Social entrepreneurship on the move in East Africa

By Adva Saldinger 30 July 2015

U.S.President Barack Obama at the opening plenary session of the Global Entrepreneurship Summit in Nairobi, Kenya. Photo by: U.S. Embassy Nairobi Photo

East Africa, and perhaps beyond, has been astir with entrepreneurship this past week. From places one would expect — like Nairobi’s Innovation Hub, a community and open space for technologists, innovators and entrepreneurs — to mainstream media and the minds of many citizens hatching ideas for their next potential business.

Perhaps it is because of the moment and the occasion of the Global Entrepreneurship Summit and U.S. President Barack Obama’s visit to Kenya, but it doesn’t quite seem that way.

From a taxi driver I rode with who pitched an idea for a business he’s considering to the more established entrepreneurs, there is certainly excitement about the promise of what is ahead.

Obama and Kenyan President Uhuru Kenyatta set the tone as they launched the Global Entrepreneurship Summit: Both addressed the audience from the podium, before perching on stools and joining a group of young entrepreneurs to hear about their work and offer support. It was a casual turn in a place where ceremony and security were otherwise in abundance.

By now you will have heard about their remarks and a number of keynote announcements made at the summit. Those carry weight, especially as some of the financial commitments will help to address some of the challenges entrepreneurs, especially young ones, face.

But what was perhaps even more striking were some of the relationships formed. Entrepreneurs were able to work on their pitches and got the chance to meet CEOs and investors who may become mentors — or provide funding — down the line.

Just as important were the relationships these entrepreneurs formed with one another.

I met one Ugandan entrepreneur who, as a result of the summit, is developing a partnership with a Kenyan entrepreneur — a deal that was brokered in part by an American entrepreneur working in Nigeria. There were entrepreneurs working in Ghana learning from those working in Bangladesh — and the stories go on and on.

What has been surprising is how discussions about entrepreneurship, financing and mentorship are permeating the public consciousness and garnering media attention. On Monday afternoon — while stuck in one of Nairobi’s famous traffic jams — I listened to one of the entrepreneurs who had been at the summit on the radio. Later that night as I was driving into Kampala, Uganda, from the airport, I listened to another radio program about some of the barriers holding back entrepreneurs and the need for more mentorship.

It’s easy to get caught up in the optimism and excitement of the moment, especially when spending time with entrepreneurs who are full of energy and enthusiasm to forge ahead with their businesses to improve smallholder farmer livelihoods, or maternal and child health, or safe drinking water — but the growing field is not without its challenges.

Entrepreneur and investor Jim Sorenson, who chairs the Sorenson Impact Foundation and is active in impact investing, said barriers exist largely because the industry remains at a nascent stage, where there is a lot of activity but that there is still a lack of a robust ecosystem.

Case Foundation CEO Jean Case, who calls herself a social entrepreneurship evangelist, echoed these comments but said she’s encouraged by the momentum she witnessed in Kenya, where she met hundreds of entrepreneurs. It was a busy trip for her and her husband: They often met separately with different groups at the same time, fielding pitches and financing a few companies along the way. They also announced a commitment to Village Capital’s now $13 million fund to support social entrepreneurs through a unique peer-selected investment approach.

One of the big gaps remains early-stage capital and skills, which are needed to eventually access commercial investments. This missing middle financing gap is a persistent challenge, as is commercial finance, which often not only comes with high interest rates but a host of requirements, including collateral that startups often can’t provide.

There may be some progress on the second point. It seems Chase Bank Kenya has realized the scale of this problem and, according to CEO Paul Njaga, is starting to explore credit scoring and other methods to assess credit worthiness. The bank announced a $600 million commitment to fund small and medium-sized businesses, especially those run by women and young entrepreneurs over the course of the next several years.

That’s a promising change, according to entrepreneurs, but one bank is not enough. The financial system will still require additional changes and an increased appetite for risk to help support and scale social enterprises.

Governments also have a role to play, and the feeling among several Kenyan entrepreneurs I spoke to is that Kenyatta truly supports their ventures and is trying to create a better environment for entrepreneurship, especially for the youth. One social entrepreneur I spoke to said Kenyatta had visited his company’s office — a sign to him of the president’s support and a message to others that the work of a social entrepreneur is important to the country.

I also heard from several entrepreneurs who received funding from donors, especially from the outset. Some praised the U.S. Agency for International Development’s approach to entrepreneurship in particular, but others said that donor funding often comes with lots of strings attached.

One entrepreneur said that even one part of the agency designed to be more nimble and to support entrepreneurs took more than a year to get back to him about a proposal. He ended up on a short list but had that funding been critical to the ability of the business to continue its operations, any funding may have come too late.

Another entrepreneur suggested that as part of President Obama’s Spark initiative, the platform to connect U.S. government programs working to promote entrepreneurship around the world, the U.S. government could develop a post-investment governance structure to be used across programs to help reduce some of the cumbersome and inflexible reporting requirements that can limit a social enterprise’s ability to pivot as it learns.

There is more to come from Devex Impact’s coverage of the Global Entrepreneurship Summit and the many insightful conversations with entrepreneurs, investors, corporations and government agencies. Stay tuned as we tackle some of the most significant issues concerning social entrepreneurship: During the next month a new series will explore what’s needed to improve the ecosystem and how social entrepreneurship can help turn the somewhat daunting sustainable development goals into tangible business opportunities.

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About the author

Adva%2520saldinger%2520photo
Adva Saldinger@AdvaSal

As a Devex Impact associate editor, Adva leads coverage of the intersection of business and international development. From partnerships to trade and social entrepreneurship to impact investing, she enjoys exploring the role the private sector and private capital play in development. Previously, she has worked as a reporter at newspapers in both the U.S. and South Africa. Most recently, she has been ghostwriting a memoir for a former child slave and NGO founder in Ghana.


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