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» POSITION PAPER SEPTEMBER 2014
CORDAID’S APPROACH AND TRACK RECORD
ENTREPRENEURS FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS
SEPTEMBER 2014 © CORDAID
ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS
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FOREWORD
Nobody would deny that entrepreneurs represent a driving force
to tackle fragility and build a socio-economically stable society.
Not only because of their collectively generated economic
impact, but very much because of multiple spin-off s such as
increased employment, skills and spending power for families.
But what does an entrepreneur need to be able to build a busi-
ness in often extremely diffi cult circumstances?
Th ink of South Sudan, think of Sierra Leone. Th e list of entre-
preneurial needs is long – from access to fi nance, to clear and
supportive regulations; from qualifi ed personnel, to exposure
to innovations. Th ese needs are pressing even in non-fragile
contexts, let alone in areas where society is emerging from a
destructive civil war or natural disaster.
In particular, Small and Medium-sized Enterprises (SMEs) are
potentially the professional businesses that can fuel an econo-
my’s fi re. However, they are signifi cantly hindered by a risk
adverse and disconnected fi nancial sector with restricted access
to capital and a limited range of appropriate fi nancial services
and products. Th e obstacles can seem insurmountable; however,
we have seen success stories.
Take the Rural Finance Initiative (RUFI) in South-Sudan for
instance. Th is is a microfi nance company that has managed to
develop itself in recent years and is currently expanding its
activities from microfi nance to services for SMEs. Or take the
West Africa Venture Fund (WAVF), providing for fi nancial and
business development services in post-civil war Sierra Leone.
One of their clients, a fl ourishing tea factory, is starting to
conquer the European market.
Many local SMEs simply cannot be successful without embracing
problem solving innovations, which often fi nd their incubation
abroad. Cordaid acts as a catalyst at the international level by
leveraging ideas and innovations that off er potential to local
actors and SMEs. Th e birth of the Babyviewer, one of the success-
ful cases described in this paper, is a perfect example of how
global entrepreneurs apply 21st century technology to generate
social impact and work together with Cordaid to develop via
social enterprises.
All the cases in this paper describe the way entrepreneurship
can contribute to meaningful social impact and thus to fl ourish-
ing communities in fragile contexts. Th is often starts at the
most elementary level. As Denis Poggo from RUFI puts it,
referring to feedback from female clients whose entrepreneurial
activities earned them extra income which helped to reduce
tensions within the household:
“Peace doesn’t come from outside, building peace starts within the family”.
Simone Filippini
CEO Cordaid
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CONTENTS
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1. FOSTERING ENTREPRENEURSHIP IN FRAGILE CONTEXTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 Focus on fragility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Tackling fragility through entrepreneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Cordaid’s approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Inclusive investments in fragile settings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.5 Leveraging ideas and innovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. FIGHTING FRAGILITY THROUGH INCLUSIVE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Case 1: RUFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investing in peace in South Sudan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Case 2: SUCCEED, PEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Supporting inclusive development for resilience and lasting peace in Mindanao . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Case 3: WAVF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Innovative fi nance for SMEs in Sierra Leone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. PARTNERING FOR INCLUSIVE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Case 4: Innovation: Soil in a bag . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Introducing new ways of addressing social challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Case 5: Co-creation: The Babyviewer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Bringing together vested stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Case 6: Social venture: Urban Link . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Identifying gaps in the market and supporting impact driven enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS
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EXECUTIVE SUMMARY
A quarter of the world population lives in societies aff ected
by confl ict. Inequality and poverty hit people living in such
fragile contexts twice as hard. While the international
community is reshaping the future of development coopera-
tion, consensus is growing on the importance of focusing
international development eff orts in fragile and confl ict-
aff ected situations.
As inclusive economic growth is a vital condition for reducing
fragility and fi ghting poverty, investing in income generation
activities and private sector development is an important
strategy for peace. For young people especially, whose wide-
spread unemployment is one of the most pressing social
challenges facing fragile regions, jobs and opportunities for
entrepreneurship are extremely important. Additionally,
supporting entrepreneurship among women and empowering
them economically similarly is an eff ective strategy for
reducing fragility and rebuilding livelihoods.
Cordaid’s mission is to contribute to the structural social
change and transformation that is needed to build fl ourishing
communities in fragile and confl ict-aff ected situations.
Cordaid encourages local private sector development in fragile
contexts by supporting and advancing entrepreneurship and
the activities of small and medium-sized enterprises (SMEs).
Th is support not only helps to create jobs and fi ght poverty,
but also to build trust, reduce inequalities and increase social
cohesion within and between communities.
Cordaid’s track record in promoting inclusive business in
fragile contexts is based on four principles:
▪ An integrated approach, which emphasizes the need for
social change that is embedded within local communities;
▪ A multi-stakeholder approach, which brings together a
variety of local, national and international stakeholders;
▪ Partnerships for smart solutions, which are partnerships
with innovative organizations worldwide, including the
private sector and research institutes;
▪ Blended fi nancing, which seeks to fi nance smart solutions
by bringing together diff erent kinds of fi nancial support
(grants, loans, investments).
Th e fragile contexts around the world where Cordaid works
diff er a great deal from each other. Th e local dynamics of
fragility determine the choice of interventions, which are
always designed and implemented together with local part-
ners. Cordaid’s work in the area of entrepreneurship focuses
on three cornerstones:
▪ Security and justice: Women’s economic empowerment,
Risk reduction, Rule of Law & enforcement
▪ Opportunities: Banking & fi nance, Markets & value chains,
Personnel
▪ Governance and services: Health, Education, Regulations
In 2014, Cordaid created the Stability Impact Fund (SIF), an
impact-fi rst investment fund that provides access to fi nance to
entrepreneurs and SMEs operating in fragile contexts. To build
the economic and entrepreneurial skills and capacities of its
investees, Cordaid also provides confl ict-sensitive Business
Development Services (BDS). Cordaid will increasingly focus
investments on the ‘missing middle’ of small enterprises in
fragile contexts. Th is forgotten target group suff ers most from
a non-functioning fi nancial sector and a lack of access to
capital. At the same time, these small SMEs have a great
potential of being powerful contributors to growth and key
stabilizers of economies in fragile contexts.
Cordaid pro-actively identifi es opportunities to strengthen
the potential of local entrepreneurship by connecting local
actors to innovative concepts and companies around the world.
Cordaid actively searches for partners – companies, technical
and academic institutes, impact investors, venture philanthro-
pists – to co-create innovations that contribute to solving
problems faced by fragile communities. Cordaid also initiates
social ventures to realize social goals.
Th is position paper shows case-based evidence from South
Sudan, Mindanao (Philippines) and Sierra Leone, illustrating
Cordaid’s multifaceted approach to fostering local entrepre-
neurship in complex fragile contexts. Th e paper also discusses
examples of international partnerships for inclusive business
that tackle diverse issues including youth unemployment in
Ethiopia, maternal death in Sub-Saharan Africa and fl ooding
in Bangladesh.
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1.2 Tackling fragility through entrepreneurship It is no coincidence that half of the world’s poor people live in
fragile contexts. Fragility feeds poverty while poverty and
inequality in turn breed fragility. Increasingly it is realized
that inclusive economic growth is a vital condition for reduc-
ing fragility. Th is points to the importance of fostering
entrepreneurship in fragile and post-confl ict situations. In its
2014 report ‘Ending confl ict & building peace in Africa: a call to
action’, the African Development Bank (AfDB) stresses that in
countries transitioning out of confl ict, the private sector can be
a force for stabilization and renewal, creating alternatives to
confl ict economies based on illicit activity.6 Th e AfDB recom-
mends making investments in income generation activities an
early priority, even in the midst of confl ict, as a strategy for
promoting peace. Other authoritative institutions including
the World Bank, the OECD and the European Commission
similarly stress the signifi cance of inclusive growth, including
in fragile contexts, by promoting entrepreneurship and private
sector development in order to combat poverty and fragility.7
Th e New Deal for Engagement in Fragile States, an initiative of
the International Dialogue on Peacebuilding and Statebuilding
(IDPS),8 singles out ‘Economic Foundations: Generate employment and
improve livelihoods’ as one of fi ve Peacebuilding and Statebuilding
Goals (PSGs).9
1.1 Focus on fragilityTh e international community is reshaping the future of
development cooperation. Th ough there are diff erences in
opinion about how the issue of peace and security is best
incorporated in the Post-2015 Global Development Agenda,1
there is a growing consensus on the importance of focusing
development eff orts in fragile and confl ict-aff ected situations.
Th e urgency fi rstly lies with the numbers: according to the
World Bank and the OECD, by 2015 a third of the world popula-
tion and half of all people surviving on less than $1.25, will live
in societies aff ected by fragility and confl ict.2,3 It is expected
that by 2025, two-thirds of all poor people will live in fragile
states and confl ict countries.
Fragility hinders sustainable development. Since the launch of
the Millennium Development Goals (MDGs) in 2000, absolute
poverty as a percentage of the world population has declined
and the lives of many poor people have improved. However,
progress on the MDGs has been very slow, if not stagnant, in
low-income fragile countries. In these states, fundamental
human needs continue to go unsatisfi ed, for example, women
are unsafe and exploited, children are malnourished and
unschooled, and communities are divided and insecure.
Fragility should thus be tackled to help millions of women,
men and children escape poverty and live decent lives in
safety.4 Fragility also needs to be addressed because, in a world
of global interdependencies, unstable countries and contexts
with increasing inequalities between countries undermine
global peace and security.
Fragile communitiesCordaid’s mission is to contribute to the structural social
change that is needed to build fl ourishing communities
in fragile contexts.
“A fragile community is one in which the social struc-
tures, systems, and institutions intended to provide for
the satisfaction of fundamental human needs such as
subsistence, protection, identity, participation, and
understanding are dysfunctional for the purpose.
Th is condition undermines the legitimacy of the social
contract between state and society, the governors and
the governed. A fl ourishing community by contrast will
be one in which the social structures are specifi cally
designed so that these human needs can be satisfi ed in a
stable and sustainable manner thereby legitimizing the
social contract between people and their government.”5
1. FOSTERING ENTREPRENEURSHIP IN FRAGILE CONTEXTS
Transforming economies: the Post-2015 AgendaIn 2000, the Millennium Development Goals (MDGs) were
launched. None of the eight MDGs specifi cally refers to
creating employment or fostering entrepreneurship. Times
have changed and priorities have too. Th e UN High-Level
Panel (HLP) of Eminent Persons on the Post-2015
Development Agenda13 has singled out ‘Transforming
economies for jobs and inclusive growth’ as one of fi ve
transformative shifts needed to eradicate poverty. Inclusive
growth is considered vital to address the growing inequali-
ties within and between countries, which are breeding
grounds for confl ict and fragility. Th e HLP has proposed
twelve goals in preparation for the Sustainable
Development Goals (SDGs) that will be agreed upon by the
international community in 2015, including:
Goal 8. Create Jobs, Sustainable Livelihoods, and Equitable Growth
▪ Increase the number of good and decent jobs and
livelihoods
▪ Decrease the number of young people not in education,
employment or training
▪ Strengthen productive capacity by providing universal
access to fi nancial services and infrastructure such as
transportation and ICT
▪ Increase new start-ups and value added from new
products through creating an enabling business
environment and boosting entrepreneurship
It is imperative that these goals will be duly implemented
in fragile contexts.
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Increasingly it is realized that
inclusive economic growth is a vital
condition for reducing fragility.
Th is points to the importance of
fostering entrepreneurship in
fragile and post-confl ict situations.
1.3 Cordaid’s approachCordaid encourages local private sector development in fragile
contexts by supporting entrepreneurship and small and medium-
sized enterprises (SMEs). Th is support not only helps to create
jobs and fi ght poverty, but also to build trust, reduce inequalities
and increase social cohesion within and between communities.
