Forbes Global Cover Story - Business and Finance
Mowlana Hazar
Imam Featured on the Front Page of Forbes
Forbes Global Cover Story - Business and Finance
May 31, 1999
The world wondered if young Prince Karim could fill the Aga Khan's shoes.
Four decades
later, the verdict is in.
Venture Capitalist to the Third World
Cambridge, Massachusetts, 1957. Prince Karim, a 20-year-old Harvard
undergraduate majoring
in Islamic history, receives word that his grandfather, Sir Sultan
Mahomed Shah, Aga
Khan III, has died. Sir Sultan's will names young Prince Karim
his successor as spiritual
head of the world's Ismaili muslims. Millions of Ismailis (and
gossip columnists) around the
world are caught by surprise. Not passing the title to Prince
Karim's fun-loving father, the
dashing Aly Khan, once married to Hollywood's Rita Hayworth,
is understandable. But could
the shy young Prince Karim possibly lead millions of scattered
Ismailis through Cold War
dangers and into the new millennium?
Today the doubts have been put to rest. As the Ismaili Shia Muslims'
49th imam, Prince
Karim Aga Khan IV has not only helped his people. He has also
changed the face of global
philanthropy. Now 62, he was early among experts in Third World
development to grasp
that government handouts and multilaterally funded megaprojects
often foster dependence,
not self-reliance, in the people they're meant to help. To counter
this danger, the Aga Khan
has become a kind of venture capitalist to the Third World. Through
his economic
development institutions, he is increasingly taking equity positions
in small-scale
commercial enterprises. His goals: to reduce what he calls "aid
dependence," and to spur
sustainable economic development and individual self-reliance
at the grassroots level
in countries such as Tanzania, Pakistan and Tajikistan that otherwise
don't have much
hope of attracting high-profile foreign investors.
"My sense is that people in developing countries want new ways
to address the
question of their economic and social well-being," the Aga Khan
told FORBES GLOBAL
in the course of a long interview at his secretariat in Gouvieux,
outside Paris. "What
we're saying through the Aga Khan Development Network is that
the era of
giveaways is gone. This is a time to enhance self-reliance, for
grassroots groups to generate
profits and use money for promoting social good."
The international media, especially the British tabloids, have
long slobbered over the Aga
Khan's glittery lifestyle—his race horses and a yacht on the
Costa Smeralda. The media
hounds went to town on the Aga Khan's 1995 divorce from his British-born
first wife, Princess
Salma, and subsequent remarriage to Gabriele zu Leiningen, a
35-year-old German princess.
His private life, however, is considerably less colorful than this tabloid
image. Rejecting the
one-ideology-fits-all strategies of collectivists and extreme
laissez-faire types alike, the Aga
Khan uses his resources to support and encourage communities
and ventures across
South and Central Asia and Africa—"in the context [he says] of
their individual cultural,
economic, and physical environments, to assume responsibility
for actions which lead to
long-term improvement in their health, their education, their
incomes and their
environment."
There are some 15 million Ismaili Shia Muslims scattered across
25 nations, with large
communities in Bombay, Nairobi, Dar es Salaam and North America
and Europe. Among Muslims,
the Ismailis are known for their prominent doctors, lawyers,
scientists, writers and other
professionals. Deep in their faith is the notion that successful
members of Ismaili communities
should help provide for the needy members. For example, prosperous
Ismaili communities
are helping Ismaili refugees leaving Afghanistan start new lives
abroad.
Unlike other Shia Muslims, the Ismailis believe in the Islamic
interpretation of a living spiritual
leader—the Aga Khan—who traces his lineage directly back to the
prophet Muhammad's
cousin and son-in-law, Hazrat Ali. This assures that Islam adapts
to the times. The Imam
regularly sends his greetings and homilies to his congregation
around the world. His photograph
graces literally every Ismaili home, Jamatkhana (community center),
school, hospital, factory.
Consistent with their deep-seated notions of giving, the Ismaili
communities regularly donate
a portion of their wealth to their less fortunate brethren. Administered
through a complex
process centered around Ismaili Jamatkhanas, the contributions
take many forms and flow
through diverse channels. One way:In the Third World, community
donations stay on the
spot, helping to support local hospitals, schools and water purification
projects. On top
of this, every year many tens of millions of dollars are channeled
to the Imamate for
redistribution to worthwhile projects, with the wealthier Ismaili
communities (and individuals
within those communities) contributing disproportionately larger
shares.
