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DouglaPrieta Works
In many cases of migration, dangers from gangs and community violence force people to leave their homes. Migrants also tend to flee because of economic challenges and persecution. A few women in Mexico who were part of these forced removals did not want to move to a new country. It was important for these women to stay where their families, cultures and traditions existed despite difficulties like finding sustainable jobs in Mexico. As a result, they decided to move to Agua Prieta, Mexico and become a part of the family at DouglaPrieta Works.

The Beginning

DouglaPrieta Work is a self-help organization that women founded to help the poor. Specifically, the founders had the dream of procuring the means to stay in their home country through the creation of a self-sufficiency co-op. To fund this, the women sell handmade goods such as reusable bags, earrings, winter accessories, dolls and more. They sell these beautiful crafts throughout Agua Prieta, neighboring cities and even in the United States. Their efforts all center back to the main goal of promoting “a mutual-aid ethic among community members, with the goal of economic self-sufficiency.”

How it Works

The first step in economic security is education. The women at DouglaPrieta Works understand this and all self-teach. They work together to learn how to sew, knit, craft, cook and read. The women utilize these skills to then sustain themselves, their families and the co-op. To further support themselves, the group incorporated a farm next to their co-op. They use the fruits and vegetables they grow for cooking. The women encourage sustainable food security through culturally-appropriate foods based on the needs of the people in their community. The group also built a woodshop to craft furniture for the community to maximize the benefits of their surrounding resources. The co-op does not exclude the children in all of this work either. Oftentimes, their children learn the skills along with them and work with each other in school.

Actions

In 2019, they led an initiative where people in their town could donate canned goods and receive a handmade reusable bag in return. This program allowed the women of DouglaPrieta Works able to donate hundreds of canned goods to those in need. Additionally, they were able to provide reusable bags to the community in order to encourage limited plastic bag use to better the environment.

DouglaPrieta Works often provides migrants working at its co-op with funds to help them and their families survive the journey of migration. There is a nearby migrant shelter in Agua Prieta, C.A.M.E, to house the travelers. While at the co-op, many migrants work in the woodshop at AguaPrieta Works in exchange for meals, funds and friendship.

Students and groups interested in learning about the U.S./Mexico border are welcome to join the women at DouglaPrieta Works for a meal, as the women provide stories and information about the border. The power of education and inclusivity is a core value at DouglaPrieta Works.

Helping Out

Overall, incredible work is occurring in the town of Agua Prieta, Mexico. These women are sustaining themselves to stay in the country they call home and they are providing food, resources and work for migrants. Their children are able to learn and grow together, as well as eat healthy, organic meals from the garden. To learn more about the co-op, visit its website.

Naomi Schmeck
Photo: Flickr

Microfinancing Partners in Africa
Microfinancing Partners in Africa is a nonprofit that provides microfinance opportunities to people in Sub-Saharan Africa. Its current programs vary in nature. Some examples include giving loans to subsistence farmers to purchase a cow, providing water filtration systems and educating students on microfinance.

Microfinance is an innovative approach to growing the economies of impoverished nations by giving its citizens access to small loans, usually under $200. It is a way for those in poverty to develop a stable income because they do not have access to traditional loans.

Historically, companies have used high-interest rates to take advantage of impoverished people seeking loans. However, agencies like Microfinancing Partners in Africa counter that practice. It offers options that often require recipients to take financial literacy courses and give them loans without requiring collateral. In this way, Microfinancing Partners in Africa works to actively combat poverty within Sub-Saharan Africa. Here are some of its success stories:

Jane Nalwadda

Jane Nalwadda is a woman from Uganda born with an obstetric fistula. Her condition left her unable to have a child with her husband who consequently left her after three years of marriage. The abandonment left Nalwadda without a reliable source of income. She fell into utter despair until a friend recommended the Kitovu hospital to her. There she would be eligible for a free fistula repair surgery program. Here is where Microfinancing Partners in Africa stepped in.

The nonprofit established the microfinance program The Piglet Project. The program helps women make money post-fistula repair by helping them raise and breed pigs, eventually creating a sustainable business. Jane was able to raise $29 with her first litter of pigs, which enabled her to build a better pen. She now has a steady means of making a living and can build a promising future.