For Cordaid, these are crucial steps on the way to building
fl ourishing communities. People are encouraged to take initia-
tive based on local needs and priorities and to seize economic
opportunities for themselves and their communities. Cordaid’s
proven track record in promoting inclusive business in fragile
and confl ict-aff ected situations is based on four principles:
▪ An integrated approach, which emphasizes the need for
social change that is embedded within local communities;
▪ A multi-stakeholder approach, which brings together a
variety of local, national and international stakeholders;
▪ Partnerships for smart solutions, which are partnerships
with innovative organizations worldwide, including the
private sector and research institutes;
▪ Blended fi nancing, which seeks to fi nance smart solutions
by bringing together diff erent kinds of fi nancial support
(grants, loans, investments).
Cordaid focuses on three cornerstones (see visual).
In linking entrepreneurship and inclusive growth to overcome
fragility, all above-mentioned institutions point to two vital
trends:
1. Th e widespread unemployment of youth is one of the most
pressing social challenges facing fragile regions in Africa
especially. Unemployed youth are a severe threat to
stability. Th e fast growing proportion of young people
makes this problem ever more urgent. For example in
South Sudan and Sierra Leone, 66% and 61% of the
population respectively is aged between 15 and 29 years
old – compared to 33% in the United States.10 Jobs and
opportunities for entrepreneurship are extremely
important and can help to draw young people away from
confl ict.11 However, given that the education of many of
these youths was interrupted by confl ict, they will need to
be supported with training in vocational skills, fi nancial
literacy and apprenticeships.
2. Fragility impacts women and men diff erently and often leads
to increased vulnerability for women and girls. At the same
time, women play a key role in agriculture, trade and micro-
businesses, mostly within the informal sector. Research shows
that supporting entrepreneurship among women (through
access to fi nance and training) contributes signifi cantly to
growth and job creation.12 In addition, women tend to invest
more into their children’s health and education than men.
Empowering women economically and bringing them
together in cooperatives and small businesses, is an eff ective
strategy for rebuilding livelihoods and reducing fragility.
Entrepreneur
Risk reduction
Women's economic
empowerment
Rule of law
legislation
Health
Education
Regulations
Banking &
Finance
Personnel
Markets & ValueChains
FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXT
INC
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BU
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INC
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INCLUSIVE APPROACH
PART
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LOBBY AND AD
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SECURITY AND JUSTICE
legislation
INTERNATIO
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INN
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OP
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NITIES
GOVERNANCE
AN
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INCLUSIVE FINANCE
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Education: Access to vocational training is important in (post-)
confl ict countries where electricians, carpenters, accountants
etc. are needed to rebuild the economy. Scarcity of technically
skilled labor may result in high costs to recruit from abroad.
Th ere should be a focus on equipping young people with the
skills needed to contribute to the economy, including entrepre-
neurial skills and a positive work ethic (punctuality, confl ict
resolution and loyalty).
Regulations: Entrepreneurs and SMEs need clear regulatory
frameworks and supportive policies that make it easy to start
and operate a business, and that also discourage corruption.
Such frameworks (e.g. on land and property rights, and taxes)
are also important in building trust among business partners
and resolving confl icts eff ectively. Clear and fair regulations
also have a positive impact on risk perceptions.
Women’s cooperatives in AfghanistanIn Afghanistan, 80% of the population lives in rural areas and
is dependent on agriculture and livestock for their liveli-
hoods. However, war and drought have made it diffi cult for
many Afghans to make a living through farming. Th ey lack
access to land, markets, credit and agricultural extension
services. 1.5 million children aged under fi ve reside in food
insecure households. Women play a vital role in small-scale
agricultural activities. Th eir role, however, often goes
unacknowledged in conservative Afghan society. In the
Balkh province of northern Afghanistan, Cordaid, together
with its local partner NPO/RRAA, supports women in
establishing cooperatives for carpet weaving and livestock
rearing. By collectively buying the raw materials and
reducing the need for middlemen, the women involved in
carpet weaving can increase their earnings. Th e extra income
is used to feed their families and to enrol their children,
especially girls, in school. “Th ere are other important social
impacts too,” says Ahmad Salim, Programme Coordinator for
Food Security based in Kabul. “Only fi ve years ago, women
had no right to leave their houses. Men took all decisions and
the women’s role was restricted to cooking and caring for the
children. Now that the women are organized under the
umbrella of cooperatives, a lot has changed. Th ey can now
receive loans and funds for their productive activities. Th e
fact that they earn their own income has gained them more
respect from male family members and generally improved
their social standing. Many women are now involved in
decision-making within the family and community”.
Security and justice: Women’s economic empowerment, Risk
reduction, Rule of Law & enforcement
Women’s economic empowerment: Specifi c constraints faced by
female entrepreneurs must be addressed, including lack of
security, mobility and access to fi nance (due to lack of collateral
and traditional inheritance systems). Legal frameworks, for
example on land ownership and the right for women to sign
contracts, need to be adjusted and implemented to provide
equal opportunities to everyone.
Risk reduction: Entrepreneurs and private companies will be
more inclined to invest if they are confi dent that risk reduction
measures are in place that will support them in case of
outbreaks of violence, natural disasters (e.g. fl ooding or
drought) or large-scale health risks (e.g. outbreak of Ebola).
Rule of law & enforcement: Many fragile contexts lack a good
working judicial system. Furthermore, for regulations and laws
to be eff ective, they need to be implemented and enforced in a
fair and transparent way. Th is includes payment of taxes,
dispute settlement and mediation, and contract enforcement.
Both employers and employees need to know what they can
expect from law enforcement institutions such as the police.
Opportunities: Banking & fi nance, Markets & value chains,
Personnel
Banking & fi nance: Entrepreneurs need capital to invest in
equipment, supplies and services. In many fragile contexts the
banking sector is underdeveloped. Th e ‘missing middle’ is
particularly underserved (see 1.4). Access to fi nance is vital to
SMEs and entrepreneurs, who often do not meet commercial
bank requirements on collateralization, formal registration,
fi nancial track record, etc.
Markets & value chains: In many fragile contexts, markets do not
function well due to insecurity, poor infrastructure and
diffi cult cross-border trade. Gaps in value chains such as poor
input sourcing add to this problem. Signifi cant losses occur in
the production, storage and distribution stages of agricultural
and other value chains. Entrepreneurs often lack relevant
market information about costs, markets and quality and
availability of inputs.
Personnel: Investing in the competencies of personnel as well as
in work ethics are preconditions for enterprise success and
sustainability in any context. Th is is especially the case in
fragile contexts as individual needs often supersede social
cohesion in the workplace. Business development services (BDS)
therefore play an important role in strengthening SMEs for
growth and bankability.
Governance and services: Health, Education, Regulations
Health: Healthy people are better workers and more creative
entrepreneurs. A stable workforce secures the continuity of
business as well as income for both employers and employees.
People who have access to aff ordable health care will be less
inclined to lose income from interrupted employment or
business due to illness, hospitalization or fatality.
Ph
oto
Co
rdaid
Women’s cooperative in Balkh, Afghanistan
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7
Cordaid works in fragile contexts that can diff er a great deal
from each other. Th ere are countries that as a whole are
defi ned as fragile, such as South Sudan and Afghanistan
(category A in fi gure 1). Th ere are also countries that on the
whole are considered safe and stable, but which include areas
of fragility (category B in fi gure 1). An example of this is the
Philippines, a middle-income country, which is extremely
vulnerable to natural hazards and where the recently ended
confl ict over the Muslim part of the island Mindanao was a
cause of fragility for many years.
Various dynamics of fragility determine the possibilities for
fostering entrepreneurship and private sector development.
Priorities to boost the economy in category A contexts must
be sought in ‘governance and services’ (e.g. access to basic
education, vocational training) and ‘security and justice’
(e.g. building of institutions and fair macroeconomic policies).
In category B contexts, entrepreneurship can be fostered by
promoting ‘opportunities’: making SMEs investment-ready by
means of business development services, improving value
chains and providing access to suitable investment capital
(see chapter 2 for the case of Cordaid’s partners, SUCCEED and
PEF, in the Philippines).
Interventions must always respond to the specifi c local
context. South Sudan and Afghanistan, for instance, are both
fragile countries, but the possibilities for private sector
development in the two countries diff er considerably. In South
Sudan, opportunities for SME development are only tentative-
ly emerging. Due to insecurity and a lack of infrastructure,
producing and processing locally is both expensive and risky.
Th e country is highly dependent on imported goods. Th e
unregulated activities of banking, land registration, taxation,
as well as the unpredictability of exchange rates or infl ation
requires returns of cash fl ows over a short period. In South
Sudan, Cordaid’s partner RUFI provides microfi nance loans to
farmers and rural entrepreneurs (see chapter 2). Helping
people earn a basic income is a strategy for peace in the
volatile post-confl ict situation. Recently, RUFI started
including SMEs in its lending port folio. Supporting basic
business skills and fi nancial literacy are crucial for economic
development in South Sudan.
Afghanistan, traditionally a country of traders, already off ers
more possibilities to work on private sector development. Road
conditions and electricity are unreliable compared to western
standards, but advanced when compared to South Sudan.
Afghans trade with neighboring countries like Uzbekistan,
Iran and Pakistan. In Afghanistan, Cordaid works successfully
with farmers’ cooperatives and women’s cooperatives, which
produce handmade carpets that fi nd their way to Middle
Eastern markets (see box Women’s cooperatives in
Afghanistan). Th e positive impacts that these cooperatives
have on empowerment and social cohesion are at least as
important as their impact on economic development.
Generally safe and reliable developing countries (category C
in fi gure 1) are the most suitable for promoting private sector
development through social enterprises, innovation and
partnerships. Th ese contexts can also be used to pilot inter-
ventions that may be successfully implemented in fragile
contexts in the future. A prime example of this approach is the
case of the Babyviewer ultrasound technology that Cordaid
and its international partners have developed and will soon be
tested in Ghana or Ethiopia (see chapter 3).
FIGURE 1: CONTEXT SENSITIVITY AND TAILOR-MADE INTERVENTIONS
INC
LS
S
I
INCLU ROACH
PART
NER
SHIPS
LOBBY AND AD
VOC
AC
Y
SECURITY AND JUSTICE
legislation
INN
OVATIO
N
OP
PO
RTU
NITIES
GOVERNANCE
AN
D S
ERV
ICES
INTERNATIO
NA
L M
AR
KET
S
INC
LS
S
I
INC OACH
PART
NER
SHIPS
LOBBY AND AD
VOC
AC
Y
SECURITY AND JUSTICE
I
INN
OVATIO
N
OP
PO
RTU
NITIES
GOVERNANCE
AN
D S
ERV
ICES
INTERNATIO
NA
L M
AR
KET
S
INC
LUS
NE
SS
INC
LW
TH
INCLUS PPROACH
PART
NER
SHIPS
LOBBY AND AD
VOC
AC
Y
SECURITY AND JUSTICE
legislation
INCCE
INN
OVATIO
N
OP
PO
RTU
NITIES
GOVERNANCE
AN
D S
ERV
ICES
CE
INTERNATIO
NA
L M
AR
KET
S
■ Category A: Fragile countries
■ Category B: Developing and middle-income
countries with fragile confl ict-affected areas
■ Category C: Developing countries
Philippines
Ghana
South Sudan
Financial performance
Soci
al p
erfo
rma
nce
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS
8
1.4 Inclusive investments in fragile settings Access to fi nance is key to fostering sustainable economic
growth. However, in most fragile and confl ict-aff ected situa-
tions, the vast majority of entrepreneurs have little to no access
to fi nance. “Th e business case for confl ict-sensitive investments
is built at grassroots level, where instability hits hardest and
the potential for social impact is at its highest,” says Laure
Wessemius Chibrac, Director of Cordaid Investments.
