Wednesday
July 31
2019

Annie Shoemaker / Juan Carlos Thomas

Getting Past Doubt: Finding Better Ways for Multinationals and SMEs to Intersect

As a nonprofit organization with a long history of working with private sector partners to support entrepreneurs and farmers, we at TechnoServe frequently sit down with representatives from corporations to discuss how they can help the small businesses in the communities where they operate. When we have these conversations with corporate representatives, we typically hear that they want their investments to create positive and lasting change, and that they’re excited by the prospect that stronger local enterprises could also help solve business challenges surrounding sourcing, distribution, licenses to operate or other issues.

But we often hear their reservations, too. Corporations may not know how to design effective programs to support entrepreneurs. Individuals within the corporations may not know how to build the business case for these investments and secure buy-in from key internal stakeholders. Or, they may perceive that there is too much risk in launching a new initiative to help entrepreneurs.

To address those concerns and to spur corporate investment in small and growing business (SGB) growth more broadly, we have partnered with the Argidius Foundation to launch the Catalyzing SGB Acceleration (CaSA) Initiative. Through this initiative, we will help a corporate partner to design and implement a shared-value pilot project to support the UN’s Sustainable Development Goals, tapping into our experience working with entrepreneurs on three continents. CaSA will provide match funding for this pilot, reducing the risk for the corporate partner.

We’re launching this initiative because we believe that private sector actors – and especially companies doing business in developing countries – have a distinct role to play in helping entrepreneurs. There are roughly 400 million micro-, small- and medium-sized enterprises in these countries, and they serve as a key source of goods, services, employment and economic activity. But they also face obstacles to growth, including a lack of market linkages, limited business or personal-effectiveness skills, and difficulty accessing finance.

At the same time, developing countries have become increasingly important to many multinational companies. Foreign direct investment in emerging markets reached $671 billion in 2018, and it now outpaces foreign aid in many countries. These investments have been made across a wide range of sectors, from natural resources and manufacturing to financial services and beyond. For these investments to prosper, multinational companies need dependable suppliers, efficient distribution networks and stable local communities. In short, they need strong local small businesses. The potential for win-win solutions is enormous; we just need to pilot more shared-value solutions to demonstrate it.

That’s where CaSA comes in. After selecting one corporate partner, we will collaborate to design and implement a project that delivers shared value to the company and local small businesses in one of its countries of operation. The idea is that this pilot will help to demonstrate the business case for investment in the sector’s small businesses, and influence the design of larger-scale initiatives.

That has already been our experience with mining, oil and gas companies, financial service providers and consumer goods manufacturers. For example, we began work on the Emerge program — an Anglo American-TechnoServe collaboration — in 2011 with the goal of spurring local economic development in Chilean mining communities. Such development would create value for both the communities and Anglo American: While large mining projects generate jobs and economic activity, these benefits do not reach everyone, and community grievances stemming from unmet expectations can threaten the mine’s operations and license to operate.

The Emerge program has worked to create a more diversified economy and establish new opportunities for community members by strengthening local small businesses. The program provides training and mentoring tailored to the type of enterprise – basic business and financial skills for new ventures, medium-term growth strategies for more mature businesses – and facilitates linkages to the supply chains of large businesses.

This model has proven very successful in Chile: The program has supported more than 1,700 businesses, which have seen their sales increase by an average of 50%. This has translated to $11 million of additional annual revenue for these businesses, and most of this money stays in the local communities. The program also has strengthened Anglo American’s license to operate and helped the company to win local recognition, including a prestigious award from the Chilean government. The success of the Emerge program has helped us develop partnerships with Anglo American and other companies in more than half a dozen countries across Latin America and Africa.

While our partnerships with Anglo American and other companies are generating exciting results, we know that there are many opportunities for shared-value solutions that have gone unexplored so far. We want to address that. CaSA is an opportunity to identify new opportunities and develop new models that deliver business results – while also strengthening the small businesses that provide livelihoods, employment, goods and services to communities around the globe. We believe that through partnership, the private sector can help bring transformative change to the 400 million small businesses in the developing world.

 

If you are interested in applying for the CaSA Initiative, please reach out to Annie Shoemaker at ashoemaker@technoserve.org before Oct. 1.

 

Juan Carlos Thomas is Global Entrepreneurship Director and Annie Shoemaker is Senior Manager for Strategic Initiatives at TechnoServe.

 

Image: An Emerge project client, Hornos Don Victor restaurant in Colina, Chile. Image courtesy of TechnoServe.

 


 

 

Categories
Entrepreneurship, Investing
Tags
business development, entrepreneurship, multinational corporation, SME finance, SMEs