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

Pakistan has been at the top of everyone’s list these days, and not in a good way. We’ve been labeled the most dangerous country in the world for journalists and make a consistent appearance on the Failed States Index. In a December 2011 cover story, The Atlantic recently called us “The Ally from Hell,” and the late Christopher Hitchens spared no punches when writing about Pakistan’s volatile state of affairs in Vanity Fair last summer.

These criticisms and list positions are not without merit; Pakistan’s roses are more the thorny than plain variety. But to brand it as such would also be one-dimensional and short-sighted. Pakistani entrepreneur Monis Rahman, the founder of Pakistani job matching site Rozee.pk, told Forbes last year, “You tend to hear the worst 5 percent of the Pakistan story 95 percent of the time.” While you may read about the latest bomb blast and see images of Pakistanis gleefully burning the American flag, you may not have heard that filmmaker Sharmeen Obaid Chinoy’s documentary, Saving Face, recently garnered an Oscar nomination, or about the recent launch of Kachee Goliyan, Pakistan’s first online comic book by 21 year olds Nofal Khan and Ramish Safa.

You also don’t hear too much about Pakistan’s untapped entrepreneurial potential.

I launched my company, Invest2Innovate (i2i) in fall 2011 because I want to turn great ideas into good businesses but also because I believe strongly in the potential of untapped markets like Pakistan. i2i is helping to build the entrepreneurial ecosystem by providing services to early-stage social enterprises and connecting those entrepreneurs to the resources and capital they need to grow. In the five months since we launched operations, we’re not only working with incredible partners and social entrepreneurs such as Asim Hussnain, who is providing income generation opportunities for small dairy farmers through his enterprise Milk’Op; or Saba Gul, who is teaching livelihood and business skills to keep young girls in school with BLISS; but we are further convinced of the need and opportunity in this market.

In Pakistan, 66 percent of the population lives at the bottom of the pyramid, under $2 a day. Low-income communities lack adequate access to healthcare, education, water, energy, and housing. Instead of throwing money at these issues and fostering further dependency, we should instead encourage more entrepreneurship, which can not only provide quality services to these communities, but also generate income and create jobs.

A 2010 report, “Creating a Place for the Future,” (authored by Philip Auerswald, Elmira Bayrasli and Sara Shroff) further emphasizes how productive enterprises as a whole can contribute substantively to economic growth and development. However, it also noted that the lack of a favorable enabling environment in Pakistan mean many entrepreneurs direct their energies towards rent-seeking rather than productive entrepreneurship. While the government can play a significant role in top-down improvements in the environment – such as reducing transaction costs, improving access to finance, and encouraging entrepreneurship, there is also a need to build a better environment from the bottom-up.

This is where i2i and our partner organizations can play a role. While impact investors like the Acumen Fund and international development organizations provide critical funding for later-stage enterprises that are looking to scale their businesses, there is an unmet demand for early-stage enterprises looking for seed capital and resources to turn their ideas into feasible businesses. If they cannot receive said resources, then they cannot achieve the first step in the entrepreneurial process. In short, they cannot start.

Pakistan’s entrepreneurial value chain is fragmented at best. First, there is a need to get would-be entrepreneurs to think entrepreneurially and critically about their surrounding environment. Once innovative and high-potential ideas are generated, they need to be matched with corresponding capital, mentorship and resources to test their enterprises in the real world, to achieve proof of concept. Successful and feasible businesses can then be fed up the pipeline to scale their impact and further build these enterprises.

At i2i, we are leveraging Pakistan’s Diaspora network – in which remittances to the country have quadrupled in the last eight years – to build a community at the seed-stage for social entrepreneurship. We carefully assess our social enterprise clients to determine what services they need to grow, and use this benchmarking process to not only present them to funders, but also to measure both their (and our) impact over the short and medium-term. While we provide these services to existing enterprises, i2i partners with key local organizations to build the broader ecosystem and encourage further entrepreneurship – from developing design challenge competitions to incubators and co-working spaces.

In markets like India, Mexico and East Africa, the social entrepreneurship ecosystem is relatively well-developed. There are many systems-based lessons we can glean for untapped markets, where we essentially are starting with a blank slate. While Pakistan may conjure up negative images of violence and corruption for some, we see a country ripe for opportunity. You just have to unlock it.