Stability Impact Fund
In 2013, Cordaid created the Stability Impact Fund (SIF). Th is
targeted €40-50 million fund is an impact-fi rst fund that
channels a large part of its investments through microfi nance
institutions (MFIs) and SME funds. MFIs serve micro-entrepre-
neurs such as small farmers, traders and market vendors to
provide them with access to fi nance helping them survive on
a day-to-day basis. SME funds, such as WAVF in Sierra Leone
and PEF in the Philippines (see chapter 2 and 3) usually serve
SMEs that have a fi nancing need of over €100.000.
“ Th e business case for confl ict-sensitive investments
is built at grassroots level, where instability hits
hardest and the potential for social impact is at
their highest.”
Laure Wessemius Chibrac, Director of Cordaid Investments.
Cordaid’s ambition is to expand the share of its investments in
smaller SMEs – referred to as the missing middle – to 10% of the
portfolio of the Stability Impact Fund. Th is missing middle of
small enterprises, which are in need of fi nance of between
€10,000 and 100,000, suff er most from a non-functioning
fi nancial sector and a lack of capital. Th ey are a forgotten target
group that is under-served. Foreign investors – the few that do
not avoid fragile, mostly (post-)confl ict zones – as well as local
banks are rarely willing to invest in small businesses due to
the higher costs and risks involved. Poor infrastructure, weak
human resource skills and a lack of appropriate business
development services make the costs of doing business
extremely high, also for fi nancial institutions. Th is is the
reason why most investors concentrate on either microfi nance
or large corporations. Cordaid however strongly believes that it
is the missing middle of the small SMEs that have the largest
impact, being powerful contributors of growth and key
stabilizers of economies in fragile contexts. Financial risks
may be high and the management expensive but, when the
investment is successful, the social impact is high too.
Total committed amount at Sept. 2014: EUR 8,690,000
PORTFOLIO STABILITY IMPACT FUND
DR Congo
Sierra Leone
South Sudan
(% are based on the committed amounts)
11%
45%
44%
DETERGENT
DETERGENT
DETERGENT
4 rs = 300!
$$@
MFI MFIMISSING MIDDLE
SEEDSwaterresistant
TOILET
€
MICRO INDIRECT THROUGH MFI’S
EUR 250k – 1m
EUR 500 - 10k ACCESS TO FINANCE FOR ENTREPRENEUR
INVESTMENTS SIZE
TA GRANT FOR INVESTEES*
BD SERVICE FOR LOCAL SME*
5 - 10%
EUR 10k - 100k
25 - 40%
EUR 100k – 1m
10 - 20%
SMEs DIRECT
EUR 10k – 100k
SMEs INDIRECTTHROUGH FUNDS
EUR 1m – 5m
FIGURE 2 TARGET GROUPS OF STABILITY IMPACT FUND
* % of investment size
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9
Impact fi rst
Financial returns in fragile contexts are bound to be modest
given the higher costs of management relative to smaller
transaction sizes. Th e Stability Impact Fund was set up as an
impact-fi rst fund. It aims for a rate of return that ensures
capital preservation and compensates for euro-area infl ation,
estimated at 1-2% per year. Investments are often in local
currency, which also illustrates the impact-fi rst objective of the
fund. Devaluation in many fragile contexts can be so high that
denominating loans in euros would infl ate the debts of
entrepreneurs – a recipe for failure and eventually default.
At the same time, it is clear that investments need to be
fi nancially viable. “Th is is the only way to have an impact in
the long-term”, says Wessemius Chibrac. SMEs are therefore
treated with a conventional investment perspective: they must
make sure that operational costs are covered by income and
honor their loan commitments. “If we were to be slack on
invested companies paying back their loans, we would be guilty
of distorting the market,” says Wessemius Chibrac, “addition-
ally, in confl ict settings it is imperative to be seen to treat
clients fairly and equally”. Cordaid acts as a catalyst for
additional fi nancing. “Our role is to open the market and prove
that investing in fragile contexts is possible. Once we have
provided training and access to fi nance to the small enterpris-
es, their increased size might allow them to attract larger
investors.”
Impact indicatorsTh e direct impact of Cordaid’s SIF is measured amongst
others according to:
▪ Th e number of SMEs that have access to fi nance
▪ Average increase of income of SMEs, measured through
EBIT (earnings before interest and taxes)
▪ Th e percentage of new jobs created for youth >35%
▪ Th e percentage of female micro-entrepreneurs that
have expanded their business > 50%
Indirect impact can be among others assessed by:
▪ Number of indirect jobs created (suppliers, clients,
distribution)
▪ Reduction of imports by investing in the revival of
industries relevant for basic products and services
Th e selection of the fund’s potential markets is based on
Cordaid’s global track record and expertise. Micro, small and
medium enterprises will be supported via local fi nancial
institutions in South Sudan, DR Congo, North Uganda, North
Kenya, Haiti, Colombia and Myanmar as well as in a number of
focus countries like Sierra Leone, Burundi, Mindanao in the
Philippines, Ethiopia and Guatemala where they will also be
fi nanced directly by Cordaid. Investing in fragile states entails
long-term commitment, endurance and fl exibility. It requires
constant monitoring and adjusting to local dynamics. Over the
years, local partner organizations and Cordaid fi eld offi ces have
built steady relationships and trust with local communities.
Th rough their in-depth understanding of local issues, political
dynamics and markets, they are well positioned to help build
the local private sector.
Two-track approach: Finance and BDS
Cordaid’s track record of investing in the missing middle in
fragile contexts is based on a two-track approach. Th e fi rst
track consists of the provision of access to inclusive fi nance
(see Figure 2). Th e second one is the provision of fragile sensi-
tive Business Development Services (BDS). Cordaid is convinced
both access to fi nance and BDS are equally important, that they
reinforce each other when supporting the missing middle to
overcome obstacles to build a business.
Our role is to open the market and prove that investing in fragile contexts is possible. Once we have provided training and access to fi nance to the small enterprises, their increased size might attract larger investors.
BDS consist of two packages. First, there is a package of base
modules that are developed to make SMEs ‘investment-ready’.
Th ese modules provide training in general disciplines of
business management such as sound fi nancial administration,
registration as a formal business, marketing strategies and
business planning. Peer-to-peer learning is facilitated as much
as possible. Th e second package, referred to as the BDS+
modules, is designed in response to the needs of SMEs with
good growth potential in fragile contexts. Th ese modules are
tailor-made, taking into account the size of the enterprise and
its level of development. Th ey include training and consultan-
cies in realizing social impact, value chain performance,
participative leadership, inclusive business and confl ict
resolution. BDS+ is delivered through local trainers with an
extensive business background. To help SMEs learn from the
experiences of others, international experts and successful
SMEs are involved in the training. Cordaid provides fi nancial
support to enable entrepreneurs to hire these experts and
makes sure that their SME pays a percentage of that service
based on improved performance over time.
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10
In fragile contexts, eff ective solutions to growth challenges are
not always close at hand. Ideas and innovations, especially in
technology and processes, often need to be sourced from
businesses and organizations operating internationally and
headquartered abroad. Cordaid actively searches for partners
– companies, technical and academic institutes, impact
investors, venture philanthropists – to co-create innovations
that will contribute to solving problems faced by fragile
communities and their entrepreneurs. Th e partnership itself
can take on many forms – for instance a PPP or a social
enterprise with a shared ownership structure - as long as
it is appropriate to the local context, is viable and, above all,
inclusive. By developing these concepts with both local actors
and impact-driven organizations from around the world,
Cordaid not only seeks self-sustainable solutions to local
problems but also strives to make sure these innovations are
economically empowering and culturally embedded.
In order to have a broad knowledge of the leading technological
ideas and innovations available, Cordaid is engaged with
international business networks, social enterprise hubs, trade
missions, and outreach. It has participated in several missions
with the Dutch Minister for Foreign Trade and Development
Cooperation to countries in Africa, South-East Asia and Central
America. Th e idea behind these missions is to encourage both
multinationals and Dutch SMEs to engage with local entrepre-
neurs. Many international companies have established a social
mission statement. Th rough outreach activities, Cordaid aims
to build on these statements and, together with local entrepre-
neurs, develop solutions that serve communities living in
fragility.
Cordaid also initiates social ventures to realize certain social
goals. Th is can be, for example, by promoting health insurance
as part of a health system strategy in Bangladesh (see box
Ensure Your Family) or by introducing a youth employment
1.5 Leveraging ideas and innovationsLocal entrepreneurship is the most important factor for
generating inclusive growth. Cordaid pro-actively identifi es
opportunities to strengthen this potential by connecting local
actors to innovative concepts and companies around the world.
Th e inclusive businesses14 that result from this are able to
expand access to goods, services, and livelihood opportunities
for those at the BoP (Base of the Pyramid) in commercially
viable and scalable ways.According to the UNDP, “Th e benefi ts
from inclusive business models go beyond immediate profi ts
and higher incomes.
For business, they include driving innovations, building
markets and strengthening supply chains. And for the poor,
they include higher productivity, sustainable earnings and
greater empowerment.”15
Glossary
Inclusive business – refers to the inclusion of people
living in poverty into business along the value chain. Th is
term is used by various organizations such as the United
Nations Development Programme (UNDP), the World
Bank and the World Business Council for Sustainable
Development (WBCSD).
Base (or Bottom) of the Pyramid (BoP) – refers to the
4 billion people with an income of 4 USD a day or less who
live primarily in Asia, Africa and South America. Th ey
are value demanding consumers, resilient and creative
entrepreneurs, producers, business partners and innova-
tors. Because they are largely excluded from formal
markets, their demand for innovative products, services
and technologies to meet their needs is largely
untapped.16
Public Private Partnership (PPP) - a form of cooperation
between businesses, civil society organizations, govern-
ments, knowledge institutions and others in which
parties combine and reinforce each other’s knowledge and
capabilities to enhance the eff ectiveness of achieving
common development objectives. Parties are jointly
accountable for activities carried out towards a common
direction, using their pooled resources and personnel as
well as sharing the risks.
Shared value creation - shared value is a management
strategy focused on companies creating measurable
business value by identifying and addressing social
problems that intersect with their business. Th e concept
was defi ned in the Harvard Business Review article
“Creating Shared Value”.17
Social enterprise/social business/social venture – refers
to companies that pursue social objectives as part of their
business model, among them fi ghting poverty. Social
enterprises apply business logic to at least cover their
costs.
Building a PPP with Philips Cordaid and Philips have teamed up to establish solar
powered community centers in rural and urban deprived
areas around the world. By providing low energy public
light to off -grid areas, the partners give fragile communi-
ties the opportunity to extend productivity by several
hours per day. In a PPP with innovative Dutch companies,
sports associations, a knowledge institute and the Dutch
government, the partners support community centers
that function as a meeting place for various activities
ranging from sports, education, healthcare provision and
a (night) market. What makes these centers unique is that
they are fi nancially self-sustainable. Sports fi elds on one
day can be night markets the next. Local traders pay a
small fee for a stall fi tted with LED lamps that provide
more reliable light to sort their fruit and vegetables. Th ey
can purchase extra energy for cooling agri-food products.
With tailor-made business models these centers can run
as social ventures generating income through the use of
light, energy and the rental of facilities. Such smart
innovations open the market for inclusive businesses
targeted at the BoP.
