One of the aspects I enjoyed most about our trip was contrast. There were two particular contrasts which I want to focus on, Kenya vs Rwanda and for-profit vs non-profit. As is turns out there is some overlap and interesting connections between the two.
Our course focused on the opportunities and challenges of sustainable social enterprise in East Africa. We visited a variety of organization in Kenya and Rwanda with a particular focus on the agricultural, educational, and micro finance industries. In addition we also met with government officials, including the prime minister of Kenya, Raila Odinga, to understand the role government plays in facilitating development especially for the bottom of the pyramid.
Kenya is a country with vast natural and human resources but has struggled to capitalize on these advantages the way other developing countries have. From my observations the reason for this is twofold; first the low density of population in rural areas makes infrastructure development uneconomical and therefore unfeasible. Secondly, it seems that the government is unproductively bureaucratic and corrupt mostly serving their self interest and those who the governments need help the least.
Contrasting this, Rwanda seems to be the complete opposite of Kenya. The country has incredible infrastructure as a matter of fact maybe the best infrastructure I have seen in a developing country of its wealth class anywhere in the world. Most of the infrastructure has been funded by foreign investment, particularly the Chinese, but it was impressive to see the rate at which the country is growing. Rwanda is one of the fasted growing countries in the world beating their own internal development targets such as per capita GDP and in just a few short years have gone from completely foreign funded to now producing over 50% of the annual budget through tax revenue. In addition to the infrastructure the country has a loved and although controversial in some regards a extremely effective government which cares for the interest of all its citizens’.
These two main differences in Kenya and Rwanda, infrastructure and government, have created distinctly different value propositions for incoming businesses. While Kenya has a large capital city, a population four times the size of Rwanda, a port, and natural resources, my sense is that despite the geographic and demographic challenges, foreigners would rather do business in Rwanda because government cooperation and the speed and quality of development.
In addition to seeing the geopolitical differences between the two countries we also saw the business strategy differences of organizations in both the countries. We visited pure non for profit models, for profit models and blends of both and within those categories we studied micro finance, micro grants, education, technology, and agricultural businesses but for simplicity sake I am going to focus on for profit vs non profit. The question is, in a developing third world economy which business structure has greater potential at creating sustainable social impact and why?
To me, the answer is clear. I believe to generate the greatest magnitude of economic value the for-profit model is far more effective. The reason for this, first and for most I believe that the for-profit models operated in a manner that would allow for growth and eventually because they do not depend on continuous donor funding a more sustainable business. I thought Rwanda Trade company in Kigali or Bridge International in Nairobi are great examples of for profit business models with social impact.
Bridge provides education to the lowest income populations in Kenya so it is clear to see their social impact. However the point I want to make is the for-profit model which they operate under is the key driver in their growth and therefore the key driver in the scale of their impact. On the other hand Rwanda trade company isn’t growing at the same scale but they are collaborating with and educating farmers and perhaps most important of all are creating jobs, setting the precedence for fair labor practices, and reinvesting in their business which will create the greatest economic impact to the community in the long run.
All work is good work so I don’t want to point out the negatives or drawbacks of the non for profit model but in general my impression was the variety of motivations behind for-profit models created better business with greater runways which in my mind is a more effective vehicle for sustainable social impact.