Bujugo Village

Bujugo is a tiny village in Tunisia that has clean water accessibility problems. The village received seven water filters from Microfinancing Partners in Africa in 2019. Villagers then received training to use the filters and developed a time table to maximize the amount of village usage. Now, 49 families receive clean drinking water because of this microfinancing program.

Florence Mbaziira and Joseph Mbaziira

Florence and Joseph Mbaziira are an older couple from Uganda who works on a farm with mostly unproductive land. They tirelessly worked on their farm to support themselves and their four grandchildren. By 2014, the family was still living off a small income that came from selling the produce that they grew. Afterward, they turned to the Cow Project.

Microfinancing Partners in Africa created the Cow Project to support farmers through a “living loan.” The Mbaziiras took full advantage of the program and bought a cow for their land. Microfinancing Partners in Africa trained them to use the cow’s manure to increase crop yields. The couple now grows coffee, bananas and seasonal foods. Thanks to microfinancing, the Mbaziiras are able to support their family through their own farming business.

Saida Juma

Saida Juma is a divorced woman with two children living in Tanzania. Previously, she worked as a maid for $5 a month. However, her passions were elsewhere. She had the desire to start selling fish. Juma worked with Microfinancing Partners in Africa to obtain a microloan of $50. With the money, she was able to go into business for a local fisherman by selling fish. Her earnings are enough to support her children as well as send them to school. Her goal is for her children to be well-educated and take over her business when she retires. She also plans to take out another $100 loan soon to buy a fridge to store unsold fish.

All of these people were struggling to survive. Microfinancing Partners in Africa’s varied programs were able to help inspire and empower them to gain a livable income. Microfinancing Partners in Africa helped increase the quality of life for these people and many others, proving that microfinancing is an effective way of fighting poverty.

Olivia Welsh
Photo: Flickr

Tourism, the advantages, disadvantages and how to improve the practice
Around the world, 44 countries rely on tourism for at least 15% of their workforce and national GDP. Many of these countries are island nations or countries that don’t have a highly developed economy or business sector. As the United Nation’s agency, the World Tourism Organization, states, increased tourism can boost developing countries’ local economies, cultural discussion and job opportunities. However, if developing nations solely depend on the tourism sector and dismiss infrastructure development and other essential services, the disadvantages of tourism can outweigh the advantages.

The Advantages

For developing countries, the advantages of tourism tend to be primarily monetary. A large scale tourism industry prevents larger, more harmful businesses from working off the land. Small tourist companies that reign on the land stops large capitalistic corporations from polluting the air or gentrifying people’s homes.

The tourism industry encompasses many different travel areas, which allows the majority of a country’s population to be employed. These employment places include hotels, car rental agencies, restaurants, tour companies, souvenir shops, and equipment shops, among others.

Profit earned from tourism can be reinvested into the country for better infrastructure, education, funding conservation efforts and creating more responsible ways of touring. Without tourism, many countries would not have the same level of access to education and infrastructure. Moreover, tourism allows hosts and visitors to share cultures and meet diverse groups of people. Through respectful interactions, a broader view of the world from both parties can be achieved. By reinvesting the money earned back into the country, tourism and its attractions can grow, creating a positive cycle for the country.

The Disadvantages

With the way the tourism industry is currently run, the disadvantages of tourism may greatly outweigh the advantages in a country. The first factor to take into consideration is environmental damage. When a country has a high tourist attraction, the number of people occupying a space increases immensely. As a result, the release of carbon monoxide gases can increase due to plane and car use affecting the country’s environment. Many countries with ancient ruins or natural attractions are also in danger of destruction or erosion with significant foot traffic and human interaction. Additionally, flora and fauna can decrease in areas or change their growth and migration patterns when there is an overflow of humans interact. Foot traffic and continuous touching can also slowly degrade the stability of ancient structures.

