When I applied for the Banyan Impact Fellowship, I expected to work with non-government, nonprofit organizations (NGOs). NGOs’ ad campaigns and fundraising efforts dominate media related to humanitarian aid, making them synonymous with development. I was surprised when I started working at Forus Health, a private limited company. Before this experience, I had yet to consider the role of for-profit organizations in the development sector. This blog explores for-profit organizations’ development impact.
My curiosity about for-profit companies
Due to my previous perceptions of development, I was surprised to learn that a larger share of development aid is awarded to for-profit companies compared to nonprofit. For example, according to Professor John Casey, City University of new York, of the top 25 contracts awarded by the UK Department for International Development in 2011, 20 went to for-profit companies, while 5 went to nonprofits.
After learning this statistic, I wondered whether there are advantages to for-profit organizations over nonprofit. While most literature agrees that analysis of the impact of these two types of international development organizations is lacking, I came to understand some benefits of for-profit development companies.
For-profit versus nonprofit organizations
One benefit of for-profit social impact organizations is sustainability. These organizations do not rely on grant money, donations, or federal programs alone as nonprofits do. Similarly, they do not depend on donor preferences to formulate their programs. Instead, they can fund their programs and projects as they like.
Additionally, for-profit companies can more easily scale their project. For one, they do not have to depend on outside investment; and two, they are incentivized to scale up the projects as greater impact leads to greater profit. Finally, social impact corporations experience greater staff retention. Since they have higher budgets and a consistent revenue stream, they can pay higher wages and ensure longer-term employment. I found many of these points to be true for Forus Health. My project focused on scaling up the company’s eye-screening services. I analyzed data to determine the investment required and the potential profit from scaling up. Compared to what they could make from these services, the investment was minimal and manageable for the organization, making scaling up the service over the next 5 years highly probable.
Yet, there are also disadvantages to these types of organizations. Private sector companies are not created for the sole purpose of helping the poor. They can prioritize profit over people. In other words, these organizations may choose to invest in projects that can be more profitable over ones that would have a greater impact on the community. While I stressed the need to perform eye exams in underserved communities by partnering with NGOs, it was evident that this idea would not be possible unless there was potential for profit.
It is complex
Overall, development and humanitarian aid are complex. There are benefits and consequences to different types of aid and the work of development organizations. I have learned that when working in development, it is important to question different organizations and their work to properly determine whether they are actually helpful to impacted communities.
References:
Casey, J., 2016, What is the role of for-profit companies in international aid and development? Paper presented at the 2016 ARNOVA conference, Washington DC
Narula, P. (2017, December 22). Council post: The forprofit social enterprise is the impact model of the future. Forbes. https://www.forbes.com/sites/forbestechcouncil/2017/12/22/the-forprofit-social-enterprise-is-the-impact-model-of-the-future/?sh=2f4878435571
United Nations. (2019, April 17). Private sector placing profit ahead of people, undermining sustainable development, speaker warns, as Forum on Financing for Development continues | UN press. United Nations. https://press.un.org/en/2019/ecosoc6975.doc.htm
What is a for-profit organization? definition and examples. Market Business News. (2019, March 29). https://marketbusinessnews.com/financial-glossary/for-profit-organization/