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11
Lobby and advocacy
Impact driven businesses and (social) entrepreneurs still face
legal or fi nancial obstacles in many countries. Cordaid has a
long track record of fi ghting fragility, as an international civil
society organization, and has been a key player internationally
in advocating enabling environments and better policies that
will benefi t communities in fragile contexts. Cordaid is
therefore well positioned to promote an enabling environment
in which entrepreneurial values and inclusive businesses
can fl ourish. For instance, Cordaid actively lobbies for policy
changes that generate a legal environment in which social
enterprises are treated favorably to conventional businesses.
Authorities are inclined to make reforms if they understand
that impact-driven ventures address specifi c problems and
provide goods and services that regular for-profi t and public
organizations have overlooked. Lobbying encourages public
authorities to consider granting fi scal and tax advantages
to impact-driven ventures in order to compensate for the
disadvantages and higher costs of, for example, providing
services to remote areas.
Dutch Good Growth Fund
Th e need for capital investment in SME development has also
triggered bilateral agencies. Because of the risk levels in fragile
contexts, fi nancial tools must be supported such as guarantees,
fi rst loss options and currency loss absorption. An example is
the Dutch Good Growth Fund (DGGF). DGGF supports Dutch
SMEs, together with entrepreneurs in emerging markets and
developing countries, by off ering a source of fi nancing for
development-relevant local investments and exports. Th e DGGF
was launched by the Dutch Minister for Foreign Trade and
Development Cooperation on 1 July 2014 and intends to allocate
25% of its investments to fragile areas, women and youth.
strategy in Ethiopia (see chapter 3). To support these initiatives,
Cordaid has built a social business incubator together with
business innovators at the organization Enviu. In this incuba-
tor, Cordaid actively scouts for impact-driven business ideas
among its local partners and internationally. Th ose ideas that
show potential to become scalable social business concepts
receive support from both a specialized group of Cordaid staff
and from the business developers at Enviu. Together, they
validate impact and business assumptions and, if they consider
the business model viable, the social enterprise is incubated,
piloted and introduced to funders such as venture philanthro-
pists and impact investors.
Ensure Your FamilyIn partnership with Enviu, Cordaid has introduced novel
fi nancial and insurance products for the family members
of migrants who remained in the country of their origin.
In response to the growing amount of remittances sent
home each year by the diaspora community, the initiative
touches a pressing need: the social venture allows mi-
grants to make sure that their fi nancial support covers
important life events of their family and ensures that their
family is well protected in case of unforeseen circumstanc-
es. Using an online platform, members of the diaspora can
directly insure their families and help them become more
fi nancially equipped, starting with the organization of
aff ordable access to quality health care. Th e platform will be
fi rst introduced to Bangladeshi migrant communities and
their families, with the ambition to replicate the concept in
various high out-migration and fragile contexts.
Ph
oto
Ph
oto
shelt
er
Bangladeshi family insured by migrant family members
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS CASE 1: RUFI
12
million South Sudanese who fl ed their country during the long
drawn-out civil war between North and South Sudan (1983-
2005). He received the opportunity to study in Scotland. After
2005, when peace was signed between the Sudan People’s
Liberation Movement and the government in Khartoum, Poggo
went back to southern Sudan. He and several of his friends
found jobs in the development business in a shattered country
that needed to be rebuilt from scratch. Members of their
extended families who had stayed behind during the war kept
knocking on their doors for help. Poggo recounts: “My friends
and I discussed this and we said ‘we don’t want to become a
charity ourselves’. We had witnessed how two decades of war
and humanitarian interventions had made many of the South
Sudanese dependent on aid. We were concerned that their
passive mentality would stand in the way of building our
country. To us, the best way to contribute to restabilizing a
post-confl ict society is to encourage the private sector”. And
thus they invested their own savings and spent their evenings,
weekends and holidays on building the new company, along-
side their jobs. “At fi rst we encountered resistance,” says Poggo.
In July 2011, South Sudan became an independent nation. Th e
challenges are huge: two decades of war have left enormous
gaps in the physical and social infrastructure of the country.
Th e eruption of violence in late 2013 showed how vulnerable
the country remains to a relapse into large-scale confl ict.
Government capacity is weak, basic social services are scarce
and civil society organizations are young and inexperienced.
Most people are active in the informal sector and the majority
of the rural population are subsistence farmers. Economic
opportunities exist but are hampered by the absence of
appropriate fi nancial services and infrastructure. In 2008,
Denis Poggo and fi ve friends registered a microfi nance com-
pany, the Rural Finance Initiative (RUFI). Th ey opened an offi ce
in Kajo Keji town, on the border with Uganda. Since 2010,
Cordaid has been supporting RUFI with funds and capacity
building.
Building a business, building a countryTh e idea to start a fi nancing business was triggered by the
entrepreneurs’ own experience. Denis Poggo is one of four
2. FIGHTING FRAGILITY THROUGH INCLUSIVE BUSINESS
CASE 1: THE RURAL FINANCE INITIATIVE (RUFI)INVESTING IN PEACE IN SOUTH SUDAN
Ethiopia
KenyaUganda
MalakalBentu
Aweil
Warab
Rumbek
Yambio
Bor
Torit
Juba (RUFI)
Wau
Sudan
Central African Republic
Democratic republic of Congo
INVESTING IN ENTREPRENEURSHIP IN SOUTH SUDAN, CORDAID’S FOOTPRINT
legislation
legislation
legislation
legislation
legislation
legislation
Risk reduction
Women's economic
empowerment
Rule of law
Health
Education
Regulations
Banking &
Finance
Personnel
Markets & ValueChains
legislation
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTSCASE 1: RUFI
13
skills development in the country, and local people are less
inclined to leave their jobs if things get tricky, which is always
a possibility in this fragile country.” Th e resident advisor set up
the Management Information System, educated the staff in
using it and trained a locally recruited CEO. “His support for
the organization was invaluable,” says Poggo. “By bringing in
experience and knowledge of fi nancing in other parts of the
continent and the world, Cordaid has broadened our horizons
and deepened our understanding of this business.”
Restore trust through fi nancial inclusionProviding access to capital for small entrepreneurs in South
Sudan is vital for building the country’s economy. But it is also
vital for peace. “At this critical stage of our country’s develop-
ment, nothing is more important than people being able to
earn a basic income,” says Poggo. “Without this prospect, it will
be very easy to revert to a war economy. After all, the one thing
that our youth has learned in the past decades is to fi ght.” RUFI
wants to help build a foundation for fi nancial inclusion in
post-war South Sudan. Most people in the rural areas are
isolated from the mainstream economy. Farmers and small
entrepreneurs have no access to fi nance from commercial
banks. RUFI’s belief is that fi nancial inclusion will help to
restore trust and social cohesion in a country that was bitterly
divided. More than half of RUFI’s clients are women. Th ey are
good at paying back their loans and they invest the little extra
they earn into their families and especially in their children’s
education. Th e government of South Sudan is regularly late in
paying salaries of civil servants. “When this happens, immedi-
ately we see crime going up,” says Poggo. “People have no back
up. However, if family members can bring in a little bit of cash
this gives some leeway and releases people from taking the
criminal route.” RUFI has received feedback from its female
clients that the company’s work contributes to better relations
within the household. While some husbands may feel threat-
ened by their wives’ increased independence now that they
earn their own income, the extra money, which is so very
needed, helps to reduce tensions in most households. “To us
this is very encouraging,” says Poggo, “peace doesn’t come from
outside, building peace starts within the family.”
“Th e notion of microcredit was new to most people. Th ey asked,
‘we are poor, why don’t you just give us the money, and why do
you ask for interest?’ But we stood our ground and explained
that living on handouts is not a way to build one’s future.
Gradually some people came to appreciate our approach”.
Cordaid began its support for RUFI in 2010 with a grant of
€ 55.000 for agricultural lending.
“ Financing farmers and rural entrepreneurs who
have no access to commercial banks will help to
strengthen the country at its foundations. People
will once again be able to dream, make plans and
act on them. It will mean more income and being
able to think ahead, which in turn, will translate
into more stability.”
Resi Janssen, Investment Manager at Cordaid.
In 2010, RUFI opened a second branch in Nimule and in 2011 a
liaison offi ce was opened in Juba, the capital of the newly
independent state. Th e company was growing and needed more
capacity. In 2012, Cordaid funded a capacity building program
that included training of offi ce and branch managers, loan
offi cers, fi nance managers and accounting staff . Th e support
also included some essential assets such as printers, software
packages and solar panels to avoid high costs of diesel genera-
tors for electricity supply. RUFI today has 21 staff and serves
around 1700 clients. “It is unlikely that without Cordaid’s
support, we would have achieved this,” says Poggo. A vital
contribution was the technical expert that Cordaid provided
who spent a full year as resident advisor at RUFI’s Juba offi ce.
As two decades of war have left an entire generation deprived
of education, many companies in South Sudan are forced to
recruit staff from Kenya and Uganda or from overseas. RUFI,
in contrast, aims to hire local staff and train them. “It’s both
less costly and more sustainable,” says Poggo. “We contribute to
The Rural Finance Initiative (RUFI): investment partner in South Sudan RUFI was established in South Sudan in 2008. South Sudan
remains a volatile country and the recent crisis has
aff ected the work of RUFI as many clients fl ed the country.
In more stable regions of the country, however, the
organization is still going strong. RUFI started with an
asset base equivalent to US$ 7,500 in October 2008.
Its portfolio by December 2013 was:
▪ Total assets: USD 1,930,114
▪ Gross outstanding portfolio: USD 1,572,225
▪ Number of clients: 2,154
▪ Number of borrowers: 1,893
▪ Percentage of female clients: 61%
▪ Percentage of rural clients: 69%
▪ Current repayment rate > 96%
▪ Number of staff : 20 (10 female, 10 male)
Ph
oto
Co
rdaid
Small entrepreneur in South Sudan
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14
business opportunities. With so many people on the run, the
transport sector profi ted. Additionally, people investing in
emergency housing for the refugees needed loans to import
cement for instance. In the areas that received many of the
refugees, shops had to restock three times a month instead of
once, leading to shopkeepers and traders turning to RUFI for
loans to import merchandise from Uganda. RUFI will continue
with its SME lending program and hopes that some of its
microfi nance clients can gradually transition into becoming
small profi table businesses, as that would indicate a signifi cant
developmental milestone.
Challenges for SMEs in South Sudan ▪ Access to capital: Banks are hesitant to lend to SMEs
arguing that, given the weak legal system, it is nearly
impossible to enforce repayments. Additionally, there is
no registry which banks can utilize to place a mortgage
or caveat on any potential security off ered to secure a
loan.
▪ High cost of operations: South Sudan is a net importer
of goods and has no national power grid. Th e high cost of
power, renting, importing from the surrounding region
with foreign currency, as well as hiring employees
hampers the growth of SMEs.
▪ Limited professionalism: Most SMEs operate on trust
and employ family members rather than professionals.
Th is limits growth and can easily hide fraud within the
enterprise.
▪ Limited government support: While there is a Private
Sector Unit in the Ministry of Finance and Economic
Planning, the support that it gives is limited and does
not help the growth of SMEs in the country to a great
extent.
Entering the SME marketFrom its start, RUFI focused on providing microfi nance mostly
to traders, vendors and farmers. In 2013, the company also
started including SMEs in its lending portfolio. “Th e potential
development gains of SME lending are bigger”, explains Poggo,
“as SMEs help to create jobs and deliver an impact in terms of
skills and knowledge transfer.” However, he says, the risks are
larger too. If SMEs default on paying back their loans, this can
mean a considerable loss for a relatively small company such as
RUFI. Th e potential risk of investing in a post-confl ict country
became clear in December 2013. An alleged coup d’état resulted
in massive killings in South Sudan. By the beginning of
January 2014, the population of Juba was halved. Th e fear of
the recurrence of violence and lootings led to many of RUFI’s
clients being forced to scale down or close their businesses. Th e
loans to people who fl ed the country, who may not return soon,
will have to be written off . “We can do little else but to accept
this loss,” says Poggo. Interestingly, the demand for loans from
SMEs increased after the recent confl ict. Th e few commercial
banks that had been fi nancing SMEs immediately stopped these
lending programs and several of the businesses turned to RUFI.