One of the advantages breached upon the sharing of cultures. While this is a great interaction of beliefs and customs, it can become destructive to a host country’s culture. One of the ways cultures can be disrespected is through the commercialization of countries’ cultures. When tourism booms, large industries swoop in and sell figures of the cultures’ icons or traditional wear, disrespecting the countries’ indigenous beliefs and can be harmful to the people living there. Moreover, poor behavior from tourists who don’t respect the spoken or unspoken codes of conduct held by indigenous peoples also undermines the sacred beliefs held within the country.

Also, for many countries, tourism is a seasonal occurrence. For people that work in the tourism industry, their jobs are only viable for a certain number of months, and after the season has ended, many are left without income. Many of these jobs also lack the benefits that other sector jobs supply. Tourism workers are often left without insurance or pension. Not to mention, foreign businesses tend to overtake the companies present in these countries, forcing small businesses to shut down. As a result, foreign businesses keep the majority of profits from tourism, while local businesses lose their income. This hurts small businesses and local economies.

As previously stated, the profit gained from tourism is often reinvested into the industry. However, with unequal infrastructure development, the tourism industry can inadvertently sustain itself without aiding a country’s other vital sectors. As such, many countries end up developing tourism hot spots while the rest of the country suffers. In these countries, there are visible socioeconomic gaps between the wealthy and the poor. Focusing mainly on the tourism industry and places of mass attraction leaves disadvantaged communities at risk of financial instability. Moreover, countries solely invested in tourism are vulnerable to quick economic falls as its working sectors are unevenly balanced. If a natural disaster, political unrest or unprecedented pandemic were to strike, the country would lose a massive income, causing an economic recession that some countries may significantly struggle to bounce back from.

Ways to Respectfully Travel

The most important step to being a respectful tourist is to be an educated tourist. Understanding and respecting the culture and the people of the country is vital. By not undermining tourism countries’ culture and beliefs, the people living there will be more welcoming to tourists, and cultures can flourish without fear of commercialization.

Being environmentally conscious is also important to the survival of these countries. Respecting a country’s land and structures preserve the countries’ beauty and keep the land clean and prepped for further development. Many countries are more environmentally strained, so reducing pollution or your carbon footprint in a foreign country can help ease the strain.

Supporting the small and local businesses found in these countries can help keep local communities employed and support the overall economy.  As local businesses grow, more people will have the opportunity to be employed outside of the tourism sector, and the economy will be able to grow within itself.

By learning the advantages and disadvantages of tourism, and how one can improve the practice of traveling, the tourism industry will be able to change for the better and support the countries that host people from all over the world.

– Marlee Ingram
Photo: Flickr

Entrepreneurial Spirit in Developing CountriesIn the ongoing effort to alleviate global poverty, many entrepreneurs focus on solutions that address social, cultural and economic challenges within a community or region. International organizations and institutions provide funding to developing countries to improve infrastructure, policy and services. All of this, in hopes of solving large-scale problems like poverty. However, perhaps the most powerful way to reduce global poverty is by focusing on the entrepreneurial spirit in developing countries. One such organization, Kountable, delivers goods and employment to emerging markets to reduce poverty.

All About Kountable

Kountable is a global trade organization that aims to interrupt generational poverty in developing countries by overcoming financial obstacles. It is these barriers that are hindering the fruition of small companies. Kountable provides funding and professional development opportunities to small and medium-sized enterprises (SMEs) that would otherwise lack access to the global market economy due to institutional barriers.

By combining “local knowledge with global expertise,” Kountable connects and fosters trade relationships between “large global suppliers… local SMEs, logistics providers, banks, and buyers from government, NGOs, and the largest multilateral institutions and foundations”.

The goal is to “bring the right goods to the right places on time” says Kountable President and Co-founder, Catherine Nomura. Another valuable aspect of Kountable is the multifaceted nature of its approach. For example, the organization collaborates with micro, small and medium-sized enterprises (MSMEs) in many industries — including healthcare, education and information and communications technology.