In 1931 the Ismailis celebrated Sir Sultan's 50th anniversary
as Aga Khan by sending him
his weight in gold. Twenty-five years later they sent the portly
fellow his weight in
diamonds. But these and other contributions belong to the Ismaili
community, not the
Imamate: the gold and diamonds were quickly pumped back into
Ismaili communities. Prince
Karim has stopped such weighing practices, but the wealth continues
to flow into the
Imamate's coffers and back out to Ismailis in need.
The Ismailis do not expect their Imam to live like a monk. They
do, however, expect him to
make wise investment decisions. Simply put, the institution of
the Imamate rests upon the
Ismailis' continuing confidence in their Imam's vision and wisdom.
This fact was no doubt at
the forefront of Sir Sultan Aga Khan III's mind when he passed
over his playboy son Aly Khan
and tapped the studious Prince Karim to lead the Ismailis.
Through the Aga Khan Foundation (see sidebar) and the Trust for
Culture, the
Imamate will distribute $85 million in outright grants for social
development and cultural
projects. In addition, the Aga Khan Development Network will
disburse around $150
million in direct equity investments this year, mainly through
the $1 billion (assets) Aga Khan
Fund for Economic Development (AKFED).
Filtisac, in Côte d'Ivoire, West Africa, is a good example
of the impact the Aga Khan hopes his
investment activities will have. AKFED set up Filtisac in 1965
to provide jute bags for key
Ivorian exports such as cocoa and coffee. In the last ten years,
annual production of such
bags has risen from 3 million to 18 million. The company—which
employs 2,000 and expects
revenues of $60 million this year—has expanded across West Africa.
In 1992 Filtisac set up a subsidiary in France to manufacture
and distribute large
polypropylene bags; the company now also produces high-quality
jute yarn that's used in
carpet-making. Ordinary Ivorians can buy Filtisac stock on the
Abidjan Stock Exchange.
Filtisac employees have also been given special stakeholdings
in the company. Peoples'
capitalism, at its best.
Tourism is another Aga Khan Development Network success. In Kenya
and Tanzania,
AKFED's Tourism Promotion Services Ltd. (TPS) is publicly traded.
Aga Khan-funded companies
have built three lodges in Kenyan game parks and reserves, and
on the Mombasa coast. In
1997-98, the company added three new lodges and a luxury tented
camp in Tanzania's fabled
Serengeti game reserve and a big hotel on the island of Zanzibar.
AKFED is also developing
tourism in Pakistan.
In banking and finance, long-held ventures such as Kenya's Jubilee
Insurance Company
have been successfully replicated in Uganda and Tanzania. The
Diamond Trust, a banking
company, now trades on the Nairobi Stock Exchange.
In India, the Aga Khan Network started the Development Cooperative
Bank. Three years
ago, the DCB was the first cooperative bank in India to be converted
to a private sector
commercial bank, giving shareholder status to its 55,000 customers.
You don't have to be an Ismaili Muslim to participate in the Aga
Khan Network. Consider,
for example, the Frigoken Company. The Aga Khan established it
with $5 million in 1994 in
Kenya—where there's been an Ismaili community for a century—to
assist non-Ismaili
local African farmers to grow and can beans and export them to
European supermarket
chains. Frigoken provided seeds and fertilizers, as well as expert
help, that enabled the
farmers to increase yields and also cultivate crops on a year-round
basis. In five years, the
number of farmers associated with the company has grown from
100 to 21,000. The
$12 million (revenues) company's success has meant that the number
of local schools has
grown, as have the number of health clinics in what were once
deprived rural areas.
How do the Shia Ismailis feel about the Aga Khan spreading their
money to other,
sometimes competing ethnic or religious groups? Apparently they
feel no qualms. And
for good reason. Lifting competing groups' boats increases the
Ismailis' own sense of
security in places like Uganda and Kenya, where demagogues can
easily turn the
ignorant poor against the relatively well-educated and well-off
Ismailis.
