REACHING THE UNDERSERVED: EPISODE 1

Expanding Entrepreneurial Growth in East Africa and Central America with Nicholas Colloff

It’s very, very important to design programs that are driven by how people learn and people solving real-life problems, their real-life problems, and then reversing them into what they need to know in order not to have that problem again.

-NICHOLAS COLLOFF
Executive Director, Argidius Foundation

Ana Singh: ConsumerCentrix is producing a podcast series on insights and stories on reaching underserved and unbanked people in the emerging markets with financial services. For our first episode, I am speaking with Nicholas Colloff, the Executive Director of Argidius Foundation, a Swiss-based, private family foundation, focused on helping entrepreneurs build profitable businesses and contribute to the sustainable development of their communities. Through the generous support of the Argidius Foundation, ConsumerCentrix has recently completed two feasibility studies in Rwanda and Uganda that determined how financial institutions could optimize their value proposition in financial and non-financial services for the SME segment. 

Nicholas, thank you for joining us. Can you explain why the Argidius Foundation is so focused on the development of entrepreneurs?

Nicholas Colloff: We are interested in enterprise development because small and growing businesses contribute to revenue and employment in low-income communities. They’re the engine of economic growth for those communities. And many of them struggle with a whole range of issues like how better to plan their business, how better to sell their product, what kind of business model do they need, as they expand how do they recruit staff, how do they structure the organization. So all of those kinds of issues which are not financially drive n but are building the capacities of the business, makes significant difference to how the business grows. And we focus on identifying what kinds of interventions help what kinds of business grow best.

Ana Singh: Why is the Argidius Foundation invested in East Africa and Central America in specific?

Nicholas Colloff: We focus on East Africa and Central America because we wanted to help build the ecosystem for services in countries which are challenging, challenged by poverty, which have a range of services which may be of indifferent quality and coverage and which we can make contribution to changing that over time by building better services with greater coverage for meeting the needs of more businesses. And then we want to be able to influence the whole system. East Africa is good because there’s a lot of interesting things happening as with Central America. And when things get going, when they gain momentum, people notice. And so, they are regions which have a lot of other donors interested in those regions and so we can influence them too.

Ana Singh: You have developed a very rigorous methodology in determining the various success levels of your funded programs. Can you explain how you went about developing your Monitoring and Evaluation process and what you have learned from it over the last few years?

Nicholas Colloff:  When I arrived six years ago, we had a strategy that had been done for us by a global consultancy that will remain nameless. And it was all accelerator programs. Accelerator programs were the flavor of the month. And so, it was high growth businesses, accelerator programs. That was it. And unfortunately, there was no evidence that accelerator programs actually worked. 

And there are other kinds of interventions, business networks, management training, incubation. So, we decided that we should let 1000 flowers bloom. And we identified what we thought were good programs, run by what we thought were good teams of people, and we would measure their results. We’d look at the incremental revenue, we would look at the employment, and we looked at the capital raised, and we would look at three different levels of business. Formalizing businesses, micro-businesses – potentially small; dynamic businesses which had been around – often family-owned businesses and look at their growth; and also the venture businesses, the businesses that are meant to go up quite quickly. And we’d look at them against these different kinds of intervention. And so that’s what we’ve done.

We have probably now data on 8,000 businesses that have passed through over 50 programs of different kinds. And you begin to see that some programs are high performing. They are consistent. The enterprises that they work with consistently grow. Others slightly less consistent, perhaps slightly middling performance. And then we’ve got what we call the WOWs which is why, why did we do this. That’s probably a why,  why is the organization doing that. When we looked at high performance, we might have hoped that they will be one of our squares. It would be accelerator programs and venture businesses all for formalizing businesses and business networks. They weren’t. They were spread right across. It didn’t matter what kind of business, it did not matter what kind of intervention. What did matter were the consistencies between these successful programs. And the answer was yes.

Ana Singh: How do you partner with financial institutions, so that they are better able to serve entrepreneurs in the SME segment?

Nicholas Colloff:  If you ask an entrepreneur what they want, they say they want money. And partly that’s true. But often, the entrepreneur doesn’t know how much money they need. And also it may not be available to them, and it may not be available to them because they don’t have a credit history. They don’t have collateral because financial institutions, particularly banks, usually lend against collateral. And so, they’re not really equipped to be investable or lent to. So, the two things go together. This capacity building is designed to get people to a point where you could invest in them or you could lend them money and also to work with the financial institutions so that it is much better equipped to understand its own clients and to begin, hopefully if it’s a bank, to lend against cash flow and credit history rather than against collateral because that enables a lot more people to be able to borrow.

And so the two things are meant going hand-in-hand. There is the taking out of risk by building a business and working with the bank taking out the risk to better understand their customers and better designing products that actually work for businesses which they’re trying to help them.

Ana Singh: Do you have any final thoughts that you would like to share on running successful business interventions? 

Nicholas Colloff: Well I think if you want one sentence about what is that works when it comes to a successful business invention it’s not what you’re doing, it’s not your curriculum, it’s not your structure, it’s how you’re doing it and how you’re following the way in which people learn. Because most people learn when they have a problem, and you help them solve the problem and then you have an opportunity to help people learn what it is they need to know not to have a problem again. So often programs just start from the other end.They assume that these are things you need to know and will teach you. But if you teach people they will absorb them to a certain extent. But if they’re not problem focused,  if they’re not current in people’s mind, much of that learning will be lost. So it’s very, very important to design programs that are driven by how people learn and people solving real-life problems, their real-life problems, and then reversing them into what they need to know in order not to have that problem again.

Ana Singh: Thank you for sharing your insights with us today. We look forward to our continued partnership with the Argidius Foundation where we will continue to work together to better understand the “real-life problems” of SMEs in East Africa so that they can expand their businesses through financial and non-financial services.