“ Peace doesn’t come from outside,
building peace starts within the family.”
Denis Poggo, Board Secretary, RUFI
“You have to be very cautious in a volatile context such as ours,”
says Poggo. “You need to understand the dynamics of confl ict
and how this aff ects the market, and be able to ascertain who is
trustworthy and who is not.” But RUFI did not shy away from
this challenge. While its Juba branch was aff ected by the
confl ict, some of its clients in Kajo Keji and Nimule saw new
SEPTEMBER 2014 © CORDAID
ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTSCASE 2: MINDANAO
15
No peace without developmentTh e peace deal has given hopes of a new future to the people
of Muslim Mindanao. However, Cordaid’s local partner,
Sustainable Cooperation for Equitable Enterprise Development
Inc. (SUCCEED), warns that lasting peace depends on whether
inclusive and sustainable economic activities will be created
that benefi t the region. “As long as there is no economy that
is respectful of the diverse local communities’ rights, their
culture and their environment, rebel forces will always fi nd
new recruits among the poor and exploited,” says Joselito
(Penpen) Libres, CEO of SUCCEED.
Th e organization approached Cordaid in late 2012 with the idea
to conduct case studies of successful economic initiatives in
Mindanao, in order to collect best practices of inclusive
In March 2014, after 17 years of negotiations, a peace accord
was signed between the government of the Philippines and
the country’s largest rebel group, the Moro Islamic Liberation
Front (MILF).18 Since the 1970s, various groups have been fi ghting
for more autonomy or independence of the island Mindanao,
where most of the country’s fi ve million Muslims live among a
majority of Christians. Th e confl ict has led to more than 120,000
deaths. Th e 2014 peace deal orders the creation of an autono-
mous political entity in western Mindanao, called Bangsamoro.
Bangsamoro will receive a fairer share of revenues from the
region’s natural resources as well as having budgetary autono-
my, a parliamentary form of governance and shariah courts.
In exchange, Th e Liberation Front agreed to give up arms as well
as its demand for a separate state.
CASE 2: MINDANAOSUPPORTING INCLUSIVE DEVELOPMENT FOR RESILIENCE AND LASTING PEACE
Davao
Manila
Cebu
TaclobanBacolod City
Zamboanga
INVESTING IN ENTREPRENEURSHIP IN THE PHILIPPINES, CORDAID’S FOOTPRINT
Philippine sea
South China sea
Mindanao
General Santos City
Catabato City
Cagayan de Oro City
PEF and WRICC
Risk reduction
Women's economic
empowerment
Rule of law
Health
Education
Regulations
Banking &
Finance
Personnel
Markets & ValueChains
legislation
SEPTEMBER 2014 © CORDAID
ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS CASE 2: MINDANAO
16
as fertilizer or seedlings. Th e cooperative serves as a vehicle for
poverty alleviation among the poor Muslim communities in
Maguidanao province. At the same time, the cooperative is a
vehicle for peace. Th e interaction that it encourages between
members from diff erent backgrounds helps to promote
dialogue and unity. Th e experiences and the capacities that
women gain through their work for the cooperative are
empowering too. Several of them have come to play crucial
leadership roles in confl ict resolution.
Turning policy to practiceIn December 2013, SUCCEED presented the fi ndings from the
case studies at a conference in Davao City, Mindanao, to more
than 100 participants from the private sector and Chambers of
Commerce, civil society organizations, academia, religious
groups, government agencies and donors. Subsequently, the
regional government of the Autonomous Region of Muslim
Mindanao (ARMM), MILF and the Bangsamoro Transition
Commission (BTC) invited SUCCEED to share its expertise and
provide input for the region’s new economic policy. “For
decades the armed struggle was the MILF’s main focus,” says
Libres. “Now as the peace agreement has to be implemented
and they have to dismantle their militias, they realize that not
having a comprehensive economic policy is a weakness.”
Based on the action research and the proposals from partici-
pants at the conference, SUCCEED came up with a list of
recommendations for the crafting of the Bangsamoro Basic
Law (BBL), which was formally submitted to the Chair of the
BTC in February 2014. Th e recommendations refl ect that there
is an important role to play by all stakeholders. NGOs can
provide training in fi nancial literacy, business skills as well
as confl ict resolution skills. Local government can create
an enabling environment for local businesses – through
enforcement of law and regulations, service delivery, revenue
collection – and support pilot activities using tax revenues.
Cooperatives provide important services to their members
– credits, farm inputs, marketing, etc. – and at the same time
build social capital and cohesion among and between divided
communities as they are a microcosm of the diverse demo-
graphic and religious makeup of the region. Th e private sector
has the ability to off er employment and supply contracts to
large numbers of people and thereby to boost people’s
development. Th e research was to be used to support the peace
process between MILF and the government and to formulate
policy recommendations for the new leadership of the region.
“We appreciated their idea,” says José Ruijter, policy offi cer at
Cordaid, “especially because SUCCEED insisted on conducting
participatory action research rather than an academic study.
Given the political momentum of the peace talks at the time,
we gathered that thorough evidence-based lobby on economic
policy for the post-confl ict society could prove to be a catalyst
for change.”
“ As long as there is no economy that is respectful
of the diverse local communities’ rights, their culture
and their environment, rebel forces will always
fi nd new recruits among the poor and exploited.”
Joselito (Penpen) Libres, CEO of SUCCEED.
Cordaid supported the research with funds and training, and
recommended to take into account the context of socio-politi-
cal confl ict in all activities. Th e researchers were trained in
peace and confl ict dynamics, and their links to economic
development. Th ey interviewed key informants and conducted
focus group discussions that involved men and women from
Muslim, Christian and indigenous communities in the region.
Th is was done to stimulate joint refl ection on which economic
strategies can help tackle the roots of confl ict and achieve
inclusive peace. “Th e Philippines is a middle income country
and not categorized as a fragile state,” says Ruijter, “but the
Muslim area of Mindanao certainly has characteristics of
fragility. Th e decades-long confl ict is more than just a back-
ground to the local situation, it is a symptom of underlying
structural weaknesses.” Th e research confi rmed that it is the
lack of economic and employment opportunities for marginal-
ized communities in Muslim Mindanao, poor access to basic
services and justice, and poor participation in economic and
political governance (particularly over land) that has resulted
in the persistence of armed confl ict.
Th e case studies showed
that initiatives for economic
development can be successful
when they take into account
the social realities of the fragile
post-confl ict situation.
For example, the Women Rural Improvement Credit
Cooperative (WRICC) in Maguindanao province (one of the case
studies concerned) provides livelihood opportunities to 1,000
ex-combatants and supporters of the recent armed struggle by
using the leaves and stems of the water lilies that grow along
the Liguasan Marsh to make handbags and other handicrafts.
Th e cooperative also provides credit to its female members, but
does not impose an interest because this is contrary to the
teachings of Islam. WRICC usually provides credit in kind, such
Ph
oto
SU
CC
EE
D
Women showing the handbags they made from water lilies
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTSCASE 2: MINDANAO
17
Th e project combines the promotion of economic capacities
- especially for smallholder agriculture, private sector
development, and democratic accountable governance - with
local processes of confl ict resolution and peace building.
“ Social enterprises in rural areas rely on local
resources to drive the local economy and create
employment. Th ey can help households have a
sustainable income.”
Ric Torres, Program Manager PEF
Fragile climate Cordaid’s co-sponsor of SUCCEED’s December conference was
the Peace and Equity Foundation (PEF). PEF, also a Cordaid
partner, was established in 2001 to manage a 1.3 billion pesos
endowment fund, which has since grown to 2.2 billion pesos
(approximately USD 50 million20). PEF primarily invested in
microfi nance institutions in its fi rst ten years. Since 2011, it
has focused on investing in social enterprises that help rural
households gain better incomes and move out of poverty.
“Microfi nance is very important to help the poorest people
survive, but on its own it is not enough to eliminate poverty,”
says Ric Torres, program manager at PEF. “Social enterprises in
rural areas rely on local resources to drive the local economy
livelihoods in a sustainable manner. All these activities
brought together help to build inclusive economic growth and
development. Th ey promote social cohesion in what have long
been highly divided communities.
Libres adds: “In essence it comes down to the principle that the
exploitation of resources in Muslim Mindanao - like land,
water and minerals - should serve the development of the
Bangsamoro population. Th is is only possible if the population
has a say in economic decision-making, can signifi cantly
participate in economic endeavors, and substantially benefi t
from it.”
Active participation from civil society is therefore also needed
in the formulation of the Bangsamoro Development Plan (BDP).
Th is plan, which is drafted by the Bangsamoro Development
Agency (BDA) - with support from the World Bank, other donor
agencies and the government of the Philippines - defi nes
short- and medium-term strategies for the recovery and
development of the Bangsamoro. “Without the involvement of
broad local civil society this plan will have limited roots in the
communities, will lack ownership, and the economic activities
it will promote will not be as inclusive as desired,” says Libres,
who in June 2014 was elected in the Mindanao People’s Caucus
(MPC)19 council of leaders. Cordaid continues to support
SUCCEED’s advocacy activities and is funding a pilot project
that has recently started in three municipalities in the
provinces of Maguindanao, Sultan Kudarat and Lanao del Sur.
Ph
oto
Co
rdaid
MAGIRCO banana chips factory
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS CASE 2: MINDANAO
18
since 2012. MAGIRCO has used the MP3 loans for acquiring
machinery and equipment as well as for a study on plant
improvements. But even if business is going well and the
political confl ict in its part of Mindanao may have ended,
MAGIRCO has little time to rest on its laurels. Torres explains:
“China is the company’s primary customer, buying 70% of
MAGIRCO’s banana chips. However, whenever there is a dispute
between our two nations over the disputed South China Sea,
China stops buying. MAGIRCO is therefore keen to explore
other export markets.”
Sharia lendingIn early 2013, using MP3 funds, PEF started providing a new
fi nancial instrument in Muslim Mindanao: sharia lending.
Th is method of investment is compliant with the Islamic
context and culture of the region. “Our consultations found
that there are many fi nancial institutions and investors
working in Muslim Mindanao, but very few of them have been
successful in sustaining their investments or seeing them
grow,” says Torres. PEF, in partnership with the Muslim
institute Al Qalam and with the federation of Muslim scholars,
realized that sharia-compliant lending would fulfi ll an
important need for this region that is home to the poorest
communities in Mindanao. Torres: “According to Muslim law,
it is haram (forbidden) to ask for interest or riba. So our invest-
ments do not take the form of loans, but of equity. PEF becomes
a shareholder of the cooperative or business that we invest in.
If they do well, we become part of the success, if they fail, we
become part of the failure.” It is a whole diff erent way of
working. Normally, when companies or borrowers do not pay
back their loans, there is always the option of going to court or
foreclosing their collateral or properties. Torres: “With sharia
lending, you become part of the community, you are no longer
an anonymous capital provider. When things go wrong, you
don’t go to court, but you come together and study why things
went wrong together with the local Imam and Sharia Council.”
PEF is now supporting six groups in Mindanao with sharia
lending. Two of them are women’s groups who provide sharia-
compliant microfi nance to women entrepreneurs themselves.
