• Inside Development

DAI: ‘Employee ownership and development innovation go hand in hand'

By Pauline Zalkin23 March 2011

Under USAID's Environmental Services Program, DAI's microfinance and water experts brought together MFIs and water utilities in a creative financing scheme to fund more than 12,000 new household water connections that would otherwise have been unaffordable. These children are gathered in one of the first households to benefit. Photo by: USAID's Indonesia Environmental Services Program

DAI was selected as a Devex Top 40 Development Innovator based on a poll of thousands of global development professionals who are part of Devex, the largest network of aid and relief workers in the world.

Announced on April 18, Devex Top 40 Development Innovators is an impressive listing of the world’s leading donor agencies & foundations, development consulting companies, implementing NGOs, and advocacy groups.

We asked each of the Innovators four questions to learn how they stay ahead to the curve and tackle old development challenges in new ways. Here’s how Betsy Marcotte, DAI’s senior vice president of technical programs, responded:

‘Demanding clients and fierce competitors certainly help, but what really drives us is an inner compulsion to stretch our capabilities, and a deep-seated conviction that ‘good’ is not good enough’ 

If you had to condense it to just one or two sentences, overall, what is it that makes your organization innovative?

Demanding clients and fierce competitors certainly help, but what really drives us is an inner compulsion to stretch our capabilities, and a deep-seated conviction that ’’good’’ is not good enough. Personally, I have never worked in an organization so inclined to self-analysis and self-improvement; it’s not always comfortable, but it kills complacency and keeps us moving forward.

Can you provide a specific example of something your organization has done that is particularly innovative?

In 1999, the state-owned Agricultural Bank of Mongolia, or AgBank (now known as Khan Bank), was in receivership and staring at outright failure. The consequences for Mongolia’s people and economic development would have been severe, as AgBank was the only bank offering significant coverage of the country’s rural hinterland and reaching the bulk of its population. At the World Bank’s prompting, the government of Mongolia agreed to attempt to revive the institution, and the U.S. Agency for International Development agreed to fund an outside management contract. In 2000, Mongolia’s government hired DAI to restore financial soundness to the bank, bring financial services to the rural population, and prepare the bank for privatization.

The turnaround was successful on all fronts. With 500 branches across all of Mongolia and more than 4,000 employees, Khan Bank is now the nation’s largest bank, serving 80 percent of Mongolian households. The institution was successfully privatized in 2003 — with DAI retained in a management capacity — and is perennially named the best bank in Mongolia by leading international finance publications. Most important, the bank has opened hundreds of new branches, reaches 98 percent of rural communities, and has massively expanded deposit, loan, and other service offerings to clients including pensioners, nomadic herders, and small enterprises — all in a profitable, and hence, sustainable manner.

The innovations at work here are many, but the biggest leap was to attempt the revival in the first place, at a time when conventional thinking called for side-stepping so-called “dinosaur” banks and pursuing rural finance instead through NGOs or startup microfinance institutions. USAID and DAI, which had already started a similar turnaround for the National Microfinance Bank of Tanzania, were able to see the potential in the ailing AgBank. USAID’s return on its investment has been substantial: For the price of a 2-year, $2.5 million management contract, the agency turned a worthless bank into a $125 million enterprise that has become fundamental to Mongolia’s economic and social infrastructure.

A second major innovation is that in 2004, DAI itself invested in the bank, to complement our ongoing advisory role. We hope to do more of this type of “impact” investing where we take a stake in private ventures that offer suitable financial returns while delivering development benefits.

Looking ahead 10 years, what are some of the innovations in international development that your organization wants to be a part of?

For us, the most powerful catalyst of innovation over the next decade will be the emerging leadership of host country development professionals and institutions. Another DAI innovation — the Center for Development Excellence – is designed to respond to and facilitate this trend. The CDE builds the capacity of local NGOs, consulting firms, governments, and other stakeholders interested in winning, managing, and accountably delivering on international development projects. We know that the best and most motivated development talent is increasingly found in developing nations themselves. Our intent through the CDE is to equip these emerging development professionals with the kind of training and structured approaches they need to give their ideas full rein, and over time to build a network of relationships through which DAI can augment its own capacities in local development contexts all over the world.

One factor in driving innovation at any organization is the talent you hire and the partnerships you make. How does your organization take into account innovation when it comes to cultivating talent and partners?

In many of our projects our leading role is partly a convening role, bringing together disparate organizations and consultants with diverse skills. We value immensely the novel thinking our small business and other subcontractors bring to the table, and we in turn have to be creative to make sure we find, engage, and retain the most innovative partners. We recently launched a Competitive Subcontracting Mechanism, for example, to streamline the teaming process by pre-approving potential partners for assignments on DAI projects. 

But even when we are serving in this “network orchestrator” role, it is impossible to do so effectively without a solid core of in-house technical expertise, and that has always been DAI’s underlying strength. How do we keep that core strong and our innovation fresh? In part through the allocation of resources. We have a talent management program that identifies leading-edge practitioners and rewards them accordingly. We recognize that innovative thinking is often crowded out by day-to-day project management responsibilities, so we fund staff time and travel dedicated solely to innovating new approaches and products – to the tune of $600,000 this year. And we support in-house publications such as Developments, the Developing Alternatives journal, and DAIdeas to give our technical staff a forum for sharing their learning. Employee-ownership is also key. As employee owners, DAI’s technical staff have a very personal stake in the innovations DAI is bringing to the marketplace.

Check out the full listing of all Devex Top 40 Development Innovators on Facebook.

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