Financial Opportunities for MSMEs

Julian Kyula, entrepreneur and founder of MODE (Mobile Decisions) from Nairobi, Kenya, explains the challenges faced by SMEs in Sub-Saharan Africa and how Kountable’s strategy can reduce poverty. Kyula founded MODE in 2010 as a technology platform cooperating with telephone companies to distribute small mobile loans. While Kyula was fortunate to overcome financial obstacles, he reveals that, since banks do not often invest in startup businesses, about 70% of MSMEs “in emerging markets lack access to credit” and are therefore unable to grow. These obstacles tend to stifle the entrepreneurial spirit in developing countries.

Furthermore, the overall lack of financial opportunities hits MSMEs especially hard in developing countries. This is because SMEs create on average, 70% of jobs in emerging markets. Also, they represent 90% of businesses worldwide. The global workforce is growing at a rate that would require an additional 600 million jobs by 2030. Importantly, SMEs are expected to be a prime supplier of these jobs.

Researchers define micro-enterprises as organizations consisting of less than 20 workers and associate these businesses with lower poverty rates, especially in rural areas. Smaller and medium-sized enterprises can provide job opportunities and mobility within the workforce. SMEs benefit local communities, unlike massive corporations that often move to rural towns but lack the structural systems to lift regions from poverty into economic prosperity. Representing another reason that the entrepreneurial spirit in developing countries is so important for poverty reduction.

COVID-19 Challenges

Amid the Covid-19 pandemic, another challenge small businesses face is acquiring the U.S. dollars needed to secure essential health goods (PPE equipment, ventilators, masks, testing materials, hospital beds, etc.). Kountable identifies this currency struggle as the “trade before the trade,” and its commitment to funding MSMEs helps small businesses avoid this particular challenge.

The Doing Business in Africa Award

Kountable recently won runner-up for NABC’s 2018 Doing Business in Africa Award, making history by being the first, global trade network ever nominated for this award. Kountable’s success in delivering goods and employment to emerging markets has confirmed its credibility as an innovative solution. Alleviating global poverty and generating wealth by supporting small businesses.

– Nye Day
Photo: Wikimedia Commons

Modern Business Opportunities in Africa
Over the next 10 years, Africa’s total populace could surpass 1.5 billion. Moreover, only 20% of the continent’s predicted population growth will transpire in rural areas. Therefore, an industrial transformation is occurring. International markets now have multiple modern business opportunities in Africa.

Online Finance Services

The demand for financial consulting is immense. Estimates have determined that 80% of Africa’s population does not have access to banking or financial services. Therefore, the evolution of the FinTech industry is underway. FinTech utilizes modern technology to improve the affordability and accessibility of financial services. Approximately 88% of sub-Saharan African countries now implement FinTech policies. Companies such as M-Pesa and Branch have successfully established their business strategies in these regions.

Branch is a digital financial service provider that capitalizes on the worldwide growth of smartphone usage to deliver financial consultation to those in need. The company operates in Tanzania, Kenya and Nigeria. Branch currently serves 3 million customers. Recently, Branch acquired over $150 million in funding to further pursue its initiative. The company hopes that providing small loans will stimulate economic development in low-income areas.

Virtual Healthcare

Providing equal access to affordable healthcare is an objective modern technology can accomplish. In sub-Saharan Africa, only one physician is available for every 5,000 people. In the U.S., there is one physician per 384 citizens. Generating digital platforms to further distribute healthcare in Africa is an under-crowded market. Companies such as Redbank and Lafiya Telehealth App now operate in this sector.

Lafiya Telehealth App incorporates smartphone application technology to provide healthcare to citizens of Nigeria. Lafiya focuses specifically on individuals living in isolated areas, who tend to be poorer. Lafiya’s programs aim to replace in-person medical examinations with voice calls, video calls and instant messaging. With wide and accessible reach, Lafiya is serving an enormous market.

United States Government Initiatives Promoting Commerce with Africa

The African Growth and Opportunity Act (AGOA) is a U.S. government initiative that provides African countries with access to thousands of American commodities. In order for countries to participate, they must launch programs to decrease poverty, protect individual rights, institute a criminal justice system and more. Currently, 38 African countries are eligible to engage in trade and investment with the U.S. AGOA has directly created over 100,000 American jobs, connected U.S. businesses with buyers and suppliers in Africa and generated over $1 billion in exports. Trade between the U.S. and African nations has grown by 300% since the Act came into effect. The U.S. government has extended this program to 2025.