Th ey are involved in diff erent businesses such as soap making,
bakeries, corn production or the cultivation of seaweed. Th is
close involvement also means that PEF supports these groups
with capacity building and business plan development. It has
brought in the experience of the Association of Islamic
Accountants to train the groups on how to prepare fi nancial
statements that are in line with sharia banking rules. Torres
considers sharia lending in Mindanao an appropriate approach
to allow for responsible impact investing and inclusive growth
in the culturally and politically sensitive area of Mindanao.
and create employment. Th ey can help households have a
sustainable income.” PEF supports projects across the
Philippines and also works in Mindanao. However, Torres
emphasizes that it is not Mindanao alone that suff ers from
fragility. “Th e increasing source of fragility in the Philippines
is climate change and this aff ects the entire country.” Th e
Philippines is among the 10 countries worldwide most prone to
natural disasters. Helping poor communities and social
enterprises become more resilient to climate change is
therefore a key element of the poverty reduction eff orts of PEF.
Since 2011, with co-funding from Cordaid, PEF has built up its
experience of fi nancing social enterprises that operate in a
context vulnerable to natural disaster. In 2015, PEF and Cordaid
will set up the Social Enterprises Fund (SEF) together. Th is fund
will invest in social enterprises that develop climate-smart
agricultural projects, such as the planting of typhoon resistant
palay seeds, the use of coconut husks for bioengineering, the
production of seedlings for mangrove forests to protect coastal
zones, and the promotion of renewable energy and technolo-
gies for community-based enterprises that reduce carbon
emissions. In the aftermath of Typhoon Sendong, which hit
northern Mindanao in December 2011, Cordaid and PEF created
a guarantee fund that allowed 3,174 displaced households to
buy land and to build safer houses. Experts in disaster risk
reduction from Cordaid together with PEF also assisted the
displaced families in setting up community associations to
deal with the agencies that provide necessary public utilities
and permits.
Investing in MindanaoCordaid has worked with PEF on the Mindanao Partnership
Project for Peace (MP3) since 2008. Th is 100 million Philippine
pesos (USD 2.8 million)21 joint Cordaid-PEF fund invests in
microfi nance institutions and increasingly also in agri-based
social enterprises in Mindanao. It provides loans to coopera-
tives and strengthens them through capacity development and
business development services. In this fund, vulnerability to
climate change is also integrated into the operations. Torres
describes: “We have 27 active MP3 clients. Together with the
Ateneo de Davao University Tropical Institute for Climate
Studies, we are now training them to have a Disaster Risk
Reduction policy and plan of action.” In this way, PEF tries to
ensure that the jobs it helps create are not washed away with
the next fl ood. One of the MP3 clients is the Magpet Agro-
industrial Resources Cooperative (MAGIRCO), which processes
more than 40,000 kilos of bananas into unsweetened banana
chips on a daily basis. MAGIRCO is located in the confl ict region
of Mindanao, which makes it especially relevant as the
enterprise provides direct jobs for 120 people from local
villages, the majority of whom are women, and assures a
regular market for 1,600 banana farmers who are mostly from
indigenous communities. MAGIRCO is a good example of what
PEF envisages with its support for social enterprises: a business
that earns a profi t and fulfi ls a social mission too. Creating
local employment is MAGIRCO’s main impact, but the coopera-
tive also focuses on being socially and environmentally aware
in its production processes. Th e bananas are fried in locally
supplied coconut oil, using rice husks as fuel to heat the oil.
Th e more than 24,000 kilos per day of banana peels, are
transported back to the farms to be turned into organic
fertilizer. PEF has invested considerably in this enterprise
MP3 portfolio ▪ Size of fund: 98 million pesos (USD 2.2 million)
▪ Number of clients: 27 partner organizations that have
reached out directly to at least 5,000 households and
have created 600 jobs locally.
▪ Average size of loan: 5 million pesos (USD 113.715) for
cooperatives, 3 million pesos (USD 68.229) for NGOs
▪ Return on investment: 3 to 4%
▪ Repayment rate: above 90%
SEPTEMBER 2014 © CORDAID
ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTSCASE 3: WAVF
19
In 2014, Cordaid obtained a 25% share in WAVF, a unique
investment fund for SMEs in Sierra Leone and Liberia.
WAVF was established in 2010 by the International Finance
Corporation (IFC), which is part of the World Bank Group and
encourages private sector development in developing countries.
Th e IFC usually invests in multi-million dollar projects; its
investment in WAVF refl ects the growing importance attrib-
uted to the role that SMEs play in creating jobs and fostering
inclusive economic growth. WAVF’s investments are between
USD 100,000 and 500,000. For entrepreneurs in the two
West-African countries, this size of capital is very diffi cult
to obtain from commercial banks, which impose interest
rates of over 20% on their clients and consider the overhead
and risks on such relatively small sums to be too signifi cant.
Additionally, commercial banks in these countries commonly
work with asset fi nancing rather than fi nancing based on the
assessment of viable business plans, which clearly limits the
opportunities for new entrants and start-ups.
In 2002, a decade-long violent civil war in Sierra Leone came to
an end. Th e war was a result of state collapse, extreme poverty
in rural areas and a clash between a younger generation that
lacked economic opportunities and an elite of elderly men that
ruled the country politically and economically. Sierra Leone’s
economy has grown at an average rate of 6% per year since the
end of the war and with a nascent democracy in place, the
country, though still extremely poor, is moving away from
fragile state status.22 Th e increasing political and economic
stability has improved Sierra Leone’s investment climate. Th e
country recently jumped from number 163 to 142 in the World
Bank’s Doing Business Index, making it one of the top reform-
ers of countries on the list.23 Investment has started to fl ow in,
boosting the mining sector in particular. Sierra Leone’s private
sector is highly dependent on large-scale investments in
extractives and agriculture. It is a skewed pyramid, with
a very broad base of 80% of all businesses in the country being
survival-oriented microenterprises.
CASE 3: WEST AFRICA VENTURE FUND (WAVF)INNOVATIVE FINANCE FOR SMEs IN SIERRA LEONE
INVESTING IN ENTREPRENEURSHIP IN SIERRA LEONE, CORDAID’S FOOTPRINT
Kenema
Bo
Makeni
Freetown(WAVF)
Liberia
GuinéeGuinée
Atlantic Ocean
Risk reduction
Women's economic
empowerment
Rule of law
Health
Education
Regulations
Banking &
Finance
Personnel
Markets & ValueChains
legislation
SEPTEMBER 2014 © CORDAID
ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS CASE 3: WAVF
20
problems. Th is approach proves to be much more eff ective than
sending an external expert round to check on the fi nancial
health of the company.” In addition to providing trained
personnel, WAVF invests a lot of time and eff ort in coaching
entrepreneurs and start-ups. Th is means taking a very hands-
on approach and walking them through all steps of the
business. “Many entrepreneurs are anxious to grow as fast as
they can,” says Dr. Oboh. “But in the long-term, it often pays to
pace growth so that you can manage it.”
Private equityWAVF chooses to be closely involved with the operations of its
investees. Th is fi ts with the type of fi nance it provides, private
equity. WAVF becomes a shareholder of the enterprises it
supports. In West Africa, this is a relatively new form of
fi nance. Oboh: “It was hard for investees to come to terms with
the concept of giving up a share in their business in exchange
for fi nance. With private equity, you don’t just provide funding
but are a partner in their business too. Th is means someone
will set demands and point out problems that the entrepreneur
may have overlooked. Entrepreneurs need time to adjust to
that. It’s not just a case of ‘give me the money and let me get on
with my business!’” And yet the close engagement of the Fund
that comes with the provision of private equity is a great
advantage in post-confl ict settings. It ensures a high degree of
knowledge transfer and capacity building, which is needed to
stimulate private sector development in fragile contexts.
In a country like Sierra Leone, Sascha Noé stresses, start-ups
and SMEs require specialized approaches. “WAVF is very
creative in off ering them tailor-made advice and services.
Together with the SME, they come up with ideas to make sure
that the investment is socially and fi nancially benefi cial to the
owner, the investor and often to the wider community too.”
An example of this is WAVF’s investment in the poultry sector
of Sierra Leone, which had been decimated by the civil war.
As a result, 90% of all the eggs and chickens consumed by the
population had to be imported from overseas until recently.
“Th e revival began in Freetown,” Dr. Oboh explains. “We helped
farmers with the investments needed for chicken feed and
chicks. Th at set the ball rolling and now some 400 farmers are
participating in what has become a community venture. It has
also led to wider social improvements, such as a water project
to supply the community with clean water. So in addition to
saving 2 million dollars in egg and chicken imports and
creating many jobs, the investment is also creating positive
eff ects throughout the community.”
Coaching entrepreneurs and start-ups means taking a very hands-on approach and walking them through all steps of the business.
Miracle treeBy providing private equity, WAVF becomes part owner of the
company of its investee. However, the original owner retains a
strong say regarding the future strategy of the company, as can
be shown by one of WAVF’s investees, the tea factory Morvigor
Ltd in Freetown. Th e company was founded and is led by Eva
Roberts, a trained medical doctor who lived in the United
Sharing a visionCordaid decided to invest in WAVF primarily because of its
target market segment. Providing fi nance to SMEs that by and
large have no access to capital is vital in post-confl ict settings
where SMEs play an important role in creating employment.
“ If you want fragile and post-confl ict areas to
stay stable, you need to make sure that the 25 to
45 year old age group has jobs. If they can earn a
decent living, they will be much less inclined to get
involved in criminal activities or to take up arms.”
Sascha Noé, Investment Manager at Cordaid
Second reason for Cordaid to invest in WAVF is that its operat-
ing principles coincide with Cordaid’s vision on how to stimu-
late entrepreneurship in fragile contexts. WAVF does not
simply give out equity or loans, but supports each and every one
of its investees with technical assistance and coaching. Noé:
“Th e intensive guidance that WAVF provides is vital for success
in countries such as Sierra Leone and Liberia.” Th e strict social,
environmental and governance selection criteria that WAVF
maintains, helps ensure that the investments ‘do no harm’.
Key fi gures WAVF ▪ Total size of the fund: USD 18 million
▪ 28 SMEs fi nanced to date
▪ USD 360,000 average investment
▪ 1,050 jobs created
▪ Cordaid share in WAVF: 25% or USD 4.5 million
Training the workforceA major bottleneck for the development of the SME sector in
Sierra Leone is the lack of access to capital. “Many people lost
their livelihoods during the war and were eager to start up
again once peace had fi nally returned,” says Dr. Anthony Oboh,
Fund Manager of WAVF. “However, the overall infrastructure
was bad and the fi nancial infrastructure in particular was
basically non-existent. So budding entrepreneurs with
promising ideas had nowhere to go for fi nance.”24 Other major
obstacles are the lack of technically skilled manpower and skill
gaps in basic numeracy, literacy and the command of English.
Work ethics are also a problem. Th e coping strategies that
people acquired during the years of violent confl ict – distrust-
ing others, fending for yourself, satisfying immediate needs
rather than working towards medium term goals – appear to
have made many workers lack basic work values such as
punctuality and service orientation.
WAVF has responded to the gaps in education by training a pool
of young men and women as fi nancial managers. Th e start-ups
and companies that WAVF invests in are obliged to include one
of these trained managers on their payroll. Sascha Noé: “Th is
has a double advantage: the investee is assured of good fi nan-
cial advice and management, while WAVF has eyes and ears in
the company and can thus respond very quickly in case of
SEPTEMBER 2014 © CORDAID
ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTSCASE 3: WAVF
21
supermarkets all over Freetown and opportunities for export
to Germany look promising. When operating at full capacity,
the factory will employ 21 people, while the business provides
indirect employment to 500 people throughout the value
chain, including farmers and distributors. Eva Roberts made
it clear to WAVF from the start that, while grateful for the
capital, she is not interested in selling her company. Her
ambition is to buy back WAVF’s shares in the future and
remain a family company. To make this possible, they agreed
that Roberts’ part of the profi ts is not paid out but put aside as
savings to enable her to buy out WAVF in the future. A creative
solution that few mainstream equity funds would have been
eager to implement.
