Visit The McKinsey Quarterly for a video interview with Jacqueline Novogratz and an excerpt from her new book: The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World.

Beatrice Nguga, a wide-shouldered woman with a firm handshake and warm eyes, raised eight kids as a single mother in Kibera, a Nairobi slum that is home to more than a million people. In the 1990s, she buried each of her children—and their spouses. All had died of AIDS, leaving her to raise 12 grandchildren. She had no job and few prospects. “At one point,” she said, “I was so desperate, and the world felt so dark, that I could think of nothing but to beg for some money so that I could buy porridge and poison and end the suffering of myself and all of those children.”

When I met her, in December 2006, Ms. Nguga was overseeing the management of several businesses. She started by selling French fries. She then sold water in the slums. She added rooms to her house with the intention of renting them and started a butcher shop, a hair salon, and a restaurant, employing scores of people. Her youngest grandchildren were in school, and a number of the older ones had graduated from college. Today, she has 11 employees and 21 rooms, most of which she rents for income. She has reached this position by taking small loans from a community organization called Jamii Bora, repaying them in a timely manner, and borrowing again. Beatrice Nguga is a woman of integrity, strength, fierce determination, and faith in life.

Hers is a great success story, but what would have happened to her grandchildren if she too had fallen ill or died? In this sense, her story illustrates a larger theme: one of the greatest challenges in escaping poverty is inadequate health care. The resources, the technologies, and the knowledge to provide adequate medical services to everyone do exist. What we don’t have are innovative and efficient business models to deliver them.

It was to solve problems of this kind that I founded Acumen Fund, a nonprofit venture capital firm for the poor, in 2001. The fund, which invests philanthropic capital raised from more than 200 partners, starts from the perspective of people as users or consumers of services. We also believe that health systems must be economically sustainable and scalable, for only then will they reach the poor and the very poor. We invest in social enterprises experimenting with sustainable approaches to the delivery of health care and clean water, because we believe that integrating the creativity of poor people and the entrepreneurs who serve them is the most efficient way to find some of these solutions.

Solving endemic health problems will require a mix of public and private resources, market incentives, and large-scale public awareness campaigns. For conditions such as malaria, HIV/AIDS, and tuberculosis, the market gives the major drug companies few incentives to research treatments for low-income people. Fortunately, the Bill & Melinda Gates Foundation has pioneered ways of intervening to ensure that this critical research is undertaken. Large-scale vaccination campaigns, like those that eradicated smallpox and are now on the way to wiping out polio, also play an important role in improving health on a global scale.

Innovative business models are essential if we are going to offer good, affordable health services to the world’s poor. My background as a banker has convinced me that to deliver social goods such as health care and clean water, getting the economics right is no less important than it is in any other kind of investment. At Acumen Fund, we buy equity in companies that we evaluate as offering such solutions. Any returns are reinvested in the portfolio.

Let me give you an example. India has one of the world’s highest rates of maternal death in childbirth, accounting for a quarter of the worldwide total. Acumen Fund became a joint venture partner with the public-sector company Hindustan Latex to create LifeSpring Hospital. This network of maternity and child health care hospitals provides high-quality, low-cost maternal services with clear and transparent pricing. At LifeSpring, expectant mothers pay 1,500 rupees ($35) to have a baby delivered. That is more than the official rate at public hospitals, which are supposed to be free though they often require undisclosed payments, but only about a sixth of the price at a private clinic.

This business model works because of the organization’s relentless focus on customers, not patients—pregnancy is not a disease. The simple rooms are clean, bright, and pleasant. Standardization allows the network’s facilities to average eight times as many procedures as private clinics do. This increase in traffic allows LifeSpring to use doctors more efficiently, so the network’s medical cost per patient is just a quarter of what a private hospital spends. LifeSpring’s innovation was figuring out how to deliver world-class care—it is ISO 9001 certified—at a price that many of the poor can afford and that also makes economic sense.

LifeSpring’s goal is to increase the number of hospital-supervised deliveries and to reduce maternal and child mortality. The organization plans to establish 30 hospitals across India over the next three years and will then evaluate a franchise model in hopes of scaling up rapidly to 150 hospitals over the next two. Each facility, with 20 to 25 beds and the capacity to serve 20,000 low-income patients a year, will provide comprehensive obstetric and pediatric care, as well as ambulance, pharmacy, and laboratory services. The hospital network has already served more than 25,000 low-income patients, mostly from families working in the informal sector.

Does LifeSpring serve the poorest? That’s an excellent question; for people making $2 a day, the 1,500 rupee cost is more than two weeks’ earnings, which can be a difficult sum to save. The company is evaluating how to extend its services to those who cannot afford even its modest charges.

By identifying business models that work for at least a large percentage of the population, Acumen Fund hopes to help lead the way in using private innovation to solve large-scale public-health problems. The fund’s $20 million health portfolio also includes A to Z Textile Mills, Africa’s largest insecticide-treated antimalarial bed net supplier, which produces 16 million nets a year and employs 6,000 women; Dial 1298 ambulances, Mumbai’s leading ambulance provider, with a service-for-all pricing model that gives free or reduced-cost rides to the poor; and First Microinsurance Agency (a partnership with the Aga Khan Agency for Microfinance), which aims to provide health insurance to 500,000 customers in its initial two years of operation as Pakistan’s first health microinsurance provider.

We are confident that this laboratory of investments will uncover innovative service delivery models that can be scaled up further through private, semiprivate, or public investment. The goal is expansive but not impossible—to show the world a whole new world of possibilities.

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