Environmental Preservation Focused SME Investment Fund for local entrepreneurs and business incubation in Ethiopia; pilot progr

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Environmental Preservation Focused SME Investment Fund for local entrepreneurs and business incubation in Ethiopia; pilot progr

Ethiopia
Website:
http://www.partners-dev.org
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Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

The fund will finance and provide business incubation to SMEs that provide solutions to environmental degradation and alternative energy in Ethiopia. Mentorship from the African Diaspora will be included. ThE pilot will be a model for SME innovation and Finance in Africa.

About Project

Solution: What is the proposed solution? Please be specific!

There is no such intervention around in Africa at this time which provides equity funding to SMEs to specificly address pressing issues such as environment degradation in their countries that also provides business incubation while also mobilizing the African Diaspora as mentors to the firms. The project will have the mission statement of funding innovation to address environmental and poverty related challenges and also seeks to encourage ICT driven projects. We propose that the traditional donors become “investors” to the Social Investment Fund in order that a demonstration model can be launched that can attract other private sector investors outside of the targeted countries as well as within. It is anticipated that this innovation will be replicated in other regions of the countries targeted and in other African countries
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

The greatest social impact will be the focused attention to the issues of environmental preservation by providing incentives of funding and incubation (rarely provided together) to the private sector and by facilitating (knowledge-sharing partnership) with the Ethiopian Diaspora.. At this time, the effects of climate change and industrial pollution are impacting the rural livelihood and overall quality of life in Ethiopia resulting in environmental degradation; and air and water pollution. This project provides an opportunity to inform and involve the private sector to start undertaking business activities that address these issues while providing economic returns and social returns in the form of cleaner air; water; and land. There is insufficient action in Ethiopia at this time in the face of severe environmental degradation. --- Cllimate change is a major threat to sustainable growth and development in Africa, and the achievement of the Millennium Development Goals, hence urgent action is needed.Although Africa is the continent least responsible for climate change, it is particularly vulnerable to the effects, including reduced agricultural production, worsening food security, the increased incidence of both flooding and drought, spreading disease and an increased risk of conflict over scarce land and water resources. Evidence from research indicates that: - Agricultural and food security are at stake; - Half of Africa will face water stress if the trend continues; - Diseases will likely spread; - Risk to coastal areas could force major population movements; and - The direct and indirect effects of climate change could further undermine peace and stability in the continent. Of the overall 60 entrepreneurs targeted, we anticipate a third addressing strategies to address climate change; another third to address air/water pollution and industrial pollution; another third will focus on alternative energy production such as the widespread use of solar, wind, and other clean energy endeavours. They will need to research this are and team up with local experts in the process. This initiative will provide an opportunity to open the “eyes” of the private sector to these issues and motivate them to address them This project seeks to promote a “Green Revolution” that will spur interest in all types of “green businesses.”
About You
Organization:
Partners in Development
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About You
First Name

Misgana

Last Name

Amelga

Website

http://www.partners-dev.org

Your Organization

Partners in Development

Country
About Your Organization
Organization Name

Partners in Development

Organization Phone

571-282-5732

Organization Address

5500 Holmes Run Parkway- C-4

Organization Country
Organization Type

Non-profit/NGO/Citizen-sector Organization

Your solution
Country your work focuses on

, AA

If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:

Africa.

Range of turnover in your target firms, in USD

Less than $1 Million.

Average turnover in USD of your target firm

200,000

Number of employees in your target firms

5-24.

Average number of employees of your target firm

20

Specify the size, average and range of expected loans or investments in each target firm

$50,000 – $100,000

What stage is your solution in?

Idea phase

Innovation
How does your proposed innovation leverage public intervention in catalyzing private SME finance?

This innovation seeks to leverage the resources of the public sector in a way that allows them to be “investors” contributing resources to the capital fund and supporting SME growth in a sustainable manner as opposed to being limited to being donors with providing only grants.

It is expected that this innovation can allow the public sector be a part of a sustainable solution to a long standing issue of creating economic growth through entrepreneurship and strengthening the private sector through much needed support to the SME sector , not to mention addressing brain drain and the need to fund innovation in Africa.

The project seeks to extend finance and knowledge to the SME sector through their partnership with Diaspora entrepreneurs as one strategy to be replicated by international donors.

The SME sector known as the ‘missing middle, – small and medium sized enterprises (SMEs) has been recognized as the biggest potential engine for development. In Africa, this sector has little in the way of support in terms of financing or capacity building. My innovation will provide finance to Diaspora entrepreneurs who will partner with local entrepreneurs and start-ups to launch innovative businesses and also be effective mentors. The local incubator established will provide the appropriate support/orientation to the Diaspora entrepreneurs and provide business training to their local partner entrepreneurs.

This innovation will seek to provide a greater return than just profit. It intends to provide ‘triple bottom line’ investing that includes monetary, social and environmental returns on a given investment. This will be possible because all investments will be required to be on key issues of concern to Ethiopia, such as preservation (e.g. solar energy; clean energy; air pollution; water treatment; sanitation; etc.)

What barriers does your proposed solution address?

Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Lack of financing to women entrepreneurs.