Kingdom during the war and returned to Sierra Leone in 2007
when business conditions began improving. Th e company is
one of the rapidly increasing number of businesses set up by
Sierra Leoneans from the diaspora. Th ese entrepreneurs, many
of them women, share several specifi c strengths. For example,
they are often well educated, have been exposed to Western
management principles and are less sensitive to pressures from
the extended family to share resources or give jobs to family
members. Th e Morvigor company processes herbal tea from the
leaves of the Moringa oleifera, dubbed ‘miracle tree’ in both
Africa and Asia because of its many health benefi ts. WAVF
has invested USD 265,000 in the company, which enabled it
to purchase a drying and packing facility necessary for tea
processing. Moringa tea is now available in shops and
Ph
oto
Co
rdaid
Morvigor Ltd tea factory in Freetown, Sierra Leone
SEPTEMBER 2014 © CORDAID
ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS CASE 4: INNOVATION: SOIL IN BAG
22
Small innovation, huge impactAs the soil bags are fi lled not only with sand, but with a mix
of seeds that can grow and fl ourish alongside the dikes, this
invention can change the practice of water management in
rural areas threatened by cyclones and seasonal fl oods. Initially
the concept was developed for the Dutch market. Th e fi rst
experiments took place at a testing site in the Netherlands,
which proved successful and spurred the interest of national
and international water management institutions. Cordaid
became aware of this innovative technological solution and
initiated consultations to introduce it to the fl ood-prone
regions of Bangladesh.
In the past, dike breaches in Bangladesh have caused salinization of the rice paddies from the resulting mix of fresh and salt seawater. Th is has destroyed villages’ rice yields, cutting seasonal income in times of fl ooding.
Gerdien Seegers elaborates: “We fi rst sought technical univer-
sities willing to cooperate on the pilot. Th eir academic valida-
tion was essential in pushing our eff orts forward. We then
ensured that our strategic partner in the fi eld, Caritas
Bangladesh, was willing to cooperate on this new challenge.
Working locally, Caritas was able to quickly select the most
viable testing sites, arranged the necessary permissions from
the Bangladesh Water Development Board, and engaged their
local engineers to reconstruct the sites in preparation for the
arrival of the soil bags.”
After consultations with local authorities and the involved
villages, the pilot started in Bangladesh in November 2013. In
the Netherlands, the bags are usually fi lled with the use of
machines. In Bangladesh, however, Caritas was able to hire
four hundred people from the adjacent villages to fi ll 40,000
locally produced jute bags with sand and local seed mixes. As
the jute bag is a product that requires minimal training and
has no need for expensive machinery, it proved an accessible
and cost-friendly solution, especially in such fragile areas.
Validating for changeTh e introduction of new technologies and ideas is not always
easy, however. Th e water management sector is long estab-
lished and works with techniques that have been tried and
tested. Introducing an alternative that diff ers from convention
Cordaid worked with Delft University of Technology and
Wageningen University to develop a pilot repairing damaged
dikes in Bangladesh using a biodegradable soil bag. Cordaid
partnered with the innovative Dutch company Green Soil Bag,
which introduced the idea of a jute bag fi lled with soil and a
mix of seeds as a cheap alternative to improve the quality of
damaged dikes. Th is innovation can off er great relief in fragile
contexts. “Th e bag has the advantages of being cheap and
accessible, the dike construction provides local jobs, and the
grass can be used as fodder for animals,” explains program
manager Gerdien Seegers.
Plastic sand bags are traditionally used to protect villages from
overfl owing dikes. However, the bags are often a hazard to the
environment and/or require heavy machinery and their related
costs. After the threats of fl oods have passed, the bags fi lled
with sand need to be cleared or would otherwise take years to
degrade, damaging the environment. Th e Dutch inventor Jean
Paul de Garde developed a bio-degradable soil bag that contin-
ues to protect fragile areas long after they have been stacked
one on top of the other: the sackcloth bag decomposes, the
roots of the grass seeds inside provide extra support to the
dikes, and the resulting grass can be utilized for various
purposes.
3. PARTNERING FOR INCLUSIVE BUSINESS
CASE 4: INNOVATION: SOIL IN A BAGINTRODUCING NEW WAYS OF ADDRESSING SOCIAL CHALLENGES
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Repair of embankment in Bangladesh
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23
The way forwardTh e initiative resulted in over 40,000 biodegradable bags being
placed along the southern delta region of Bangladesh, covering
an area of over 10,000 square meters of dikes, which protect
two villages against fl oods. Eight weeks after the placement of
the soil bags, grass grew two meters high on the dikes with
strong rooting. Following this initial successful pilot, new
projects have been planned with the Government of Bangladesh,
the Bangladesh Agricultural Research Institute (BARI), the
Bangladesh Water Management Board and the Institute of
Water Modeling. With the academic support of Delft University,
the next phase aims to provide the required validation for
scaling of the initiative across and beyond Bangladesh’s fl ood
prone regions, to countries such as Myanmar.
requires compelling evidence and the lobbying skills of local
organizations and government departments.
At the start, questions were raised whether this innovation
actually responded to an existing need. In addition, alternative
‘green’ solutions to fl ood prevention required new alliances and
methods. Th is is a shift that not all stakeholders are willing to
take without fi rm evidence and validation. Despite this, the
Dutch approach of ‘Building with Nature’25 has great potential
in fl ood prone regions and this type of eco-engineering is
starting to gain momentum in the fi eld. Th e involvement of
respected academic institutions, as well as the trusted reputa-
tion of Cordaid, helped to convince the stakeholders to take on
this challenge. P
ho
to C
ord
aid
Results of a dike construction with Green Soil Bags
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS CASE 5: CO-CREATION: THE BABYVIEWER
24
“ Th e collaboration with Cordaid makes it easier for us
to get an idea of people’s real and most urgent needs.
Th e organization has long-term experience and a
good reputation with mother and child projects as
well as a large network of trusted contacts in the
fi eld. A good relationship with the end users of a
product, in this case primarily nurses and midwives,
is important for the verifi cation of ideas and
concepts, and leads to the quickest and best results.”
Guido Geerts, Director Delft Imaging Systems
“Companies developing innovative products usually aim at the
western market fi rst, and then introduce an adjusted version
in Africa. However, our partner organizations in developing
countries and the clinics we support there are much better
served by medical equipment that has been specifi cally
designed for them,” says Nathalie Popken. Th is was the very
reason for linking up with DIS: the company focuses primarily
on markets in developing countries and takes local needs as
the starting point for product development. Th e partnership
also has important advantages for DIS.
CASE 5: CO-CREATION: THE BABYVIEWER BRINGING TOGETHER VESTED STAKEHOLDERS
Th e lack of access to health care seriously aff ects the life chances
of mothers and their newborns in the fragile contexts where
Cordaid works. In fragile regions of Afghanistan and the
Democratic Republic of Congo for instance, only a minority of
pregnant women have access to antenatal care. Health facilities
are either too far away, too expensive, destroyed by gunfi re or
corruption, or inaccessible due to unsafe roads. “Every day, 800
women worldwide die due to complications during pregnancy
and delivery,” says Nathalie Popken, Business Development
Manager at Cordaid. “99% of these deaths occur in developing
countries, in particular in remote areas. Th e knowledge and
technology to prevent these deaths exists, but the diffi culty is
ensuring women’s access to aff ordable and quality care.”
Local needs are the starting pointDuring a Dutch trade mission to Ghana in April 2013, Cordaid
staff met with the director of Delft Imaging Systems (DIS), a
Dutch company working on medical imaging systems and
e-Health software. Soon after, the two parties joined hands
with a concrete project in mind, to develop portable ultrasound
equipment. Ultrasound is an eff ective solution for identifying
complications and risk factors during pregnancy. Cordaid and
DIS realized that if they were to off er a useful technology for
remote and fragile areas, three criteria needed to be met: fi rst,
the technology needed to be low-cost; second, in order to bring
care closer to people it needed to be mobile; and third, given the
lack of professional health personnel in such areas, it needed to
be robust and easy to use.
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A minority of women in fragile regions have access to antenatal care
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25
On to the marketBefore product development started, Cordaid conducted a
feasibility study in northern Ghana in cooperation with a
Dutch consultancy fi rm. Th is involved a market survey and
interviews with gynecologists, midwives and medical assis-
tants. Th e assessment clearly showed the potential of integrat-
ing the innovative ultrasound technology into the existing
health system to improve obstetric health care. Costs are an
important factor: while the ultrasound technology used in
hospitals across the world costs between US$10,000 and
100,000, this device can be manufactured for as little as
US$500. Now that the prototype hardware and software are
ready, the next step will be the pre-clinical testing of what has
been dubbed the ‘Babyviewer’. Th is will take place in Ghana,
Malawi or Ethiopia in late 2014. Th irty devices will be produced
for this testing phase, which is to gather valuable information
for improvements to the technology. If all goes well, DIS and
Cordaid will establish a social venture to bring the Babyviewer
to the market, which potentially includes any country in the
world where access to antenatal care for pregnant women is
hampered by poverty or fragility. DIS will be responsible for
marketing, selling and delivering the Babyviewer, while
Cordaid will complement these eff orts by also making use of its
own distribution channels. Cordaid’s primary role in the social
venture will be to maximize the social impact of the technol-
ogy. “Up-scaling the use of the Babyviewer to earn back the
development costs is important,” says Popken, “but it is more
important for Cordaid to make sure that the fi nal product suits
the exact needs of the users because only then will it have the
desired impact: the early detection of prenatal complications
and the prevention of unnecessary deaths.”
Smart innovation for easy use DIS had contacts with researchers at the School of Electrical
and Electronic Engineering at Newcastle University, who had
developed a prototype of a low-cost, portable ultrasound probe
in 2011. Th e device is roughly the size of a computer mouse and
works in a similar way to existing ultrasound scanners, i.e. it
uses pulses of high frequency sound to build up a picture of the
fetus or unborn child. Th e USB device can be plugged into any
computer or tablet to show these pictures on the screen. Due to
its size, it is very suitable for use in remote and sparsely
populated areas: health workers can easily carry the device
with them while visiting pregnant women. Taking this
prototype probe as the starting point, DIS has been working on
developing suitable software together with the Diagnostic
Image Analysis Group (DIAG) at the Radboud University
Nijmegen in the Netherlands and Fraunhofer MEVIS in
Germany. Th e Computer Vision software package that has been
developed can automatically detect the gestational age of a
fetus from the ultrasound image. With most ultrasound
technology, this requires the user to freeze the image and set
markers with a cursor on the femur and head of the fetus, after
which the computer calculates the gestational age. “Th e fact
that the novel software does not require this human interven-
tion makes it easy to use,” says Popken. “Midwives and birth
attendants can use the device eff ectively with a minimum of
training, which is very relevant for the contexts where Cordaid
works.” Researchers at DIAG and Fraunhofer MEVIS are
currently investigating more challenging computer aided
diagnostic (CAD) algorithms for the automatic detection of
prevalent risk factors associated with the large number of
maternal and neonatal deaths such as breech, multiple
gestations and placenta previa. If successful, these will be
integrated into the software.
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BABYVIEWER
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS CASE 6: SOCIAL VENTURE: URBAN LINK
26
idea of setting up a recruitment agency was born: a social
venture where ambitious young people are matched with
employers in search for a reliable workforce. “However, the
pilot taught us that the only way this initiative could become
fi nancially independent, was by transforming it into a com-
mercialy viable, yet social recruitment and selection agency”,
says Inge Bouwmans, Program Expert Urban Matters at Cordaid.
Africa’s youth population will double in the next 30 years from 200 million to 400 million people.
