How can entrepreneurship really make an impact?

Inclusive Economy29 Sep 2014Yannick du Pont

In conflict-affected societies, entrepreneurship promotion plays a crucial role in harvesting young people’s innovative potential and in stirring economic growth on a national level. But what do those entrepreneurs really need?

Entrepreneurship for development is the new hype. Several years ago, many in the development sector were questioning whether entrepreneurship, especially in relation to supporting high growth potential SMEs, was something development organizations should get involved in. Today, however, every self-respecting organization seems to be opening an entrepreneurship department. This is good news, meaning entrepreneurship has become an accepted mainstream tool for Dutch development organizations.

It is, however, important to carefully review and investigate the empirical evidence at this point on what lessons have been learned about entrepreneurship development. At SPARK we draw our lessons from our own failures in programmes (usually the most expensive, but also an excellent way to learn), which are shared at the annual Brilliant Mistake Award ceremony for the Dutch Development Sector.

But then, more structural research into what entrepreneurs actually need provides important clues. Evidence from two recent studies by SPARK among 900 SMEs in 10 fragile states, conducted in 2013 and 2014, shows that the lack of human resources, i.e. qualified personnel and access to education, training and coaching, is one of the main obstacles entrepreneurs face. However, this is often not a problem of entrepreneurship training, but of unskilled employees requiring employability training. Effective examples are training production equipment operators, enhancing agricultural skills, etc. Much of this can be achieved by working with local TVET (Technical Vocational Education and Training) institutions, such as lower and higher vocational school or universities. Curriculum reform can be a good tool in this respect: ensuring that SME and other business owners not only sit together with the schools to design the curriculum but also teach at the schools and provide internships for students. This helps to form close ties between SMEs and education providers. SPARK has done this at a modern European accredited higher vocational business school in Kosovo, leading the establishment of this Bachelor level business academy. To design the curriculum, workshops were organized with representatives of the business community, who explained what skills and study outcomes would be important for their future employees to have. In the teaching process, internships are now a mandatory component of the study programmes and regular study visits are organized to relevant businesses. Business leaders give guest lectures at the school. This has been challenging, as much of it was relatively new. Internships, for example, are not yet fully integrated in all state higher education institutions.

As it is important to match the training to real market needs, giving market actors more control of curriculum development is a good starting point.

Another good method in our experience is to find the market first. For example, by working with Chevron in Liberia, SPARK has been able to assist local SMEs in engaging with an existing and already planned large international investment. Through a local business centre that SPARK had established in Monrovia, local SMEs were coached and trained to feed into Chevron’s value chain. As opportunities for local SMEs were clearly on the horizon from the outset, this provides a powerful motivator for local SMEs to perform better, and avoid investing time and money in capacity building that may lead to no growth in markets that are unclear.

Training and education can then be tailored to meet the need. In other words, find the market with a commercial large party and design educational programmes to work towards it.

As for entrepreneurs, the question remains whether they can be educated. The best entrepreneurs I have met seem to ‘have it in them’, have that entrepreneurial ‘SPARK’ that can be ignited by being coached by another experienced entrepreneur. As time has passed, SPARK has stopped giving mass training in entrepreneurship and moved towards local coaching of the most promising entrepreneurs, identified through competitions, as this proved to be far more successful. And of course it is important to select well and realize that entrepreneurism should not be overhyped. Entrepreneurship training cannot lift an entire population out of poverty. What will work is careful selection, proper coaching and ensuring that all schools and institutes of higher education offer entrepreneurship as a subject, to enable those who ‘have it in them’ to realize their potential.

In all this, it is crucial not to forget who is most excluded from real entrepreneurial opportunities. According to SPARK’s surveys, women, young people, internally displaced persons and refugees are hardest hit, together with ex-combatants. It is a real challenge for a true development organization to find ways to identify potential entrepreneurs among these groups and coach them to success, while helping to train their personnel in relevant skills and ensure that they are integrated in regular vocational school programmes. In all of its programmes SPARK has now integrated objectives to reach entrepreneurs from these groups. The major challenge here is not to sacrifice that quality of the business selected with the social objective of empowering certain groups. SPARK is working to attain this primarily by promoting and recruiting potential entrepreneurs especially from these groups, but also by organizing a separate process to select beneficiaries that primarily takes into account the quality of the business proposition.

This leads to mixed groups of entrepreneurs taking part, including some who are already reasonably well off, but also a significant proportion with a background that is more challenging. SPARK sees this as a necessary area of tension as it does not want to confuse SME development with social aid programming, while only supporting SMEs that are already doing well, usually run by entrepreneurs who are already reasonably well off, would call into question the added value of the intervention. In other words, was support really necessary for them to succeed?