If you checked any of these barriers, describe how your solution addresses them

This solution will address issues faced by local entrepreneurs such as lack of financial capacity by providing equity financing. it will also address lack of SME access to skills/ knowledge/markets by establishing local business incubators.

It will address lack of financing to women entrepreneurs as 40- 50% of the SMEs selected will be women owned.

It will also address the issue of lack of lack of incentives for financial intermediaries to serve SMEs as the project provides a demonstration of the viability of equity financing, especially in the area of environmental preservation/alternative energy.

Impact
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

Social investment refers to a growing segment within the worldwide investment community that seeks to realize more than just monetary gain from leveraged activities. In some cases, the gains sought could be a measure of environmental conservation, social benefits such as the advancement of women’s causes, job creation or other such features. Tradeoffs of some financial return in exchange for increased non-monetary impact may sometimes be made within the context of assessing returns that use a more holistic measure than simple dollars and cents. While many such ventures are targeted at developing countries, it is by no means a new concept in developed ones either. However, developing countries are certainly fertile ground for such projects given that the ‘normal’ model of investing is usually a bit more challenging in such countries.

In the highly dynamic environments that African emerging economies present, the possibility of both significant profit (at higher return rates than investments in developed countries) and great social impact are clearly evident. Yet the tradeoffs that may need to be made can seem daunting at times. Nevertheless, there is no shortage of examples where such investments have been and are being made with great success.

There is evidence that venture capital for social business that worked in Asia and other developing regions. Below is a list of such organizations:

Social Investment Funds

(i) SPESA (Social Private Equity South Africa) - is a PE fund targeting investment opportunities with high social value add. It employs by using flexible financial instruments to provide funding access to entrepreneurs that may not be able to do the same via traditional models of financing. It further provides a range of non-financial assistance to investees including helping them create sustainable business models, refine service delivery models and so forth.

(ii) “Aavishkaar India Micro Venture Capital Fund” (“AIMVCF”) is a fund created to promote inclusive development in rural and semi-urban regions in India. The fund’s mission is based on the premise that promising micro, small to medium -sized enterprises (MSMEs) will help drive positive changes in the underserved regions of the country. Aavishkaar was incorporated in the form of a Trust in October 2001 and was registered with SEBI as a Venture Capital Fund in May 2002. Aavishkaar’s mission is to encourage the creation and spawning of socially relevant entrepreneurial solutions addressing local needs to help India achieve holistic sustainable economic development. To achieve this, Aavishkaar aims to support socially relevant, commercially viable and environmental friendly micro and small enterprises by providing them with early stage equity finance and management support.

(iii) Legatum Ventures is a double bottom line investor that incubates and invests in for –profit enterprises that deliver measurable social returns while generating financial returns that allow operations to be increased in both scale and scope. Its underlying philosophy is that business is development and this philosophy has led it to become a premier provider of patient capital to help entrepreneurs drive the creation and growth of sustainable businesses in developing countries.

How many firms do you expect to reach?

In terms of providing equity funds and access to business incubation, this project expects to reach 20 SMEs a year and 60 over a three year period.

What is the volume of private SME finance you aim to catalyze?

I expect to raise about 3-4 million in capital funds for the 60 entrepreneurs, who would be receiving approximately up to $50,000 -100,000 each. This initiative also seeks to raise grant funds for the business incubator which may cost approximately $600,000 for three years, after which it must be self-sustaining.

What time frame will be required to reach these targets?

I estimate approximately six months to a year.

Does your solution seek to have an impact on public policy?

Yes

What would prevent your solution from being a success?

Raising all the funds required in the anticipated time. In such a case, it may be that the project will start on a smaller scale or start with the incubator first.

Sustainability
List all the funding sources that are required for the sustainability of this solution

The initiative will require 3 -4 million in capital funds and another $600,000 to support the establishment of a business incubator over a three year period.Approximately 150 words left (800 characters).

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

The solution is expected to graduate from public finance after a five year period. The first batch of entrepreneurs will have started to make initial profits after that time.

The business incubator is expected to become self-financing after three by providing consulting training services to the public and collecting rental fees from tenants.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

In that case, we will look for private capital which may be more willing to finance the initiative as it is already underway and will require less investment.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

The key partnerships that are critical are those with organizations and individuals who have the skills necessary to support us in the area of: investment assessment (screening business plans); SME business training; and technical support in environmental science (experts locally and in the Diaspora who can also screen the business plans and support entrepreneurs as mentors in the area of environmental science.

We anticipate partnership with the following:

-Offshoring Technology 2.0 –an ICT consulting firm with expertise in business incubation
establishing the incubator,

-Additional incubation advisory service possibly from the management of BusyInternet in Ghana who have expressed willingness to provide guidance.

-A fund management firm that can manage the capital funds.

-There will also be partnership with local environmental preservation organizations such as “Greener Ethiopia” and experts in environmental science at Addis Ababa University in Ethiopia. In addition, there are online Ethiopian Diaspora associations who can be available as mentors.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

The performance of the participating entrepreneurs, however, we plan to minimize that risk by screening the viability of their business plans and providing top level training and suppor while they are being incubated.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

Our strength will be on our focus on environmentally sustainable business, which we see as a high growth sector with promising sub-sectors. We do indeed hope to scale up within Ethiopia and elsewhere in Africa as the need for this intervention is great.

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