Matching slum CVs with multinationalsUrban Link moves beyond the traditional approach of vocation-
al training programs by organizing job opportunities for young
people with ‘slum CVs’ at international corporations. Often
traditional courses allow for personal growth and skill en-
hancement but are rarely connected to professional develop-
ment goals or opportunities on the real job market. Local Urban
Link coordinator Teshome Shibru explains his organization’s
approach. “Youngsters leave the course with a new skills set,
but are then challenged in fi nding a matching job. In essence,
Cordaid wishes to focus less on training the ‘many’, but on
building career opportunities for the motivated.”
Recruitment of the young working population is conducted in
close cooperation with community-based organizations such
as churches and community projects dealing with the urban
youth. Th ese long-standing partners of Cordaid know the
community well. Th ey help to identify those young ‘achievers’
who want to invest in themselves and who can become role
models for others once they have obtained a good job.
Booming Addis Ethiopia is characterized by a promising investment
climate and Addis Ababa is a fertile starting ground for
Urban Link due to its regional hub status for international
companies seeking local employees. In a market scan,
multinationals such as Heineken and international SMEs
dealing with agro-products, indicated the need for reliable
staff and were willing to invest in local personnel that were
motivated, coached and fi tted their requirements. In
addition, they realized that working with a recruitment
agency operating as a social enterprise would add value
to their own local business model and would strengthen
their own license to operate.
Triple Win Urban Link does not try to serve a single purpose, but aims to
meet a demand from various angles: creating employment
opportunities for an emerging young population, satisfying
market demand for a motivated workforce. By modeling this
In Ethiopia’s capital city, Addis Ababa, 60% of people between 15
and 24 years old are unemployed and cannot meet basic living
standards. Th e main cause of these high unemployment
numbers among the city’s youth is the missing link between
the capacities of young people and the requirements of local
employers. Cordaid identifi ed a growing demand for skilled
and motivated employees, and has introduced the social
venture “Urban Link” as a response to a problem that is
common in many fast growing cities across the globe. With
Addis Ababa’s fi rst recruitment agency of its kind, Cordaid aims
to match urban youth with employers to help them get a job,
hold on to it, and build a career.
The launch of an ideaTh e idea for Urban Link did not have its origins in Ethiopia but
in Cape Town, South Africa. Here, Cordaid worked closely with
community-based organizations in the informal urban
settlements and, together with the multinational Virgin,
started a project to off er employment opportunities to the local
youth. With the support of the EU, an initiative was launched
that focused on providing young people with internships, in
this case at Virgin’s sports studios, while off ering them formal
training in skills they lack that they might require for future
job opportunities. Motivated young people were recruited from
the urban slums and the pilot resulted in the foundation of a
Sports Academy where personal fi tness trainers were schooled
and matched with potential employers.
Cordaid knew there was an abundant supply of youngsters
motivated and willing to move forward from its previous
experiences of working in city slums, and with youth and
church organizations. Over the years, Cordaid also learned that
addressing youth unemployment pays off . It was merely a
matter of fi nding an entry-point to bridge the gap between
supply and demand. Th e Cape Town pilot was a success and the
CASE 6: SOCIAL VENTURE: URBAN LINKIDENTIFYING GAPS IN THE MARKET AND SUPPORTING IMPACT DRIVEN ENTERPRISES
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Unemployed youth in Addis Ababa, Ethiopia
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS
27
ambitions”, says Teshome Shibru. Young people are easily
tempted to switch jobs when off ered a higher pay at another
company. “Urban Link tries to convince companies to give us
the responsibility to motivate their workforce.”
“ We convince companies to throw away their stick
and focus on the carrot instead”
Teshome Shibru, Urban Link coordinator Cordaid Ethiopia
With Urban Link, Cordaid started a social venture that can
reach scale and can be replicated in other countries where
Cordaid works to fi ght youth unemployment. Th e fi rst market
scans in countries as diverse as Haiti, El Salvador and Kenya are
being prepared.
recruitment agency as a social enterprise that is fi nancially
sustainable and even profi table, it fi lls a gap in the market.
Cordaid not only matches young people to jobs but also shows
them the advantages of a long-term commitment . By focusing
on three tiers of the job cycle (getting a job, keeping a job and
growing in a job), Urban Link helps them to improve their
livelihoods. By having a job and contributing to society, young
people will have a more meaningful life and will be less
inclined to engage in harmful activities such as substance
abuse and delinquency. In the end, community members will
experience that their youth are a valuable asset in their
community, rather than a nuisance. In the long term, Urban
Link helps to increase social cohesion in urban settlements.
For companies, the benefi t is clear as using the services of
Urban Link helps to prevent high staff turnover. “Some
companies say that they are not making any profi ts because of
their current workforce that has little motivation and no
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ENTREPRENEURS: FOSTERING ECONOMIC OPPORTUNITIES IN FRAGILE CONTEXTS
28
11 World Development Report 2013, Jobs http://siteresources.worldbank.org/EXTNWDR2013/Resources/8258024-1320950747192/8260293-1322665883147/WDR_2013_Report.pdf
12 african Development Bank, http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Ending_Conflict_and_Building_Peace_in_africa-_a_Call_to_action.pdf; WDR 2012, Gender equality and development.
https://siteresources.worldbank.org/INTWDR2012/Resources/7778105-1299699968583/7786210-1315936222006/Complete-Report.pdf
13 United Nations, a new global partnership: eradicate poverty and transform economies through sustainable development. The Report of the High-Level Panel of Eminent Persons on the Post-2015 Development agenda. New York 2013; http://www.un.org/sg/management/pdf/HLP_P2015_Report.pdf
14 The World Bank describes inclusive business as “... Inclusive business models are helping companies turn underserved populations into dynamic consumer markets and diverse new sources of supply. In the process, companies are developing product, service, and business model innovations with the potential to tip the scales of competitive advantage in more established markets as well.” from IFC, accelerating Inclusive Business Opportunities, 2011 (p.2)
15 UNDP, Creating Value for all: Strategies for Doing Business with the Poor, 2008 (p2.) http://growinginclusivemarkets.org/media/gimlaunch/Report_2008/GIM%20Report%20Final%20august%202008.pdf
16 Prahalad, C. K. (2006) The Fortune at the Bottom of the Pyramid. Pearson Education, Upper Sadle River NJ. http://www.cs.berkeley.edu/~brewer/ict4b/Fortune-BoP.pdf
17 Porter, Michael and Mark Kramer, Creating Shared Value. Harvard Business Review. January/February 2011. http://www.waterhealth.com/sites/default/files/Harvard_Buiness_Review_Shared_Value.pdf
18 In October 2013, the Framework agreement (FaB) was signed by the Government of the Philippines and the MILF. In March 2014, the Comprehensive agreement of the Bangsamoro (CaB) was signed, which includes the FaB and four annexes, i.e. revenue and wealth sharing; power sharing; transitional arrangements; and normalization
19 The MPC is a broad network of grassroots organizations and NGOs in Mindanao that is in the forefront of accompanying the peace process between the MILF and the Government of the Philippines.
20 Exchange rate September 2014.
21 Exchange rate September 2014.
22 Sierra Leone ranks 177 out of 187 on the Human Development Index of Human Development Report 2013 http://hdr.undp.org/en/2013-report. It is unlikely to meet any of the Millennium Development Goals (MDGs) before 2015.
23 http://www.doingbusiness.org/data/exploreeconomies/sierra-leone/.
24 This and other quotes by Dr. Oboh are taken from an article by Karen Jochems published at http://www.upsides.com/interview/business-partners-just-financiers/
25 de Vriend, Huib et al (2014) ‘Building with nature’: the new Dutch approach to coastal and river works. Proceedings of the ICE – Civil Engineering, 167(1): 18-24
1 The UN Open Working Group developed the Zero Draft listing 17 Sustainable Development Goals to be attained by 2030. The 16th proposed goal relates to fragile states: “achieve peaceful and inclusive societies, access to justice for all, and effective and capable institutions”. http://sustainabledevelopment.un.org/focussdgs.html The UN High-Level Panel of Eminent Persons on the Post-2015 Development agenda proposed twelve goals, of which goal 11 is ‘Ensure stable and peaceful societies’; http://www.un.org/sg/management/pdf/HLP_P2015_Report.pdf. Cordaid stresses that it is of eminent importance that the Post-2015 agenda mainstreams and integrates matters of peace, security, stability and people’s safety across the whole framework. Introducing a specific goal on peaceful societies is vital but not enough; https://www.cordaid.org/en/publications/focus-fragility/
2 World Bank, World Development Report 2011. Conflict, Security and Development. Washington 2011. http://siteresources.worldbank.org/INTWDRS/Resources/WDR2011_Full_Text.pdf
3 OECD, Fragile States 2013. Resource flows and trends in a shifting world. Paris, 2012. http://www.oecd.org/dac/incaf/FragileStates2013.pdf
4 Cordaid, Focus on Fragility. Position paper, The Hague, November 2013. http://eudevdays.eu/sites/default/files/Cordaid_position_FocusonFragility_new.pdf
5 This is how Cordaid defines fragility. Other often used definitions of fragility for instance include the OECD’s definition: “A fragile region or state has weak capacity to carry out basic governance functions, and lacks the ability to develop mutually constructive relations with society. Fragile states are also more vulnerable to internal or external shocks such as economic crises or natural disasters. More resilient states exhibit the capacity and legitimacy of governing a population and its territory. They can manage and adapt to changing social needs and expectations, shifts in elite and other political agreements, and growing institutional complexity. Fragility and resilience should be seen as shifting points along a spectrum” (OECD 2012, Fragile states 2013: Resource flows and trends in a shifting world).
6 African Development Bank, 2014, Ending conflict & building peace in Africa: a call to action. High Level Panel on Fragile States, p.17 http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Ending_Conflict_and_Building_Peace_in_africa-_a_Call_to_action.pdf
7 World Bank, World Development Report 2011. Conflict, Security and Development. Washington 2011; World Bank, World Development Report 2013, Jobs, Washington 2013; http://siteresources.worldbank.org/INTWDRS/Resources/WDR2011_Full_Text.pdf OECD, Fragile States 2013. Resource flows and trends in shifting world. Paris, 2012; European Commission, a Stronger Role of the Private Sector in achieving Inclusive and Sustainable Growth in Developing Countries, Brussels, 13 May 2014 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX%3A52014DC0263&qid=1400681732387&from=EN
8 The IDPS is comprised of the g7+ group of 19 fragile and conflict-affected countries, development partners and international organizations. Cordaid hosts the global secretariat of the Civil Society Platform for Peacebuilding and Statebuilding (CSPPS).
9 The other four PSGs are: Legitimate Politics, Security, Justice, and Revenues & Services. http://www.newdeal4peace.org/wp-content/uploads/2013/01/new-deal-for-engagement-in-fragile-states-en.pdf
10 https://www.census.gov/population/international/data/idb/informationGateway.php
NOTES
CARE.ACT.SHARE.LIKE CORDAID.
about cordaid
Cordaid is based in the
Netherlands and has country
offi ces in 11 countries. It has
been fi ghting poverty and
exclusion in the world’s most
fragile societies and confl ict-
stricken area’s for a century. It
delivers innovative solutions
to complex problems by
emphasizing sustainability
and performance in projects
that tackle security and
justice, health and economic
opportunity. Cordaid is deeply
rooted in the Dutch society
with more than 300,000
private donors. Cordaid is a
founding member of Caritas
Internationalis and CIDSE.
contact
Ingrid Hagen
Director Corporate Strategy
Laure Wessemius-Chibrac
Director Investments
Peter van Poortvliet
Director Entrepreneurship
Cordaid the Netherlands
Lutherse Burgwal 10
2512 CB Th e Hague
+31(0)70-31 36 300
www.cordaid.org