'Since I was 18, I have wanted to save the world'

Oxfam's first lady is building bridges with the private sector to bring more focus and money to the business of helping others rise out of poverty

Dame Barbara Stocking smiles a little sadly as she describes one of her favourite moments running Oxfam, the international human rights champion and aid agency. "I was in Mali where two groups of warring Tuaregs had been in bitter conflict; we were sitting around the camp at night chatting when one Tuareg leader told me the only way for the dispute to be properly resolved was for us to make sure the other tribesmen had enough sheep and animals to feed themselves, so they would be looked after."

If only, she sighs, all world leaders could be persuaded to share a similar philosophy. "Then maybe they would stop going to war."

Her Mali moment is one of the happier ones that Dame Barbara recounts from her travels to more than 43 countries around the world – about 12 trips a year – often seeing them at their worst at times of war or terrible hardships. She was in Pakistan recently and reminds us millions of people are still living in destitution after the floods, and she is off today on a visit to the Gulf States where she will try to persuade Arab leaders to cough up more funds to help.

It's been a whirlwind 10-year journey since she applied for the top Oxfam job, spotted while reading The Economist magazine one Friday at home. "I saw the ad and thought, that's the job for me. Ever since I was 18, I have wanted to save the world, as you do," she laughs.

"My husband encouraged me, and I wrote off straight anyway. The interview lasted for hours. It was really tough and I didn't think I had got it." But she did, and while she's not yet saved the world, she has stopped Oxfam from going to war with private business; instead, under her reign, Oxfam is working on two new initiatives which mark a radical departure from the days when campaigners saw the giant multi-nationals as the enemy.

Dame Barbara explains: "Times have changed, and Oxfam is moving with the times. It took a while for many in the organisation to understand what is happening but since the late 1990s we have seen quite different relationships develop with private business. There is the work with groups like Fairtrade, but there is now also growing consensus that helping to provide capital to the very poor can be extremely effective."

She's in talks with a number of European financial services companies about raising a new "fund of funds" to raise private capital to finance direct investment in projects and countries – a sort of spin on micro-finance. Oxfam's role would be to help the investors choose the people to invest in, while helping to protect them and offering advice, she says. "I'm very proud that this is happening during my time here."

Her move echoes the decision by Live Aid's Bob Geldof to raise funds to invest directly into new businesses in some of the poorest regions of Africa. While this new mood is far from the anti-globalisation tenor of the past few decades, it's a shift which is backed increasingly by today's leading development economists – those such as Dambiso Moyo, a Barclays non-executive director and author of Dead Aid, and the brilliant Peruvian Hernando de Soto – who argue that the West can relieve poverty more potently by providing both access to capital and land rights.

Dame Barbara has also been building Oxfam's relationships with big business and the NGO now works alongside corporations such as Unilever, Monsoon and the US Sysco group on many diverse projects, concentrating mainly on the need to ensure the supply chains work properly between agricultural workers and the producer company. She's due to go to Azerbaijan next spring for the launch of a new partnership with Unilever in which some 30,000 smallholder onion farmers are selling their produce to its factories.

Oxfam's presence helps in many ways, she adds. "We're there to help workers negotiate prices, terms and the rights of the farmers and can take issues direct to Unilever."

Part union mediator, part archangel Gabriel. It's been doing a similar job in India with cotton farmers, weavers and garment workers who supply materials to Monsoon, the UK fashion retailer, and in Guatemala; it works with Sysco, one of the biggest buyers of broccoli and sweet peas, and helped to manage supply chain relations with the farmers in what is one of the poorest countries on earth – some 80 per cent of all children in Guatemala are malnourished.

And the financial crisis has pushed even more people into poverty – she estimates another 50 million can be added to the one billion already living on the breadline. That's why Oxfam's latest campaign, to be launched next year, for "food justice in a resource-constrained world" is so vital, she says, as food shortages combined with soaring food and commodity prices are making conditions worse. She's also focusing world attention on helping smallholders and nomadic tribes to establish their land rights as richer nations such as China and the Gulf States gobble up land in Africa in what's called the new "land grab".

