Five lessons learned in entrepreneurship for development

Entrepreneurship for development

This blog explores an interesting, yet contentious example of an organisation promoting an entrepreneurship-initiative for rural development. It highlights the difficulties of introducing a set of Western market-practices into a non-Western context – namely Tanzania.

Economic development in rural Tanzania may be key to alleviating the negative consequences of rapid urbanisation and to addressing the poverty cycle by which 70 percent of Tanzanians still live under $2.00/day. In the search for appropriate organisational vehicles to foster economic development, experts have pointed to entrepreneurship initiatives that have the potential to create jobs and wealth.

One such initiative was Villages for Africa [pseudonym] that had some success with a new model for rural economic development, and yet, also faced some considerable (ultimately, irreparable) challenges. As a promoter of the Macro-credit model, Villages for Africa was established as a deliberate counter-initiative to the micro-finance model – studies had suggested that micro-credits help the poor gain access to financial capital but also come with unintended consequences such as the social shaming of individual borrowers – and designed specifically to foster rural entrepreneurship in Africa.

Macro-credits are loans given to entire communities in order for them to establish their own village enterprises. These village enterprises could take up business activities such as pig farming, bull herding, and the construction of houses. Through the stream of revenues that they would generate, village enterprises would contribute to the socio-economic development of their communities. The idea was that each village would have a specific core competency so that they could trade with one another as part of a larger multi-village cluster. In the ‘housing construction cluster’, for example, one village would make all of the interlocking bricks; another windows and doors, a third the roof’s and the fourth would install the foundations.

Thus, the ultimate vision of the macro-credit model was to foster rural economic development at large by connecting different villages, clusters, and regions; one community at a time.

Villages for Africa’s journey explained by (former) managing director Bill Lightfoot:

“Our model was quite clever. We would identify clusters of four villages, typically in the same ward where we could set up a small business called a Village Company. Owned and managed by villagers, we would train them on governance, good business practice and as they graduated through the training process, we would help them develop a plan for their business activities.”

“The macro-credit model went through numerous design stages. From an initial focus on funding start-up businesses engaged in healthcare and agricultural activities, by the time I got involved in late 2013, it was transitioning towards home building as the driver of economic activity. Our first house was built on time, in budget, and to the quality level we desired. It was exciting and seemed to indicate that finally – after nearly a decade, we’d be able to begin realising the dream our investor had of changing the world, one village, and one house at a time.”

“The enthusiasm of success, however, only lasted as long as it took to celebrate the success of building the first house. Within weeks of being featured on national TV and being invited to a meeting with the Minister of Human Settlement where we were introduced as the innovative model for rural housing development, we were quickly crashing as the forces of ‘nature’ began to collapse around us. First, the long rains came slowing the building of our second home dramatically; next immigration reared its head threatening our expulsion. Within months we were shutting down our businesses letting our Tanzanian employees go, and exiting the villages and country.”

“What had held great promise to ‘change the world’ quickly became a casualty.”

Why Villages for Africa failed, five lessons learned

1. Finding the ‘right’ local partners is crucial.
Caveat: It is virtually impossible to know whom to trust without the benefit of time.

In Bill’s personal experience: “Identifying the right people in a culture that is fundamentally different than our own is not an easy task. And the more different a culture is, the harder it is to find those ‘right people’. Experience does not work as the cultural cues and the way the overall society works are distinctly different. So, we need time – lots of it – and ways to test or evaluate if a person or persons are trustworthy. And even then, we can be fooled.”

Research findings: From existing research, we know that one strategy to mitigate the uncertainties around finding the ‘right’ partners involves the co-optation or engagement of local elites, that is, making sure that the village leaders, village elders, women, and/or other people of local authority are on board with the foreign initiative; and, by endorsing it, provide access to their local social networks – which will greatly facilitate the identification of potential partners.

