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Leila Chirayath Janah

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Making the Case for Impact Sourcing

Posted: 10/06/2012 11:24 am

Last week, B Corporation, a network of socially responsible "for-benefit" businesses, announced its plans to scale internationally at the Clinton Global Initiative. Many of these businesses are supported by impact investors, a group of double- and triple-bottom-line funders that received little attention until the Rockefeller Foundation launched a major impact investing initiative in 2008. Impact investing now boasts $50B in assets and is expected to grow by a factor of ten in the next decade.

Much as impact investing is transforming capital markets, impact sourcing could transform the trillion-dollar outsourcing industry. Impact sourcing, a new initiative piloted by the Rockefeller Foundation and several key partners, including my company Samasource, promises to connect poor and marginalized people to digital jobs on a massive scale. A study published last week by Avasant projects by 2020, the market for Impact Sourcing services will grow to employ 2.9 million people and generate revenues of $55.4 billion.

There are many reasons to be skeptical of impact sourcing as a strategy to create large numbers of jobs for the poor. Constraints abound--literacy, access to infrastructure, the types of work that poor people can do, and the large number of for-profit outsourcing companies competing for similar work. Why not focus on impact agriculture, or impact manufacturing--fields which seem to have fewer barriers to growth in poor regions?

I left my job at a consulting firm five years ago to start Samasource, an innovative social business that connects women and youth in poverty to dignified work via the Internet. I founded Samasource because I was frustrated by traditional approaches to poverty alleviation. Even those approaches focused on jobs often equip poor people with skills for which there is little market demand. One of my colleagues recently told me about a program in northern Uganda that trained youth to be cobblers. This sounds like a great idea, until one visits the town and realizes that the only shoes anyone wears are flip-flops.

I believe there is no other way to create decent livelihoods for the world's poorest people than to connect them to global markets as producers, and on fair terms. Low-end digital work, the kind of stuff we tackle with our microwork model, is a fast-growing industry. Through microwork--small digital tasks parsed from larger projects--Samasource has developed an efficient way to create dignified formal-sector jobs in poor places with little infrastructure. Microwork is a piece of the larger impact sourcing pie that is focused exclusively on small tasks sent to people without advanced training or skills.

Microwork is an efficient way to create good formal-sector jobs in poor places that lack traditional infrastructure, among people without a ton of formal outsourcing or digital work experience. We have seen that in many countries, education and literacy have scaled faster than demand for formal labor, leaving an enormous surplus of young people with no hope for employment. In Kenya, for example, 95% of people under 30 can read and write English, but there is over 40% youth unemployment (this is the official government estimate; the World Bank estimates the real figure is nearly 70%).

There are a number of challenges to this model, and to impact sourcing more broadly. We face poor information and communication technology infrastructure in rural areas, lack of management expertise, and other challenges. But I have seen this work over the last four years at Samasource, enough to show me that we can overcome these challenges with a bit of creativity. We have now employed over 3,000 workers from low-income backgrounds in places as diverse as rural Haiti, informal settlements in East Africa, and peri-urban parts in India. We've accomplished this using under $3.5 million in donor funds, and managed to pay out over $2 million in wages (meaning that we are getting pretty good leverage in the market).

Microwork and impact sourcing could be the next big thing in the development world. According to The Coming Jobs War, a new book by Gallup's CEO Jim Clifton, the global economy is short 1.8 billion jobs, mainly in developing countries. His firm's extensive polling data from over 200 countries show that what the world wants more than peace, security, human rights, and even love is decent work--a job that pays a living wage and treats workers fairly. Jobs are the number one priority for hundreds of governments around the world, and what we have developed is an innovative way to create them.

I believe microwork will be a movement akin to microfinance. We are in the nascent stages of this business, and already we are seeing results. Our baseline and follow-on surveys show that workers double or triple their incomes after joining Samasource, and 75% of them move on to higher-paying jobs in the formal sector or higher education. If we could scale this 100x, we'd see an enormous ripple effect of that capital moving into places that are completely disconnected--jobs in service industries, transportation and the like. We'd see a reduction in brain drain as more people would see opportunity locally and avoid "disaster migration" to urban slums. Based on Esther Duflo and Abhijit Banerjee's research, we would see improved educational outcomes for several generations of children--one of the main effects of sustained formal employment in a concentrated area.

We are also exploring models to scale. At our present pace, Samasource expects to pay and train about 20,000 workers by 2017. We will more than double our sales this year. A growing rural business process outsourcing (BPO) network in India is contacting Samasource regularly for guidance on how to build out their centers. Many aspiring rural BPO entrepreneurs come from outsourcing centers in urban India and want to return to their hometowns to set up local shops. They could benefit from our expertise in sales and quality assurance, and we could allow them to use our platform to create local businesses catering to the domestic market. This would enable us to reach at least 100,000 workers in the same period, if not more.

Some say that outsourcing is simply taking jobs from one place and relocating them to another. What we've seen in the microwork space is that our main competitor is not U.S. labor, but non-consumption. Many firms simply weren't digitizing the kinds of information they send to Samasource because it wasn't cost effective. We realized that this critique brought up a valid point: how can we ignore what is happening domestically on the jobs front? So Samasource decided to launch a program in the U.S. next year with a grant from the California Endowment. Our model in the states will be different from what we do abroad--we'll be training people to work from home on growing online work platforms using low-cost training methods. We do not yet know if this model will be a success, but this kind of innovation is desperately needed in our country.

The demand for outsourcing already exists; we now need to find new ways to connect people living in poverty to these opportunities. Impact sourcing could employ roughly 23% of global sector outsourcing jobs by 2020. I hope foundations, governments, and private donors around the world continue their investment in the impact sourcing sector. To me, it represents one of the most promising solutions to the pressing problem of global poverty, and we need to do as much as possible to see it scale.

 

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