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.
later, the verdict is in.
Venture Capitalist to the Third World
Cambridge, Massachusetts, 1957. Prince Karim, a 20-year-old Harvard
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
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
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
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
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
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
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