Like a Silicon Valley venture capitalist, AKFED looks at its equity
stakes in small-scale entrepreneurial projects as future sources of
new money that can be reinvested in the businesses and, eventually,
fund new
projects. For example, dividends from successful ventures have
helped the Aga Khan network
expand its activities in the former Soviet republic of Tajikistan,
where almost one million
Ismailis are being exposed to Western ways for the first time.
There the Aga Khan is focusing
on promoting agriculture and agribusinesses. Not through the
old collectivist communes and
cooperatives but through making loans to farmers and agri-entrepreneurs.
In the last
three years, more than 600 loans ranging from the equivalent
of $100 to $5,000—big money in
the local context—have been made. As a result, in addition to
farmers who take pride in
owning their land rather than slaving for some faceless state
bureaucracy, a new
entrepreneurial class of shoemakers, pharmacists and shopkeepers
is springing up to
serve the needs of the newly prosperous community.
As he channels resources to local entrepreneurial ventures, the
Aga Khan is also
reordering his own personal portfolio. (In his own right, he
has a substantial personal
fortune.) His much-publicized involvement with the 3,400-hectare
Costa Smeralda resort in
Sardinia is ending, although he retains a minor interest in property
development there. His
Sardinia hotels are now owned by U.S.-based Starwood. He has
a big shareholding in
Meridiana, the biggest private airline in Italy, but is likely
to gradually divest his holding.
One business the Aga Khan will expand is his media business in
Kenya. In the early 1960s he
founded The Nation, a daily and Sunday newspaper based in Nairobi
and distributed
throughout in Uganda, Kenya and Tanzania. Several satellite publications
have since been
added. A recent survey showed that The Nation enjoys 23 readers
per copy—in excess
of 4 million readers a day. (The daily print run is around 200,000,
but street vendors rent the
paper out for the equivalent of 7 U.S. cents for a few hours
of reading time.)
Do you want to invest in this growing Third World media franchise?
You can: Since 1973,
The Nation Group has traded on the Nairobi Stock Exchange. Stock
market capitalization:
$72 million as of May 7. There are now some 8,000 small shareholders
in the company; the
Aga Khan retains 45%. Gerard M. Wilkinson, an Irishman who serves
as the Aga Khan's
principal media adviser, says a move into broadcast media is
imminent. "And broadcast is
music and entertainment as well as news and education," says
Wilkinson.
At 62, Prince Karim is still a relatively young Imam. He's the
leader of the Ismaili community
until he dies. Most likely one of his two sons will succeed him.
Prince Rahim, 28, is executive
director of the Aga Khan Fund for Economic Development. Prince
Hussein, 25, is involved in
the Trust for Culture. Twenty-nine-year-old Princess Zahra looks
after the network's health
and education programs, with a particular emphasis on the concerns
of women. The Aga
Khan has also brought in some professional managers, such as
Tom Kessinger, former
president of Haverford College in the U.S.; he runs the Aga Khan's
Trust for Culture.
As Aga Khan for life, Prince Karim has the rare luxury of being
able to take a truly long-term
view in the ventures he backs:
"When you inherit an office, which is a life office, you are simply
a link in the chain. And
you therefore look at life somewhat differently than if you were,
I suppose, a professional
who moves around and is free to do what he wishes. Now some things
are impossible to
achieve. I well know that. And if that is the case, I simply
have to try and move the issues
forward as much as I can. The next Imam will then decide how
he wishes to handle the
issues. But, it is the continuum which is at the back of my mind.
And that's why perhaps my
time dimension appears different than it might for other people.
If I have to wait 12, 15, 20
years to achieve goals which I think are important, I will wait
12, 15, or 20 years.
"What I can tell you," he adds, smiling at the Ismailis' growing
roster of thriving commercial
businesses, "is that I have a higher level of comfort today than
I would have had four
decades ago."
An
entrepreneur in the poverty industry
Prince
Aly Khan - Famous Legionnaire featured in Forbes. ALI KHAN, son of
Aga Khan III, served in Syria from
1938-1939. Having the Son of God marching in the unit must have been a
morale booster.
His Highness the Aga
Khan - Birthday Tribute
