Nouvel Economiste Philanthropic Entrepreneur of the Year 2009 Award

Bismillah-ir-Rahman-ir-Rahim

The First President,
Minister,
Your Excellencies,
Your Excellency, the Rector,
Commissioner for diversity and equal opportunities,
Distinguished representatives of the President’s office, the Ministry of Foreign and European Affairs, the Ministry of the Interior and Paris Town Hall,
Distinguished guests,
Chairman of the Board of M6,
Editor in Chief and Associate Director of the Nouvel Economiste,
Ladies and Gentlemen,
I shall begin by saying how honoured I am to be given the Nouvel Economiste Philanthropic Entrepreneur of the Year 2009 Award in this splendid setting, the Palais Cambon.

I particularly wish to thank Madame Tchakaloff, for her very kind words, as well as the entire editorial team under the leadership of Monsieur Nijdam, for having singled me out. I would also like to thank the sponsor of this ceremony, and here, I turn to you, Mr First President, our gracious host. And of course I also wish to greet the Finance Minister, who is on a trip to Lebanon and Syria and sends us warm greetings through Madame Cotta. Thank you.

I also turn to His Excellency Rector Dali Boubakeur, whom I am delighted to see here, and who, at particular moments of my life in France, has honoured me with his friendship and advice. I also pay tribute through him to the Great Mosque of Paris, which my family and I look upon with great friendship and respect, and express my gratitude for everything he has done for Muslims in France.

Allow me to move straight on to the subject of this speech, which is to share with you the experience gained over the past five decades during which the Aga Khan Development Network (AKDN) has been built up.

I shall focus my talk on the strategy we implement, which will enable me to outline the notion of philanthropic enterprise.

First, a few figures:

The AKDN Foundation is an umbrella organization which coordinates the activities of over 200 agencies and institutions that make up the network, employing a total of 70,000 paid staff and 100,000 volunteers;

The network operates in 35 of the poorest countries in the world and is statutorily secular.

This tableau is of course merely a momentary snapshot of a constantly evolving process, but its contours are clearly defined enough today for us to speak about goals, strategy and method.

The goal is clear: the aim is to create or strengthen civil society in developing countries. This single goal, when it is achieved, is in fact necessary and sufficient to ensure peaceful and stable development over the long term, even when governance is problematic.

As regards the strategy, civil society obviously cannot exist without apolitical and secular civil institutions, in particular social, cultural and economic ones. The essence of our development strategy is thus to create these where they are lacking or need to be reinforced.

Lastly, the method. It first involves answering the question as to whether it is the right moment to create the institution and, in the affirmative, to bring together the human and financial resources to get it off the ground.

The various organizations within the AKDN fall into two categories which both share the same goal of supporting development: commercial companies (grouped together into the Aga Khan Fund for Economic Development, known as AKFED) and those non-profit enterprises which I call “para-companies,” that work toward social or cultural goals.

The reason for this dual structure is that civil society cannot emerge solely by starting businesses or solely by building hospitals, schools and universities or cultural facilities.

It is the architecture of this dual company/para-company structure that I would now like to present.

I will start by saying that the two abide by a set of common rules.

First of all, they must implement current best management practices in their respective areas of competence and keep up-to-date in this regard. Among these practices I might point out one that is particularly difficult to achieve, and that is: the ability to withstand a crisis.

Another common rule is, they must be designed in such a way as to have measurable benefits for the local population, the general target being the very poor, and among them, rural communities.

I should also like to point out this rule: projects located in countries emerging from domestic or international conflict, or undergoing a change in their economic fundamentals, should not be dismissed, but should on the contrary often even be sought out. It is indeed in such circumstances that the poorest populations need the most attention.

All this requires very special skills and long-term AKDN involvement, if only to ensure that the managerial culture becomes strong enough for “best practice” reflexes to truly take hold.

And now, turning to AKFED commercial enterprises, we’re talking about approximately 150 companies in some 15 countries. They employ over 30,000 people and generate a turnover of two billion dollars.

They indirectly provide a living for millions of people, in particular in the agribusiness sector. To give you an example, AKFED developed green bean farming in Kenya by providing 50,000 farmers with technical assistance and buying their produce for export to Europe. The company has 2,000 employees, turns a profit and indirectly provides a living for 500,000 people.

Specific rules govern AKFED companies. I will discuss two of the essential ones.

The first is that AKDN investments earmarked for AKFED projects should in most cases be made in the form of long-term equity participation. This is to avoid the risk of excessive debt.

The second is that AKFED’s share of profits must be entirely reinvested in the group’s projects. This is a fundamental feature of AKFED projects, the rule being that any return on investment should solely benefit the population of the country where it has been made.

Commercial activity alone is not enough to create or strengthen civil society. It also takes para-companies. These are in fact so essential that AKDN commits four times more resources to them as to the profit-making sector.

Para-companies are designed to be economically independent. An urban and rural network of schools such as the one we manage in Pakistan, a university hospital such as the Aga Khan hospital in Nairobi and a park such as Al-Azhar in Cairo, thus can be perfectly well conceived to produce a surplus to ensure their survival and development as long as an entrepreneurial philosophy underpins the creation process and later the day-to-day management. This notion of surplus, it should be pointed out, in no way conflicts with the non-profit status of para-companies.

In any event, one condition in order for a para-company to attain financial independence is that its start-up cost must be covered by an outright gift from the AKDN, supplemented in some cases from partner donations, usually from national or international financial development institutions.

I do not wish to go over the allotted time, but I would like to conclude by emphasizing that an important function of the network’s umbrella organization, the AKDN Foundation, is to work closely with the governments of the countries with which we cooperate.

With France, this work is particularly intense, and I’m happy to report that in 2008, the French Delegation of the AKDN Foundation, the largest of all, signed a cooperation agreement with the French state and the French Development Agency to assist 23 developing countries, involving all the AKDN’s areas of activity.

This brief presentation of AKDN companies and para-companies should not give the impression that the work of each is entirely separate from the other. On the contrary, both being part of the AKDN, the two types of organizations are able to offer each other mutual support.

For instance, a commercial or industrial AKFED company can set up endowment funds to subsidize access for the poor to top-quality medical services or to help one of the network’s microfinance banks.

In return, through their enormous contribution to building civil society, para-companies create a space conducive to the development of AKFED companies.

Of course, the major principles guiding the AKDN are difficult to implement, and we have met with occasional disappointment. We have had enough successful achievements, however, to convince us to stay the course.

In other words, development works!

I am pleased to have had this opportunity to explain to you how, on the basis of a few fairly simple but fairly uncommon principles, we have tried to relieve hardship in the world and to help create peaceful, enlightened civil societies that are proud of their culture.

Lastly, and I say this tongue in cheek, I hope I have convinced you that I am neither a typical entrepreneur nor an ordinary philanthropist, and therefore may not deserve this award. 

Thank you.