A For-Profit Brings Clean Water to the Poor

WaterHealth International's Tralance Addy typifies one of the latest trends in entrepreneurship: helping the poor while making money

Tralance Addy knows all too well what can happen to people if they run afoul of dirty water. When his company, WaterHealth International, was shooting a video to promote its water purification systems for rural villages, he posed beside a lake near Hyderabad, India, that was none too clean. The video producers suggested he reach down into the lake and let the water run through his fingers. Which he did. Unfortunately, he forgot to wash his hands immediately afterward. A few hours later, he became violently ill and had to be hospitalized. He didn't completely recover for six weeks. Says Addy, 63: "We were trying to demonstrate something about bad water, and I really did it."

Such are the extraordinary difficulties faced by profit-making companies trying to solve some of the world's most stubborn problems. Addy, a longtime Johnson & Johnson (JNJ) executive, had retired early to invest in technologies aimed at helping poor people. Four years ago, he took over the struggling WaterHealth. About 5 million people die each year from waterborne diseases and billions suffer from such illnesses, so he saw both a big need and a big financial opportunity. The company is now in India, the Philippines, and Ghana, with more than 200 village purification systems installed, but eventually he plans on expanding to emerging nations all over the world.

WaterHealth typifies one of the latest trends in social entrepreneurship. A new generation of leaders believes it can do more for poor people if they operate as profit-making businesses rather than donor-backed organizations. WaterHealth has designed both a proprietary purification process and a simple facility for housing the equipment. It sells the systems to villages, helps secure financing, and runs the plants. After eight years, when the villages pay off their loans, the money they make from sales of water goes straight to their coffers—available for village improvements.

Marked Improvements

During BusinessWeek's visit to Indian villages, water problems were readily apparent. In one tiny hamlet, a herd of buffalo swam in a pond that was also used for drinking water. Yet in villages served by WaterHealth, leaders proudly showed off their gleaming new glass and steel purification plants. The water has worked wonders at the public elementary school in the village of Naidugudema, where 49 students from first grade to fifth are packed in one large classroom. D. Sri Devi, the head teacher, says that in the past, 10 to 12 of the kids would be out sick every day, but since they started getting free water from the new plant, only one or two are out sick. Also, they're doing better in school.

WaterHealth has critics. Verghese Jacob, lead partner at the nonprofit Byrraju Foundation, which also sets up water purification plants in Indian villages, says his plants cost less than half as much as WaterHealth's, and he charges less for water. "WaterHealth has good intentions, but unless they can bring the costs down, it's not really sustainable," he says.

Addy answers that because Byrraju's plants depend on subsidies, its model is the one that won't last. "The bigger we get, the better and more efficient we get," he says. His investors agree. "The business model is still a little too expensive to be easily affordable for villages, but we think it will work long-term," says Brian Trelstad, chief investment officer for Acumen Fund, which made a $600,000 equity investment in WaterHealth and also guarantees some bank loans to villages.

Addy's drive to provide drinkable water for the world's poor has roots in his own upbringing. He grew up in a middle-class family in Ghana, but he did volunteer work in rural villages before heading off to the U.S. for college and a career. Now, with the Indian operations clicking, Addy is turning toward Ghana again. Recently, the company opened its first pilot site there—just a few miles from a village where Addy did volunteer work as a kid. Some of the people from the village attended the launch ceremony. "They were emotional, and I was even more emotional," says Addy. "I was going full circle."

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