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Interview with Jacqueline Novogratz

Aired May 14, 2010 - 16:49:00   ET



BECKY ANDERSON, CNN CORRESPONDENT (voice-over): Poverty in the developing world -- how do you help so many who have so little?

Jacqueline Novogratz, CEO of Acumen Fund, has a unique perspective. She believes in a type of humanitarian aid that targets poverty through investment.

JACQUELINE NOVOGRATZ, CEO, ACUMEN FUND: We're really focused on the power of finance to actually bring us a kind of discipline to creating companies that look as if -- at low income people as agents of change rather than as passive recipients of charity.

ANDERSON: After leaving Wall Street, Novogratz created The Acumen Fund in 2001. It's a venture capital fund that uses small investments to fund enterprises that support the poor. She sees it as a way of empowering communities and drawing them out of the poverty. The fund has raised more than $30 million and boasts contributions from the likes of Bill Gates and Google.

Taking on one of the great challenges of our time, Jacqueline Novogratz is your Connector of the Day.


ANDERSON: And one of her early projects was in Rwanda, helping local entrepreneurs better themselves and their community.

So when I spoke to your Connector of the Day earlier via broadband from New York, I asked her how that work had informed the development of The Acumen Fund.

This is fascinating.

Listen to this.


ANDERSON: Jean-Michel Ferat says: "I started the first microfinance bank in Rwanda back in 1986. I saw the power of the markets, but also the limitations of the markets and on the other side saw the limitation of charity and aid and thought there has to be a better way, a third way, which we call patient capital. And that was really the beginning of The Acumen Fund.

ANDERSON: Jean-Michel Ferar says: "How do you address, at the fund, the risks of fraud and corruption to ensure that the program funds are used for their intended purposes?"

And that's a very good question.

NOVOGRATZ: That's a great question. Always, whether you're in business or whether you're with non-profits, the most important is really evaluating the integrity of the entrepreneur. We spend a lot of them and due diligence understanding who that entrepreneur is, whether or his value system is and understanding the business model, recognizing that we -- we do make loans and we expect to get the money back or investments.

There obviously are cases where we find problems. And hopefully we find them during the due diligence process and then we don't invest. And if we do find a problem after we've invested, we exit, which we've done in a couple of cases.

ANDERSON: Patrick Gage writes in. He says: "Government to government aid doesn't work, but private sector aid is very effective."

What is your response to that?

NOVOGRATZ: I think there are no black and white answers when it comes to making real change in the world. There are cases where government to government aid actually has worked. Look at the eradication of smallpox and the near eradication of polio. But these are really top down solutions that require government to government support and aid.

I think that the more interesting question is whether there's a way to restructure the way that government and private sector work together so that you can create more enabling environments where governments focus on issues like corruption and transparency and law and infrastructure that allow markets to work more effectively. And that's really the area where Acumen is trying to make its mark.

ANDERSON: Gonsalves asks a very good question. He says: "What is the average percentage that goes into the administration of Acumen?"

NOVOGRATZ: We don't take money and then look at administrative costs to give clean water to a low income person. So the overall cost of doing it is miniscule in terms of the ultimate money invested and the ultimate impact raised.

ANDERSON: What do you get out of it?

NOVOGRATZ: I think the most joyful, purpose-driven life, to look around at the -- the people who are supporting this work, to go a city like Bombay, which, a few years ago, really had a completely broken ambulance system, where 90 percent of the people in the ambulances were dead. People would call an ambulance to see what -- when someone died and they wanted to go to the morgue.

To see that a company like 1298 come up with a new innovation, a new model for delivering services in an uncorrupt way that enabled the poor as well as the wealthy to access it and to see that that company, over the last few years, signed government contracts for $80 million and they'll -- which will now allow 1,000 ambulances to reach a million people, an unbelievable sense of satisfaction.

I think it's something that -- I can't imagine doing any other kind of work. And I think it's the most interesting work on the planet.

ANDERSON: Good for you.

Jacqueline Novogratz is your Connector of the Day.

And Monday, your Connector is an actress and fashion designer who - - well, her personal life often gets as much attention, I'm afraid, as her professional life. Now, though, Sienna Miller is turning the media spotlight on Haiti. She's recently become an ambassador to the International Medical Corps and has been meeting those who lost their loved ones and livelihoods in January's massive earthquake.

But do send your comments in for CNN. And remember to tell us where you're writing in from.

Head to to do that.

That's for Monday.