The success of AGOA has prompted the creation of Prosper Africa. Prosper Africa is a U.S. policy with a design to further increase opportunities for trade between the United States and Africa. Prosper Africa increases Africa’s availability to U.S. digital and in-person services, supports commerce by advancing profit-making contracts and enhancing cooperation with African institutions to create healthy business environments. The completion of these objectives will produce profits for employees, businesses and stakeholders among both regions.

The U.N. Conference on Trade and Development recognized Africa as one of the most profitable regions in the world. The continent’s growing urban population, increase in consumer spending and largely untapped markets provide ample scenarios for international corporations. Modern business opportunities in Africa will continue to grow with the implementation of U.S. government initiatives to improve local economies, promote stable growth and persuade future business investments. These modern business opportunities in Africa will expand as wealthy nations share resources and generate economic growth in regions across the continent.

John Brinkman
Photo: pxfuel

Brands Addressing Global Poverty
Cosmetics is a booming industry, with an estimated value of $532 billion, it continues to grow. However, for a long time, many beauty brands have been associated with unconscionable practices as a means to drive profits and sales — such as the use of child labor and unethical sourcing of materials. However, brands addressing global poverty may have an impact not only on worldwide poverty but also on themselves.

Business Structure & Social Impact

In a joint study by The Donor Committee for Enterprise Development and Oxfam, researchers concluded that “business structure can influence the social impact of a company…,” meaning that how a business is operated, keeping the supply chain in mind, can have either positive or negative effects on the social environment that the business engages with.

Inclusive businesses aim to incorporate impoverished people into the supply chain — as suppliers, manufacturers, retailers and customers which encourages economic growth. For a beauty brand addressing global poverty, working with an inclusive business model in mind and working towards more ethical and sustainable practices in the industry — are crucial steps in uplifting and collaborating with emerging markets. Here are five beauty brands addressing global poverty, today.

5 Beauty Brands Addressing Global Poverty

  1. Human Nature: A beauty brand based in the Philippines with compassion at its core. Human Nature creates products with raw materials from community-based suppliers. Working with fair trade principles in mind, the brand ensures that it pays appropriate (sometimes above-market) prices for suppliers’ goods. Human Nature also pays its employees fair living wages to combat poverty in the region.
  2. The Body Shop: The Body Shop believes that business can be a force for good with the motto “Enrich Not Exploit.” The brand engages in ethical trade practices, where retailers and suppliers are accountable for the conditions of their workers. Part of The Body Shop’s global commitment is to help economically, vulnerable people find work. The brand also pledges to invest 250,000 hours of skill-building in the communities where it operates.
  3. L’Occitane: L’Occitane is an eco-friendly, beauty brand addressing global poverty through its philanthropic efforts. The brand maintains a key partnership with women in Burkina Faso who produce shea butter for certain products. L’Occitane provides literacy programs, business training and microcredit opportunities to support women’s leadership and economic empowerment. Since 2006, more than 26,000 women have benefited from the brand’s support.
  4. Karité: Founded by three sisters from Ghana — Karité specializes in ethically sourced shea butter, palm oil and coconut oil from Ghana. Manufacturing is located in New Jersey. This international partnership works with women-run, co-ops supporting economic activity in both Ghana and the U.S. The brand has developed various projects (e.g., the Shea for Soles Initiative) that benefit Ghanan communities. Karité observed the needs of the women who work on the co-ops, noticing that many only wore flip-flops. Subsequently, the brand launched a campaign to provide shoes to the workers.
  5. Conscious Coconut: Conscious Coconut is another international, beauty brand addressing poverty through its fair trade and sustainable sourcing practices. Working globally — growers and workers are paid fair wages, ensuring that employees in poor communities can meet their basic needs. Conscious Coconut advocates against the use of child labor and human rights abuse. Moreover, the brand cultivates close relationships with its suppliers to make certain that they have dignified working conditions. Packaging for the company occurs in Florida at the MacDonald Training Center — which gives work opportunities to adults with disabilities.

