In the last edition, we started shared some expert perspectives on how businesses can be revived through inclusion, especially in Nigeria. Engaging indigenous people (integrating everyone in process, activities/production) in innovating and developing local content will not only resuscitate the economy, but also lift a significant segment of the population out of poverty. Inclusion is capable of changing the business atmosphere and economic dynamics; improving the quality of lives of the people and ensuring sustainable development.
Nigerian enterprises, which run into millions are a crucial part of the inclusive ecosystem. Through growth, wealth creation, and employment generation, enterprises contribute to inclusion. Several evidences of economic growth and revival through enterprises have lent credence to the fact that entrepreneurs are capable of improving a country’s economy. The World Bank postulates that when economic growth is achieved through more productive use of all resources, including labour, a nation’s per capital income increases and there are improvements in the standard of living of the people. Thus, enterprises/entrepreneurs are vital to both the growth and revival of any economy.
Unfortunately, enterprises often encounter sustainability challenges; some record reduced impact after some time whilst others face difficulties staying in business or simply close down business. Some of the major obstacles to the sustainability of enterprises, especially young and budding start-ups are funding, innovating, and scaling.
We share below excerpts from discussions with Nigerians who have hands on experience in providing active support in microfinance, strategy, innovation, development and servicing of the active African entrepreneurial ecosystem.
Sustainability is about creating impact. Survival is key for businesses and in Nigeria today, a business employing people is practicing sustainable development by creating wealth. By the nature of business esand services rendered, the concept of sustainability can be defined. Entrepreneurs should create businesses that have measurable impact on the society, in line with the first UN Sustainable Development Goal, which is to eradicate poverty.
Although Nigeria is largely an entrepreneurial society, a pool of resources and patient equity capital is still needed to grow ‘mature’ start-ups. One wonders why very few venture capitalist firms and angel investors invest in SMEs as opposed to foreign climes, where wealthy citizens invest in companies and take a bet on them. It is necessary to begin to question how finance can be structured in a way that closely matches the performance of SMEs with the creation of an incentive-based system, as against the typical structure of short term loans that banks give. However, there exists many short term thinking investors who are not willing to wait long term as a number of Nigerians are risk averse.
On the part of the start-ups, it is crucial to take calculated risks, retain skilled talent, who should be offered a stake in the company so that people can begin to have a sense of ownership and sustainability will be easier to attain.
Bunmi Lawson, Managing Director/ CEO, Accion Microfinance Bank
It is necessary to look at the entire ecosystem support required for entrepreneurs to thrive such as access to market information, resources, research and innovation, interconnectivity of technology across different sectors and policy regulatory environment that allow businesses to thrive. When working systems are existing, there is so much that can be done.
Traditional businesses can adopt the apprenticeship system where the apprentice learns how to manage the business, manage customers, suppliers and also learns about the industry. Having a design thinking approach is necessary to understand customers and from a knowledge perspective, there is no one- size-fits-all.
A big challenge with the Nigerian entrepreneurship ecosystem sadly, is the culture of not wanting to work together. It is therefore paramount to look at how business owners are being educated, encourage collaboration and growth of knowledge platforms as people seek to understand market needs.
Adenike Adeyemi, Executive Director, FATE Foundation
The operation of people in silos has led to the lack of growth, currently being seen in the entrepreneurial space. Creating an enabling environment for entrepreneurship to actually thrive is an ecosystem approach and what this does is to ensure that businesses get into the system and still scale. To create the number of jobs required to sustain the ecosystem, big companies need to employ people.
Furthermore, ensuring rich conversations around entrepreneurship, acceleration and development is critical, not underestimating the impact of collaborating with educational institutions. When decisions are being taken in entirety, getting the entire ecosystem to talk to each other is also required.
Trust is another issue that should be approached and addressed in overcoming the problem of impeded start up growth. Before a bank or any investor whatsoever can partner with a business, the element of trust is required. Developing the culture of modeling your space in a high trust environment will, overtime, pass across the message. Bolaji Finnih, Founder, Techpreneur Africa
Although Indonesian investors can help Nigerian small businesses scale yet, trust is a major consideration. We are not enthusiastic about businesses with questionable sources of income and/or individuals who are not genuine. However, once trust is built, we are willing to invest.
Bona Kusuma, Vice Director, Indonesian Trade Promotion Centre (ITPC)
A business can be focused on solving a social problem yet it is still very critical to build a business (revenue) model around it so that the business is not stuck when a donor decides to terminate funding. It is essential that the business model solves problems with a wide reaching base that has a larger pool of people at the bottom of the pyramid. Besides, being ingenious in the type of problems solved requires going beyond the generic buying and selling to using mobile technology platforms becoming increasing popular in the country.
BudgIT and Wecyclers, are two entrepreneurial success examples in Nigeria that have a primary focus of solving a social problem but who have been able to create a sustainable business model round their solutions. To create a sustainable enterprise is to create jobs, solve fundamental environmental problems and at the same time generate enough revenue.
Moreover, as Albert Einstein stated, no problem can be solved from the level of thinking it was when it was created. For real change to occur, there has to be a new culture. In solving specific social problems such as health care and in order to overcome the resistance to change, a cognizant factor is building solutions that leverage on existing technology stakeholders already have, which removes the obstacle of requiring a large investment before the innovation can be scaled successfully.
Femi Longe, Co-Founder, Co-Creation Hub
Small enterprises have to combat certain challenges such as savings, insurance, credit and banks. Whilst bearing in mind that yield is affected by the quality of seeds and the quality of the inputs, the measure of impact would be on the basis of the number of people whom a business grants the privilege of accessing quality products at affordable prices as well as the impact on their lives.
Besides, it is important to pay specific attention to the details of partnership investment agreements, employing technically competent staff to fill any skills gap and finally, administering proper know your customer (KYC) between investors and small business owners.
Adenike Kuti, Associate Director, Leapfrog Investments
Simply, collaboration is key in growing start-ups therefore, all sectors, especially the academia should do more to collaborate. There are three levels of trust required in partnerships and collaborations which are the institutional, social and interpersonal trust and all three play a role in business decisions.
Professor Kenneth Amaeshi, Director, Sustainable Business Initiative, University of Edinburgh Business School
In summary, to revive the troubled Nigerian business environment is to create opportunities for businesses to thrive through legislation, investments, and funding. Also, solving relevant challenges in the society in order to be sustainable is fundamental to growing creative and impactful business models, whilst embracing knowledge, collaboration/partnership, and trust.