2. Dignity is important, especially if you are a mzungu.
Caveat: It also means you will have to give up control.

Bill: “We found that treating local populations with dignity was crucial to meet them as ‘partners.’ As a core value, dignity meant respect for the local leadership and that we make sure we don’t impose our ideas or ‘help’ in a way that was not truly valued or needed by the local people. We tried to lead with our ears – to listen to their needs and interests rather than to impose ours.”

Research findings: Studies have shown that approaching local communities with dignity is crucial for the long-term sustainability of development initiatives. It seems to be important that local communities feel as ‘owners’ of their own destiny. However, for the foreign organisation, this also comes with the necessity to give up control and accept that local populations might choose to run the introduced initiative in line with their own norms and values – which might not always match the vision of the foreign intervenors.

3. Success attracts attention and attention reinforces success.
Caveat: Be careful what you wish for.

Bill: “Through the various iterations of the business model, we had been training villagers from nearly a dozen villages on business practice, and good governance for over five years – ultimately winning recognition from the United Nations (SEED award). Then when our first home was built, came the recognition by the district governor, and then the Minister of Human Settlement. The combination of increasing recognition led to increased presence and ultimately harassment by local immigration officials seeking to participate in the apparent flow of cash into the rural village companies.”

Research findings: While the celebrations of milestones are often treated as an obvious sign of success – something that any initiative would strive for – the unintended consequences of the increased visibility that come with such recognitions are often underestimated. Particularly in contexts such as rural Tanzania, bribery and corruption are still very prevalent practices; the likelihood of which increases the more attention an initiative receives. It is helpful to decide on how one wants to deal with such bribery requests in advance.

4. Corruption, bribes and immigration.
Caveat: Be prepared for ethical dilemmas.

Bill: “Before I joined the initiative in 2014, our team already had numerous encounters with local authorities. The requests for ‘payments’ continued to arise when I became involved. As an example, in late March 2016 I was advised by our attorney that we needed to make a ‘payment’ to two immigration officials – no names, no cause – or else we would be unable to continue. I would either be jailed or kicked out upon my return. (I was speaking at a conference in Italy when I got the call).”

“Had I chosen to continue to play the game locally would probably have enabled the project to move forward. Instead, I refused to do so experiencing both the emotional turmoil of trying to do right ethically and the judgement laced ridicule of others who do play the game with no remorse. To me, there was no option. We could not ‘win’ and create legitimate businesses unless we did it by the book, and developed a sustainable, market-driven model. Giving into the local officials would put us on a slippery slope that we could never get off of, and which would expose me and the rest of the team to future legal issues.”

Research findings: Studies suggest that one way to mitigate/control sudden requests for bribes is by putting ‘transparency controls’ in place early on (e.g., regular financial assessments, reporting exercises, and monthly meetings with village communities). What also has been shown to be effective in (pro-actively) shielding against corruption is the co-optation of local elites (see point 1), in other words, keeping these elites in the loop by giving them stake in the intervention (e.g., through shares or in an advisory role), and thereby ensuring that they maintain their commitment to the foreigners’ vision of a no-corruption policy.

5. And once again, culture eats strategy for breakfast

What we ultimately learned from our journey is that, once again, ‘culture eats strategy for breakfast.’ What had started out nearly a decade earlier that held great promise for sustainable economic development in rural communities had crashed and burned because we never could crack the code culturally. And as our model finally evolved into a workable project that seemed ready for scaling, as our strategy was finally beginning to work, the local culture asserted itself, consuming what was left into the existing ecosystem.

Despite everything – we did make some progress. Above all, we learned a lot and with these experiences, we are confident the macro-credit model for rural economic development can work.

More than anything, we hope that other entrepreneurs can learn from our mistakes. Failure is a necessary step on the path to success and we are convinced that the lessons we learned can help us find (more) effective ways to address poverty in rural Africa.

If you are interested in learning more, we would love to hear from you.

William Lightfoot (Bill) [email protected]

Laura Claus, PHD candidate at the Cambridge Centre for Social Innovation (CCSI) [email protected]

William Lightfoot & Laura Claus

William Lightfoot & Laura Claus

William Lightfoot & Laura Claus

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