An Admirable Business Model

While not all brands follow the same principles that guide these five previously mentioned — each additional brand that joins the cause represents progress. As the world becomes more connected, the global economy plays an increasingly significant role in fighting global poverty. Brands like the five mentioned here are taking an admirable, active role in addressing their business objectives and global poverty, simultaneously.

Melanie McCrackin
Photo: Pixabay

Incentives to Invest in Developing CountriesIn an era of large corporate business and capitalism, many low-income nations are struggling to increase economic growth. Although industries like fast fashion utilize cheap labor in developing countries, these companies neither invest in local economies nor help improve living standards for their employees. Businesses have the potential to play a major role in strengthening low-income economies and bringing citizens out of poverty. Thus, it is critical to create and publicize incentives to motivate businesses to invest in developing countries.

Incentives for Investing

  1. Fiscal Incentives. Fiscal incentives are one of the most common incentives used to attract businesses to developing countries. Fiscal incentives include tax exemptions, tax holidays and loans. Other examples include reduced restrictions on shareholders and stocks, as well as greater access to domestic and international partners. These rewards can be provided by local or city governments, and are designed to encourage businesses to expand into developing countries. The presence of fiscal incentives in these nations can draw in new investors, skilled workers and economic growth.
  2. Privileged Treatment. Some businesses, especially major corporations, may ask for “preferential treatment in the domestic market.”  Privileges could include increased access to resources, less regulation and priority for business decisions.
  3. Resources and Infrastructure. If a business opens in a developing country, it may possess the authority to demand lower infrastructure costs or resources. These businesses can also request lower interest rates on imports and exports in order to expand their international networks, as well as request resources to increase long-term investment domestically and internationally. Large corporations often have the power to request assistance in increasing local ties with other firms and organizations. Overall, due to developing countries’ strong desire for economic investment, companies choosing to establish this presence gain access to a plethora of resources.

Potential Risks

While incentives for businesses to invest in developing countries are certainly important, disadvantages to this practice are also worth noting. Incentives can distort the market and even create dominant monopolies. Monopolistic competition makes it difficult for small businesses to gain traction and thrive long-term, which can lead to unemployment for many local workers and business owners. Furthermore, with fiscal incentives come greater risks for inflation, corruption and fraud. Therefore, although incentives may be critical in creating economic growth and development, it is important to address their drawbacks.

Deciding Whether to Provide Incentives

In sum, encouraging large businesses to operate in low-income countries boosts profits and yields exposure to new markets. Perhaps more importantly, though, developing countries themselves benefit immensely. Corporate presence from just one company opens the door for other businesses to expand into these countries, attracting new jobs, income, resources and opportunities. This economic growth can help reduce extreme poverty by involving more citizens in the job market.

However, it remains essential for developing countries to acknowledge the potential drawbacks of corporate investment and make economic decisions accordingly. Regardless, providing incentives for business investment has the potential to give hope to low-income countries aiming to improve life for their citizens.

– Sophia McWilliams
Photo: Flickr

Rafode
For many years, microfinance was viewed as one of the most successful means of raising individuals and communities out of poverty. In Myanmar, small and medium enterprises made up 99% of the country’s businesses. Most of those were, to no surprise, micro-businesses. In particular, the tool of microfinance was viewed as especially helpful to women. Yet, it turns out that studies found that microloans were not actually as impactful as many wanted them to be. The problem is that, because microloans are often given to those considered high-risk borrowers, high-interest rates are charged, making it difficult for those receiving the loans in the long run. The way to make microloans sustainable is by diverting the focus away from scalability and immediate returns. Rafode, a startup in Kenya, has done just that.

Headquartered in Kisumu, Kenya, Rafode is a “non-deposit taking Microfinance Institution.” With its main focus on women in rural communities, Rafode has successfully distributed over 40,000 loans, all with a value of around 700 million Kenya Shillings or $6.5 million. Relying on technology to deliver its products and services, Rafode has succeeded in reaching rural communities and uplifting both men and women through microloans.

Products and Services

Rafode has eight different products, all in the form of loans for different purposes.

