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

Earlier this year, the Shell Foundation released a report – Enterprise Solutions to Poverty – arguing that enterprise and business thinking must be placed at the heart of the war on poverty if we are really going to “Make Poverty History”. Backing its words up, the Foundation has established a $100 million fund to enable Small and Medium-Size enterprises (SMEs) to scale throughout Africa.

In its newly released follow-up report, Aid Reform and the Role of Enterprise, the Shell Foundation shows how the aid industry can finally put poor country entrepreneurs at the centre of the fight against poverty. The report’s author and Shell Foundation director, Kurt Hoffman (who was interviewed by Nextbillion.net in July), explains:

“Poverty is about a lack of money. With a job and a stable income, the poor can access shelter, education and healthcare. Small enterprise is the vehicle to make this happen, but I’m not sure the aid industry alone can spur the creation of a responsible and flourishing private sector because setting up and running a business is not something aid professionals know much about.”

Therefore, the report makes the case for reforming the aid industry by applying fundamental business principles to enhance its performance and accountability. It calls on the aid community to give poor people real choice when delivering development, which in turn can be measured against tangible targets such as the number of pro-poor enterprises supported and jobs created.

Hoffman continues: “No one is saying the aid community can do this alone – nor should they. The private sector – particularly big business – is a massive yet untapped reservoir of enterprise expertise that can easily be applied to poverty eradication. But the aid community has to want to change and improve its performance. This begs the central question of what we as donors and taxpayers expect in return for our social investment?”

I see a lot of value in what the Shell Foundation is doing. Taken together, the reports show the way forward for both the private sector and the aid community: working together for mutual gain. I think Hoffman gets it right when he says there needs to be a desire to change. And for that, there must first be a recognition of past failures, and the need for help to prevent repeating them. This could turn out to be the biggest challenge of all.