Why Handouts Fail and Innovation Succeeds
An Entrepreneurial Impact Series Article
GOOD PEOPLE across the globe are taking action to relieve suffering – particularly that induced by poverty – in diverse ways. Large scale foreign aid programs and local food pantries are among the very necessary crisis management efforts. However, there is a growing recognition that the giving economy, while admirable and necessary, does not often promote sustainability. Mentoring people toward independence through entrepreneurialism is fundamentally critical to long term solutions, for national economies, communities, and families.
South Korea offers an example of national and large scale entrepreneurialism that changed an entire country’s trajectory. South Korean leaders, more than half a century ago, began the process of turning a young, broken, poverty stricken, subsistence-based agrarian nation into a major economic world player. Beginning in the 1960’s, government leaders initiated a radical transformation of the economy and the national psyche, prodding the people to turn from what may be described as a socialist slave mentality towards educated, invested, entrepreneurial contributions. Land ownership laws were reformed to limit holdings, thus eliminating land barons and freeing millions from effective serfdom. Emphasis was placed on educating the masses and providing technical training, which improved productivity, and the government put the fledgling nation’s top entrepreneurs to work in reforming the economy. South Korean leadership recognized that to become a strong, thriving nation, they could not continue to rely so heavily on foreign aid, which at the time, contributed the majority of the country’s GDP. Instead, it improved its industrial output from labor heavy to capital intensive and encouraged international trade. The contrasts between North and South Korea are starkly evident. South Korea is presently among the world’s top fifteen economies, almost as large as Russia, while North Korea is ranked in the mid 100’s, with an economy smaller than Jamaica and most of the African nations.
Former Harvard Professor, Clayton M. Christensen (1953-2021), in The Prosperity Paradox, takes task with the giving emphasis of global aid programs, and counters with stories of companies that have had a vast impact on poverty in Africa and Asia through innovative enterprise. Examples in Africa include Tolaram, with their Indomie noodles, and Celtel, a mobile telephone company. These entrepreneurial enterprises developed the infrastructure needed for their businesses from the ground up, thus establishing valuable community resources, improving quality of life in some respects and creating thousands of jobs. The result has been far more beneficial for those communities in the long term than any handouts have been. The central proposition of The Prosperity Paradox is that handouts do not work. Solutions come from enterprises that meet needs.
That same principle is a fundamental premise of the Italian, Universita Cattolica del Sacro Cuore, which has been sharing its wealth of knowledge and experience with numerous African nations for almost two decades. What started as an isolated MBA program for Africans in Italy, has become a sprawling foundation for entrepreneurialism and sustainable change, with programs throughout Africa. The foundation, E4Impact, aims to create job makers, not job seekers. It also has the added benefit of increasing trade between the African and European continents.
E4Impact uses the entrepreneurship model to build pockets of development in several African nations. Its Theory of Change (ToC) “frames a model where practical business education and entrepreneurship support contribute to the creation of decent jobs and therefore the alleviation of poverty in Africa.” The foundation implements this model by empowering locals to develop and expand their own businesses, which in turn creates jobs and encourages the expansion or formation of new industries. For example, in Nigeria, with the help of E4Impact, an increase in digital markets is increasing demand for locally made products and services. This increases demand for reliable distribution methods, particularly overseas. Thus, more courier and transport services are being created in Nigeria. Manufacturing and storage premises capable of housing larger scale productions are expected to follow.
While many national governments are creating policies aimed at improving and increasing opportunities for entrepreneurial education primarily for youth, E4Impact targets established business owners and entrepreneurs. Through empowering its alumni of 6,000 individuals, and counting, the trickle-down effect is immense. Close to 100% of the graduates of the Global MBA in Impact Entrepreneurship increase their income, while creating an average of six jobs per entrepreneur.
E4Impact alumnus, Louisa Gathecha, of Bottle Logistics in Kenya, has 87 employees and has created 47 additional jobs. Joseph Nkandu’s efforts through The National Union of Coffee Agribusinesses and Farm Enterprises (NUCAFE) has improved the lives of 1.5 million coffee farmers in Uganda. And more than 600 women per year in Uganda benefit from the Terrewode specialist hospital Alice Emasu established. Each one of those employees, farmers and women represent families, whose health, livelihoods, living conditions and education opportunities may all be improved through the trickle down effect of E4Impact’s mission to provide solutions to problems in many African countries through training and mentorship of impact entrepreneurs.
Countless individuals around the world desire to truly make something of their own lives, and many aspire to make an impact for good well beyond their own needs. However, most people lack the know-how to navigate government regulations and bureaucratic hurdles, as well as to source sound funding or investment. Others lack the business acumen to expand their present reach. E4Impact trains entrepreneurs to make those impacts, at home, across borders and overseas. Its effect on individuals, families, communities and the planet is vast and growing.
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Why the Entrepreneurial Impact Series? Veritas Chronicles focuses its reporting on people and programs capable of being scaled for impact with national, regional and global effect. Examples of scalable entrepreneurship will be one of the key areas of focus for the Veritas Chronicles team. Each segment of the Entrepreneurial Impact Series is designed to highlight one or more innovative programs that has the potential to scale across borders and cultures.