  1. Inuka Business Loan: As a group loan, this is intended to encourage clients to create, upgrade or expand a business. This loan is the first step to receiving an individual loan and can range from 10,000 to 480,000 Kenya shillings.
  2. Masomo Loan: Dedicated to education, this loan is aimed to support a client’s family in receiving an education.
  3. Green Energy Loan: Working with other companies that provide green products, including Burn, Marathoner and Sunking, this group loan provides support for rural clients seeking access to affordable green energy products.
  4. Agribusiness Loan: As the name would suggest, this loan exists to specifically help small scale farmers in the agribusiness industry.
  5. Pamoja Loan: As another group loan, this works to support a group hoping to support its local economy.
  6. Emergency Loan: As an individual loan, the Emergency Loan serves to cater to the client’s emergencies, typically related to their business.
  7. Individual Business Loan: A more selective loan to receive, this loan exists exclusively for clients who already have businesses, and who already have businesses that are stable and have a reliable source of profits.
  8. Asset Loan: This final loan is self-securing. Providing real flexibility to clients, they gain the ability to finance movable assets and free up cash they might not have had before. Like the Individual Business Loan, this exists for clients who already are seeing their business profit, and hope to expand or grow it even more.

The Value of Microfinance

While conventional microloans have not been so effective, researchers have found that by providing microloans with little to no collateral, there are usually better results. Specifically, when given to women, these results are even more effective. This is because, especially in developing countries, microloans are among the only things that increase women’s decision-making power. In other words, microloans undeniably empower women.

So, Rafode’s efforts to give 85% of their microloans to women, focusing on rural communities and offering a plethora of different types of loans, all with very little collateral, have enabled this startup to do extremely impactful work that provides mutual benefits to the clients and back to the company. The most successful microfinance products allow flexible payment periods, individual liability contracts and one of Rafode’s main tools, the use of technology.

By believing in microfinance and adjusting to what will work by trusting in their clients, Rafode has raised individuals and families out of poverty, as well as revitalized economies in the process.

– Olivia Fish
Photo: Flickr

US Enterprise Funds
Many post-communist states have met with challenges, as without a working market economy, private capital is scarce. Enter U.S. enterprise funds, providing loans to businesses to improve their standing, create jobs and return money to U.S. coffers—a win-win situation.

US Enterprise Funds

Enterprise funds operate as a venture capital firm, with an emphasis on lending to small and medium businesses (SMEs) in the countries where they exist. They have a limited lifetime—usually 10 to 15 years. Each fund also has a board of directors, with appointees from both U.S. businesses and local enterprises. For the most part, the funds work with great autonomy under USAID’s umbrella. There were political concerns regarding early enterprise funds, as some believed USAID lacked sufficient business know-how. However, it turned out that their involvement would be beneficial.

The funds also have a dual mandate. They are to “promote private sector development” while “generat[ing] financial returns for the U.S. government,” according to The Hill.

Post-Soviet Funds

In post-communist Eastern Europe, the George H. Bush Administration first deployed enterprise funds to help former Soviet states rebuild. The first two such occurred in Hungary and Poland, with a total investment of $300 million. By investing in private companies, the Funds aimed to help develop these states’ free market. In Poland, for example, the Fund helped start a micro-lending company, Fundusz Mikro, that is still operational today and has loaned money to over 57,000 small and micro-business owners.

Congress established 10 enterprise funds across Europe in the 1990s, which generated almost $7 billion in private capital and “as much as $1.7 billion of net proceeds from successful investments,” according to the Center for Strategic and International Studies. They also helped create more than 300,000 jobs in the Eastern and Central European regions. For the United States, these funds contributed to stabilizing the region, fostering private investment and returned $200 million to the U.S. Treasury.

Current Funds

Today, only two enterprise funds remain. These emerged under the Obama Administration in Tunisia and Egypt, in 2012. Aiming to support post-Arab Spring markets, these funds granted annual cash infusions, with total funding capped at $100 million and $300 million, respectively, for the life of the programs.

