NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Since my first blog post, the Entrepreneurial Finance Lab (EFL) has gone on a whirlwind tour of the world: Asia for the G20 summit, Riyadh in the Middle East, Europe with the DEG SME summit in Germany, the U.S. for the Global Empowerment Meeting, and back to headquarters in South America [Lima] and Africa [Johannesburg]. Along the way, we’ve been inspired and humbled by our partners, our customers, our fellow G20 SME Finance Challenge winners, and the “Trillion Dollar Ideas” showcased in our backyard at Harvard.

Given this unique opportunity to witness and share the front lines with entrepreneurs and solutions empowering them alike, we’ve decided to use this forum not only to keep the NextBillion community updated on our progress, but more importantly, to share the inspiring work we witnessed along the journey. [In short, since we last wrote, EFL is responsible for driving over two-thirds of SME lending for our major bank partner in Kenya in less than six months. And EFL is also currently live and lending with our partners in Ghana, Nigeria and South Africa. (I’ll go into more detail in a later post…)

Part One: Nigeria

In February, EFL officially entered the Nigerian market. Often misunderstood, and more often feared, Nigeria is a country brimming with entrepreneurial energy and latent demand for financing. Fresh off the heels of a devastating financial crisis triggered by events overseas, Nigeria’s financial sector is just now re-emerging from gut-wrenching regulatory overhauls steered by the Central Bank of Nigeria (CBN). To aid recovery and jumpstart the economy, the CBN injected N200 billion (%7E$1.3 billion) in 2010 in the form of an SME Credit Guarantee Fund and SME Refinancing and Restructuring Fund, and in early 2011, another N5 billion (%7E$33 million) in Q1 2011 to grant low interest loans to small businesses in Nigeria. A large tranche of Federal Government planned intervention for SMEs (apart from the CBN) is primarily administered via the Bank of Industry (BOI), $200 million of the $500 million dedicated is mandated for the entertainment industry.

Part Two: Banky

EFL, as an organization, is strongly rooted in development and social enterprise from our early days at the Harvard Center for International Development (CID). So while we see our work with the large, established multinational financial institutions as the most effective way to reach the masses, we also dedicate significant resources to forming partnerships with non-profits, business plan competitions and incubators. Alongside our internationally-known partner organizations like TechnoServe and Endeavor, are more locally-focused (and driven) organizations like Zazida Schools and the Awethu Project in South Africa, and most recently, the Enterprise Development Center (EDC) of Pan African University in Lagos.

The EDC was created in the mold of its impassioned and personable head, Peter “Banky” Bamkole (pi, a veteran international entrepreneur and by-product of the ubiquitous oil and utilities industries in Nigeria. The EDC is housed in the Pan African University’s Lagos campus, and offers a certificate in entrepreneurial management to its classes of roughly 50 graduates per quarter. These graduates are trained in a case study and practical curriculum, and provided with support services such as mentoring, business advisory and networking. With the support of the IFC, the EDL model has been replicated across 5 countries spanning East and West Africa. Central to the training is steeping the graduates in EDC’s MISFIT model, which stipulates the conditions that negatively affect entrepreneurship:

• M – Market
• I – Infrastructure
• S – Support Services
• F – Finance
• I – Information
• T – Technology

Based on its success, EDC was selected as the first partner for the Goldman Sachs’ 10,000 Women initiative, as well as locally by the British Council, and Diamond Bank’s “building entrepreneurs today” program. But Banky’s devotion to, and affection for, his entrepreneurs is most evident in the innovative approaches he and his team take to remain connected to his entrepreneurs, including setting up year-long mentoring relationships after graduation, complete with free mobile phones to enable even the most resource-constrained participants to gain access to valuable training and camaraderie.

No visit to Nigeria or to the EDC is complete without sampling its notoriously spicy cuisine. Over a bowl of pepper soup, Banky explained, using a most appropriate metaphor, the role he sees EDC playing in the entrepreneurial ecosystem. He sees EDC’s initial program, of 30 classroom days spread over five months as the appetizer, leaving the entrepreneur hungry for more. By the time they come back for the main dish, consisting of additional training, mentoring, and support services for a year, they leave transformed. But just as Nigerian meals demand dessert, Banky sees the EDC’s work as incomplete without the final course: access to finance. Armed with 1,000 EFL tests in the 30 user computer lab, the EDC hopes to leverage EFL’s growing credibility among financial institutions in the Nigerian market to do just that …