Devex | Will a social enterprise movement be the path to Haiti's future?

Published on Jan 22, 2015

Last week Yve-Car Momperousse gathered her team to reflect on the fifth anniversary of the earthquake in Haiti — they remembered some of the failed development initiatives, but it was also a moment to celebrate the role the growing field of social enterprise is playing in improving lives and livelihoods in Haiti. A moment that fueled them to work harder.

“Social enterprise is really the future of Haiti and how we’re going to start to get the country back on track,” said Momperousse, CEO of Kreyol Essence, a social enterprise that hires farmers and producers, many of them women, to grow and make castor oil, which is then turned into beauty products sold in Haiti and exported to other markets.

Momperousse, and a cadre of Haitians, Haitians in the diaspora and others, are working to build social enterprises in Haiti and play their part in transforming what some referred to as a country run by nongovernmental organizations and aid to one whose future is dictated by market-based solutions, investment and business.

In a country where the role of aid and how money has been spent has often come into question, entrepreneurs are working to change the way social challenges can be tackled.

Social entrepreneurs make a similar case for their role — a market-based approach is often more long term, more sustainable and more scalable than aid programs, which can be short term, focused on immediate success stories and disappear after a few years.

But it’s not easy to start or run a social enterprise in Haiti. There remain several barriers to success, including that the concept itself is still fairly new in the Caribbean nation.

A challenging environment

Haiti is a difficult place to do any type of business — from complicated incorporation rules to poor infrastructure and workforce challenges — but for a social enterprise it may be even harder.

One of the challenges is defining social business in Haiti. Often when people hear the term they believe it means that the company gives things away for free, rather than looking to make money and reinvest its dividends, said Philippe Saint-Cyr, Yunus Social Business’ Haiti country director.

Part of the process of building the field is educating people about social businesses and how social metrics are incorporated into the business model — a fairly new concept in Haiti that isn’t always understood, Momperousse said.

There is also a misconception that social businesses don’t need to run like real businesses, she said, but that’s just not the case. A social entrepreneur may not need an MBA but does need to understand cash flow, profits and losses and how to build a financial model.

It’s not just teaching people a new type of business that’s challenging, but also basic business operations. Everything from finding office space to transportation and Internet access to finding qualified employees can be difficult, said Jim Chu, CEO of dloHaiti, a water company that is building a network of water treatment facilities to improve access to and reduce the cost of clean water, especially in rural areas.

The difficulty of finding skilled, dedicated workers was mentioned by several entrepreneurs, including Chu, who said it has been particularly challenging to fill accounting, administrative and human resources roles. That is in part because many talented Haitians have left the country to seek opportunity elsewhere. To address the issue, dloHaiti is working to build a platform for back office resources that they can share with other entrepreneurs to help tackle the challenge and reduce costs.

It’s not just about identifying the right person for the job but also knowing when to bring them on to the team, said Rob Johnson, general manager at the Acceso Peanut Enterprise Corp.

“Oftentimes it’s important to think about transitions and how you want to position your team and finding the right people who can grow in the business and fulfill more technical roles,” he said.

Beyond the challenges of doing business, there is the task of finding financing.

Social enterprises have unique constellations of funders — including donors, impact investors and high net worth individuals. Each likely has different reporting requirements, which can make for more work. Chu said that while he once took a small grant from an institutional donor, he found that the requirements, many of which had nothing to do with the sustainability of the business and results, slowed the process and held back the business.

There is still a reticence among some donors to invest in Haiti, Chu said, recounting several experiences where donors have been interested in his business but not in its location. And the donors who are perhaps the perfect investors for these enterprises — high net worth individuals — are nearly impossible to get a meeting with, he said.

A different way of delivering development

The emergence of social enterprises in Haiti marks what could become a significant shift in the approach to delivering aid and improving livelihoods in the country — a move from traditional development to market-based solutions, or perhaps some blend of the two.

There are two key distinctions in the way a business operates when compared to an NGO or the government, according to Chu. Businesses can be much closer to the customer and their needs; in fact, he said, their business depends on it. Where NGOs sometimes impose a particular program, product or intervention, a business has to listen and deliver on what the customer wants in order to succeed.