In Tunisia, the Tunisian-American Enterprise Fund (TAEF) has seen success, investing in information and technology, construction and other sectors. One company, Net-Info, a school offering courses in 3D animation and gaming in the North African region, received funding from TAEF to open a campus in Tunisia’s capital, Tunis. Africa’s population is both young and growing, and youth make up 60% of the continent’s unemployed, so institutions like Net-Info that give marketable skills can reduce joblessness and instability. In sum, TAEF has supported around 5,000 jobs in Tunisia.

Meanwhile, the Egyptian-American Enterprise Fund (EAEF) has experienced similar success. EAEF has assisted 140,000 SMEs, like Fawry and Sarwa Capital, companies focusing on improving financial accessibility in a country where two-thirds of citizens are unbanked. Both companies have seen substantial growth, with Fawry adding more than 6 million customers since EAEF’s initial investment. Another financial services company, Flat6Labs Cairo, has given seed money to several small businesses, 31% of which women own. In 2017, reports determined that the fund directly generated 430 jobs in the country.

Enterprise funds, historically, have accomplished their mandate well. Congress has considered expanding certain enterprise funds. For example, an Enterprise Fund in Jordan emerged but never received funding. A logical step for Congress would be to continue this fund and consider establishing similar enterprises in other states where businesses have insufficient access to capital.

Jonathan Helton
Photo: Flickr

tech startups in Latin America
According to the Vice President for Finance and World Bank Controller Jorge Familiar, “We should adopt and promote technology and innovation to boost economic growth, poverty reduction and increase opportunities for all, rather than planning barriers.” In recent years, Latin America has followed Familiar’s advice as it has seen a dramatic rise in access to technology and a sense of entrepreneurship. Below are seven facts about tech startups in Latin America.

7 Facts About Tech Startups in Latin America

  1. Latin America is more connected than it has ever been, a necessity for the success of tech startups. More than 70 percent of South Americans had access to the internet as of January 2020, up from 55 percent in 2017. There are about 500 million smartphone subscriptions across the region. Brazil and Mexico rank fourth and fifth in the number of Facebook users with 120 million and 84 million users respectively. Additionally, Latin America has been one of the top growing markets for Spotify and Netflix.
  2. E-commerce sales in the region reached $53.2 billion in 2018, up 18 percent from 2017. This is attracting attention from international e-commerce businesses such as Amazon, which opened its first distribution center in Brazil in 2019.
  3. Venture capital investments in Latin America surpassed $1 billion at the end of 2017. There were 25 new global investors that year. These investors include Softbank, Telstra Ventures and Rethink Education.
  4. Three tech startups surpassed $1 billion valuations at the beginning of 2018. These startups include Nubank, an online banking service, and PagSeguro, an e-commerce service for commercial operations.
  5. Strong institutional support in the region has facilitated the expansion of startups. Startup Chile and Mexico’s Fund of Funds are government-initiated investment firms that act as accelerators to provide capital to small and medium enterprises to get them off the ground. Similar organizations exist in Argentina, Peru and Columbia. Brazil’s development bank has played a critical role in the provision of capital to small businesses as well.
  6. The share of female participation in creating startups is higher in Latin America than in Europe. The failure rate of startups is higher than ever in many Latin American countries. However, this is due to a growing sense of entrepreneurship amongst men and women alike.
  7. The Tech Growth Coalition began in 2018 to facilitate investment in the region’s startups. One of the issues Latin American startups face is the small domestic markets the countries have. However, by working together as a region, countries can overcome this problem. The Tech Growth Coalition, which consists of large investors such as Google and Facebook, emerged to help with this cross-border collaboration. The parent organization, the Latin American Venture Capital Association, which originated in 2002 and consists of more than 190 firms of all types and sizes, has built up $65 billion worth of assets “directed at capitalizing and growing Latin American businesses.”

The growth in the number and size of tech startups in Latin America is key for several reasons. One key reason is the opening of foreign markets and the attraction of foreign investment and businesses. This not only leads to increased “investible resources and capital formation” but “a means of transferring production technology, skills, innovative capacity and organizational and managerial practices between locations, as well as of accessing international marketing networks.”

Scott Boyce
Photo: Flickr