investments in Mali for D.Capital, Dalberg Global Advisors’ impact investing arm.  Caroline Mauldin spent four years at Accion International, one of the largest microfinance organizations in the world, before heading to the State Department to write speeches for senior officials in the Obama Administration and and set up the super cool Open Government Partnership.   We are all MBA students at the MIT Sloan School of Management, and the other three are picking up a Masters of Public Administration from the Harvard Kennedy School along the way.  Our team was stacked, and it was great to work with such an accomplished crew.

After tossing around a couple of dead-end ideas – including one proposed by me around vitamin-enriched flavoring packets – Aleem first proposed the idea of “slum meal plans.” When you dig down to the root cause of hunger in the urban slums, the availability of food is not necessarily the issue.  Generally, there is enough food to go around in most countries (with the exception of places plagued famine, like Somalia in 2011).  The problem is that food is expensive to purchase in small quantities.  We started to think about why this was the case, and came to the conclusion that there were two problems: finance and distribution.

On the financing side, people in the slums have irregular income that can be volatile throughout the month.  It is common to hear about people living on less than $2 per day.  But one of the most interesting insights to come from the research into the financial lives of the poor came from a book called Portfolios of the Poor.  After analyzing financial diaries collected from people living in slums in South Africa, Bangladesh, and India, the authors realized that income fluctuates wildly from week to week, and the poor use a variety of informal financial instruments to smooth consumption.  From this realization came their central conclusion:

“The poor are as diverse a group of citizens as any other, but the one thing they have in common, the thing that deines them as poor, is that they don’t have much money. If you’re poor, managing your money well is absolutely central to your life—perhaps more so than for any other group.”

So we took this as a starting point and applied it to the problem of food consumption.  What if we could construct a micro-savings program that could allow people to put money away for food when they earn income, in order to buy food when they don’t?  There are plenty of mobile-based savings platforms that exist around the world.  Safaricom, the East African telecom that developed M-Pesa, recently released M-Shwari, a savings platform that has seen swift uptake among the poor.  Our idea was to use a food-oriented savings account to take advantage of what is called an “illiquidity preference” – putting cash where you don’t have have instant access to it in order to prevent it from being spent on unnecessary purchases.  In order to incentivize people to join, we would need to offer some sort of discount or loyalty program.  To that end, we started to the think about distribution.

The second part of the equation is what we called the distribution problem.  Disparate suppliers outside the cities and fragmented vendors and retailers in the slums makes achieving economies of scale for any product, let alone food, difficult.  On a per-unit basis, people in the slums pay more for basic goods than their comparatively wealthier counterparts.  If we could develop a network of food vendors in the slums and effectively become a wholesaler of certain products, we could potentially shrink the existing margins between supplier and customer.  We could then distribute a portion of the savings to our customers, and reinvest the remainder in growing the business.

And with these two components, our idea took concrete form.  We called the idea M.yala – taken from the name of a town in Western Kenya and the Arabic word for “Let’s go.”  We spent weeks putting together our presentation and practicing our pitch.

On the day of the competition, we went head to head with 46 teams from schools around the world.  We were selected as one of four semi-finalists, and invited to present to 18 judges and 300 spectators.  Unfortunately, we just missed winning the regional final.  But there is a great team from Hult San Francisco that will be competing at the final round at the Clinton Global Initiative in October, and we wished them the best of luck.

All in all, it was a great experience.  Best of luck to all of the other competitors, and hopefully one of them makes a dent in the problem of urban hunger.

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