The business model is also naturally different. A social enterprise must find innovative ways to do things differently, more efficiently and at a lower cost. For others, due to favors or concessions, the incentive might not be there to innovate or spend less. Beyond that though, NGO-driven projects often don’t have the flexibility or ability to innovate and make mistakes and iterate, Chu said.

That is something Johnson of Acceso is familiar with. After moving to Haiti to work for TechnoServe on a survey about gaps in agriculture supply chains, it became clear to him that a social enterprise — not a traditional donor-funded program — is needed to address the challenges in the peanut industry. He started Acceso in 2014 with funding from the Clinton Giustra Enterprise Partnership. The organization is working to provide farmers with inputs, microfinancing and technical support through depots, which will then buy their crops and sell them up the supply chain.

Business, and social business, is that critical next step beyond emergency aid, Johnson said.

“More and more often we as a development community should look at how we take hybrid forms and ask hard questions — who can do it more efficiently, sustainably,” he said.

Too often traditional development programs do not start with a sustainability or exit plan, Johnson said, adding that donors need to be more critical of big development organizations and force them to consider those factors from the beginning. It is the responsibility of donors, because NGOs and implementers are unlikely to stop accepting funding, even if it could achieve greater impact elsewhere, he said.

“It’s going to be a bit of a battle to be honest in proving that in pulling funds away from the traditional status quo model that has existed to these other mechanisms that may deliver in a more sustainable long-term way,” Johnson said.

It’s a shift that some donors, including the U.S. Agency for International Development, are already addressing. USAID has recognized the role of social enterprises and the need to support small and midsize businesses in Haiti, and is investing in the space through the LEAD program, which is being implemented by the Pan American Development Foundation. Through a competition, the program provides between $50,000 and $200,000 to promising businesses, which have to come up with a plan to match the funds.

The program helps businesses through the process, offering technical assistance and helping them create and improve business plans and gain access to business development services, Nadia Cherrouk, the foundation’s country director, said. It is currently working with 34 companies in various sectors; some, but not all, are social enterprises.

“I think the program came in recognizing SMEs in Haiti were in a difficult environment,” Cherrouk said. “We had financial products for microenterprises, and large enterprises were able to prove credit soundness over years, while SMEs do not have that history.”

Given Haiti’s still fragile economic ecosystem, it has been hard for financial institutions to tailor products to SMEs. So in addition to helping businesses bolster their business plans, PADF is working with financial institutions to identify hurdles and help prove the creditworthiness of SMEs and the viability of lending to them, she said.

Cherrouk said there are several ways donors and development organizations can support the sector: work with financial institutions to develop appropriate products; collaborate with governments on policy, tax or export incentives; provide continued technical support for business development services; and provide workforce development training to increase skilled workers.

“I think [social enterprise] has a huge role to play in terms of economic growth in Haiti, in terms of creation of jobs,” she said, adding that it is important that there are policies in place to encourage entrepreneurship and innovation, something development actors can engage in at the policy level.

A young sector looks ahead

The next several years will tell an interesting story — whether Haiti’s young social enterprises reach profitability, if the still nascent field of social business will grow, and what the development impact will be of these market-based approaches.

Kreyol Essence, dloHaiti and Acceso are all still working toward profitability, a key benchmark, along with the various social metrics they are tracking. The companies all report to be on schedule, with dloHaiti expecting profitability this year and Kreyol Essence and Acceso on track with their plans to reach that goal in the next few years.

As social enterprises prove their ability to create jobs and make social impact, there may be more funding available from traditional development donors, Saint-Cyr said.

Social businesses have an important role to play in the broader economy as well — often filling gaps where business might find the margins too thin or not see the potential of base-of-pyramid customers.

Saint-Cyr, who until recently worked at the American Chamber of Commerce, said that in Haiti, there has been a recent shift from talking about aid to discussing how the Caribbean nation can compete with other countries to attract business, particularly in agriculture and manufacturing. Haiti’s private sector wants to earn the right to compete at a regional level on production, export and manufacturing.

“We still have a long way to go to create enough jobs to have good, double-digit [gross domestic product] growth and change the country forever,” he said. “I think we’re moving forward, but not quickly enough.”