Q&A: Hult Prize CEO on social enterprise in the Middle East

If challenges alone created opportunity, the Middle East would be primed for social enterprise. Several countries across the region have youth unemployment rates hovering above 30 percent; job creation is needed far more than job seekers. Meanwhile, governments are struggling to cope with a range of social needs and market failures, exacerbated by humanitarian crises and conflict. So no wonder social enterprise is a buzzword at the moment in the region, and being seen as a way to solve serious problems while employing growing numbers of youth. Countless governments, philanthropists and NGOs are pushing to foster and promote entrepreneurs. The idea of social enterprise is cropping up everywhere from finance and transport to refugee employment and healthcare. Yet for now, the sector has not truly taken off. Devex sat down with Ahmad Ashkar, founder and chief executive officer of the Hult Prize Foundation, to discuss what challenges are holding back progress and how governments can better align incentives to promote growth. The conversation has been edited for length and clarity. In the Middle East, there often seems to be an intersection between the work of new social enterprises and the traditional role of aid organizations and NGOs. How do you see that breaking down? I think there’s a common misconception about what needs to be social enterprise and what isn’t. Aid and emergency relief are not social enterprise — ever. They can’t be, that’s not the purpose of social enterprise. The ironic thing is that in the Middle East, the confusion doesn’t just come from start-ups, but from government and the NGO space as well. You can’t separate the offering from the impact, and I think that’s the biggest challenge that these organizations and these young people are facing. To create a social enterprise means to create a for profit company, and unfortunately the DNA and the makeup of your traditional charity staff — they may make the wrong decisions. For example, deciding to cut a program can be for the greatest good for the greatest number of people. Someone at a social enterprise will make that decision easily because it’s keeping them from their ultimate goal. At Hult Prize, we’ve defined a methodology: Living at the intersection of being impact-centered, market driven and profit minded. That’s where we feel like the future of this sector needs to go. But in the Middle East, honestly it’s a big mash up right now. That’s okay. And there’s going to be a storm before there’s normalization, because we are seeing governments moving. In Dubai, we have got government officials calling us in regularly asking about [things like], how do they need to be licensed? By that same token, it’s important for the [government] to know that the more successful social enterprise is, the less responsibility the government will have. And the less pay-out. What are some of the things that need to happen for that chaos to normalize? Three things: The first is policy. Policy is so important, because we need to dictate how governance is going to work, how the funding is going to work, how the registrations are going to work, and what happens with failing companies. The second is pipeline. The reason we have so much chaos is because there’s not enough competition. Chaos can live until there’s a competitor that can do it right. If you think of any startup or sector, there’s always chaos early. The challenge in the region is that the pipeline of viable companies that are doing this the right way is a little weak. The third thing is successful stories, and with that comes finance, human capital, and then scale. Those are the three pieces. The success stories are kind of a function of number one and number two, but as you get the successes, you get the dreams, and those are what keep the cycle going. Philanthropies here talk a lot about entrepreneurs and developing them. What can they do to help? “A medical student or engineer is not wired to create companies. We need an entire system overhaul.” --— Actions speak louder than words. But more importantly, incentives are key. And right now, incentives are misaligned. We have one of the top three programs in the world to stimulate early stage entrepreneurship in the social enterprise space. I can’t get $100,000 out of an organization here without trying to launch a national-level program for their country that I have nothing to do with. I have been forcing our program on the Middle East, but in every other region in the world, we have inbound proposals like this. Guess where our shortest lead pool is? The Middle East. It’s because the incentives are misaligned. You can’t wave a magic wand. You have a culture here where not only is entrepreneurship not promoted, but failure is not accepted. We have more engineers and doctors coming out of the region than anything else, and they’re the traditional jobseekers. A medical student or engineer is not wired to create companies. We need an entire system overhaul. Youth today, millennials, they need to be inspired and believe in a cause. It’s got to be real, the user has to fundamentally believe it. What should governments do to help realign incentives? Where could they look to for insight? [One promising case is] Lebanon’s Circular 101: $600 million guaranteed from the Central Bank to fund start ups. They said [to banks], “go do the deal sourcing, we will guarantee the financing.” That’s a commitment. The incentive. Lebanon has an incentive: If start ups don’t exist, the economy will falter. Jordan has an incentive, Palestine has an incentive. The Gulf does not have an incentive. The young people know that. Young Arab entrepreneurs are flocking to Lebanon. Is there an education component to this? What have you learned about what works based on previous Hult Prize winners? We map out the learning experience, and we think of ourselves as an immersion-based learning program. Start ups are the output. We just educate, and our six-step pedagogy starts with inspiration and the second step is education. The common factor is a willingness and a desire to change and to have impact. That’s it. If I can get the kids to get that feeling of “I have to do something” — we live in a generation that is better networked and better resourced than any generation that came before us. It’s actually not that hard to start a company if I know what the problem is and I’m super jazzed up to solve it. This is a region facing soaring youth unemployment. What advice would you give young people here? “You only get a couple of chances in your life to create a company, so my advice to them would be to create a company that solves a pretty darn big problem.” --— We’ve got to focus more on creating jobs than seeking jobs. If you’re local to the Gulf, try not to leave. The dream if you’re a young brilliant entrepreneur here is to get to Silicon Valley. I beg with all the startups [I advise] — I can’t keep them from leaving, because they don’t believe that there is a system that supports them here. So the first piece of advice I would tell them is try to make it work locally, because you can really be a gem. The second is to really make sure they are focused on market-based solutions, because a lot of startups are emerging in this region that have no business. You only get a couple of chances in your life to create a company, so my advice to them would be to create a company that solves a pretty darn big problem. Make it count. The third thing is get sponsors, and I don’t necessarily mean fiscal sponsors. Who’s going to be your champion? Because in this region, if you don’t play the game right, you’re dead before you’ve even started. I always ask, who wins if you’re successful? If the answer is this minister, this guy, then go get those guys into your game plan now. It’s a different way to do entrepreneurship than in the West, but any good entrepreneur can unlock the magic. Devex delivers cutting-edge insights and analysis to the leaders shaping and innovating the business of development. Make sure you don't miss out. Become a Devex Executive Member today.