Back in the UK, she has more glamorous work, as Dame Barbara rivals Mary Portas for title of queen bee of UK retailing: Oxfam is one of the country's biggest retailers with more than 700 shops and, through its secondhand book shops, is Europe's biggest book retailer. Working with celebrities such as Annie Lennox as well as Sir Stuart Rose of Marks & Spencer, she's kept up Oxfam's campaign to keep its shops brimming and the donations coming.

People don't give away so much in harder times, she says, but there are more who want to buy cheap; so the pressure is on Oxfam to keep up both the donations and giving things away.

Even so, retailing still brings in big bucks. Oxfam's shops made a profit of about £20m on revenue of £80m – M&S eat your heart out at those margins – providing a big chunk of the record £318m income which Oxfam raised last year to fund its campaigning, development and humanitarian work, although it too is cutting costs and staff. After retail, the balance is split between private donations and institutions – a source that she hopes won't dry up because of the recession.

We meet in a small Kensington café for lunch, where we both have salad – "I've got to be careful, all these lunches and dinners" – and she's got another one tonight with the chief of staffs at Admiralty House after meeting William Hague, the Foreign Secretary, to keep up pressure on the Afghans over women's rights.

Working independently of the military or war leaders in the countries where Oxfam operates is one of Dame Barbara's recurring nightmares. "It's not something that many countries understand, that we are an NGO and don't want to get involved, that we are impartial. This is one of the most fraught areas that I have to deal with.

"But, in the main, whether it's the Taliban, bandits or rogue tribesmen, most people respect our work and help us get through to areas of crises. Having said that, security in Afghanistan is getting more dangerous for our aid workers." But she denies that Oxfam has ever been involved in what is known as "facilitation payments'' – bribes to us – but refuses to say whether it has insurance taken out against kidnapping for ransoms for its staff.

"It's a tricky one and I can't talk about. We had two kidnaps this year of locals in Afghanistan and Chad." Dame Barbara went twice to Chad during negotiations to meet the politicians and the kidnap was resolved peacefully.

There's no doubting this Methodist "working-class postman's daughter from Rugby" – her words, not mine – is a toughie. She made it to Cambridge through fluke; her friends at school were going and so she assumed that applying was the only thing to do, even though it never occurred to her family. At New Hall, she studied natural sciences, discovered a passion for opera, and then took her masters in physiology at Wisconsin, in the US. Her first job was at the National Academy of Sciences in Washington, an experience which catapulted her forward about 10 years in her career. "At 23 I found myself on this very influential committee – only as a clerk – but it gave me access to top US scientists and added about 10 years to my experience."

After stints in West Africa working out in the field in river blindness for World Health Organisation, she switched to the King's Fund and then into NHS management. She was in charge of the NHS Modernisation Agency – just missing out on the NHS chief executive role – when she applied to Oxfam.

What next? The 59-year-old isn't shy; she would love a big job at the United Nations where she has worked alongside Kofi Annan and Mary Robinson during global crises. While she travels the world, her husband, Dr John Macinnes, with whom she has two grown-up sons, is a prison doctor near their Oxford home.

"Crikey," I say, "home life must be gloomy – all that talk about prisoners, torture, injustice, kidnaps, poverty?" Not a bit, she says, very firmly.

"We both see the optimistic side; the capacity of man to do good and overcome adversity. Wherever I go with Oxfam, I am looked after. People treat me like one of the family – even the food is good. I haven't even had the funny tummy that so many people do."

Sixty eight years of aid

Oxfam was founded in 1942 by the Oxford Committee for Famine Relief following a meeting organised by an Oxford University vicar, Canon Milford, to help Greek civilian victims of war.

Today, Oxfam has 4,600 staff around the world and 441,000 regular donors; around 12 million people take part in campaigns in which eight million have received water, sanitation and hygiene support; one million people have received food assistance; 740,000 have received cash grants; 435,000 received shelter; and 140,000 received livestock.

Current work includes: Haiti cholera breakout: looking after 70,000 people.

Flooding in Pakistan: providing support to almost 21 million people.

Food crisis in west Africa: emergency programme providing support to 220,000 people in Niger, 250,000 in Mali and 248,000 in Chad.

Floods in Colombia: helping more than 900,000 people.