Archive for June 30, 2018
Invest in Job Creators Instead of Projects
In countries like Haiti, there are two extremes: those who are poor and those who are not. There is hardly anyone in the middle class. The approach taken by the international community has been to focus on helping those who are poorest. After decades of following this approach, we see the results. The needle has barely budged. In the last 20 years according to most data, per capita GDP in Haiti has been less than $800 US (in comparison, across the border in the Dominican Republic per capita GDP is close to $7,000 US). It is time to change the approach and focus instead on those who can create economic activity through job creation that is (entrepreneurs and existing business owners who are proven job creators).
We are where we are in Haiti because we have not taken the necessary actions to increase economic activity. Giving food, clothing or medical assistance to the poor have proven to be more than just ineffective; they are in fact a barrier to increased economic activity. Because, there is a supply of donors in developed countries, there are enough social entrepreneurs to satisfy the “demands” from these donors with the creation of non-governmental organizations (NGOs). Creating an NGO is a way to improve their financial conditions for many “social entrepreneurs.” The problem is that the economic activity from the aid given by these NGOs, the cars they rent, the hotel rooms they purchase, the maids, security personnel or drivers is not enough. On the other hand, the activities of many of these NGOs take away resources that could be used for producing services and goods for profitable ventures.
That said, the donors to aid organizations, the volunteers who travel thousands of miles to come to help have the right intentions. It is only natural to want to help the stunted child due to malnutrition, the pregnant women who don’t have access to healthcare or to feel sorry for the kids who are unable to get the basic education that every child deserves. Like most people, my heart aches when I see the images of these helpless children on TVs and even more when I see them face to face in Haiti. We need to admit that sometimes good intentions don’t translate to the desired outcome. If someone is sick on the side of the road and people stop to give whatever they have (shoe, blanket, clothing, or food) how is that going to help?
So, what is the approach?
First, I believe that thriving enterprises that create goods and services for which there is a demand should be the focus. Show me a country, a state, a community or any geographical areas where you have thriving businesses, and I’ll show you a place where people have jobs to provide for their families or at least satisfy their basic needs.
Hence, the singular focus for helping Haiti or any other developing countries should be on developing business activities. Some NGOs seem to have embraced that idea and have begun to engage in for-profit activities. While this is better than giving aid, this is not optimum. Building enterprises, start with entrepreneurs. It’s the who and not the what. My message to these NGOs and their donors is to invest in entrepreneurs and proven job creators (people who are already running successful businesses) instead of the projects. Let the entrepreneurs and existing business leaders who are on the ground come up with solutions that address needs and demands from both internal and external markets.
First and foremost, what these entrepreneurs need is financing to get their ventures off the ground or grow what they’ve already started. According to the United Nations, between 2010 and 2012 Haiti received $6.43 B in foreign aid. Imagine if 80% of these funds were invested to provide seed or growth capital for enterprises that don’t have access to adequate capital. The beneficiaries would include small, medium and large enterprises across the spectrum. It would be foolish to limit investments in only small, and medium enterprises (SMEs). In Haiti, several well-established large businesses with access to growth capital at a lower interest rate would be able to grow faster and hence create more jobs.
Besides financing, there are other barriers to entrepreneurship such as business regulations or lack of infrastructure. Certainly, it would be useful to have the infrastructure and to remove bureaucratic barriers. Outside of investing in entrepreneurs, perhaps the second-best area to invest foreign aid would be in infrastructure. That said, I would point out to the fact that entrepreneurs have in their DNAs to solve problems and to remove roadblocks. Betting on the entrepreneurs to solve these problems should be where to start while in parallel creating a more favorable environment (better infrastructure or policy).
Specifically, I ask international aid agencies, foreign governments to provide capital that go directly to both established businesses (existing job creators) and entrepreneurs. As an entrepreneur born in Haiti but who has spent most of his life outside of the country, I can attest to the fact that entrepreneurs in Haiti as in other countries are made up of the same materials. They are visionary, disciplined, determined, perseverant and tenacious. With those aid budgets instead of giving handouts, create funds that provide loans at a reasonable rate or a combination of equity and senior debt (mezzanine). In Haiti, it is almost impossible for an entrepreneur with a good idea to get a loan to start a business. Even for businesses, getting a business loan can mean paying exorbitant double-digit rates exceeding 15%.
For my friends, who are business executives one of the ways that you can help is by mentoring Haitian entrepreneurs or established business owners and if you can, invest in their business. This is the best way to use your talent to help fish as opposed to giving the proverbial fish. Don’t let the language barrier be an excuse. There are enough entrepreneurs and business owners in Haiti who speak English that you can help.
AyiPreneur 