Ask a TechnoServe Expert: Juan Carlos Thomas on Entrepreneurship

"Ask a TechnoServe Expert" is a series where our staff members, who work on a range of important global development issues, answer your questions. In this edition, Global Director of Entrepreneurship Juan Carlos Thomas answered your questions about entrepreneurship.

How do you empower women to be entrepreneurs in male-dominated fields? When much of the housework and childcare is women-led, how do you empower women to develop and lead their businesses?

– Keara; Antigua, Guatemala

It is difficult to be an entrepreneur, but it is even more difficult to be a woman entrepreneur. Traditional challenges such as access to skills, networks, and funding can be more acute for women who are trying to start businesses. Existing gender norms in many countries suggest that women are not supposed to get the same level of education as men, own property, or even pursue activities outside the home.

Roughly 60 percent of the beneficiaries in TechnoServe’s entrepreneurship programs are women. We also have programs that specifically target women entrepreneurs, such as our Business Women Connect program in Mozambique and Tanzania. At TechnoServe, we strive to apply a gender lens to our work, which means that at every stage of the project, we identify opportunities to make our programs welcoming and supportive of women entrepreneurs. Sometimes small extra steps can make a huge difference. For example, in the recruitment process, you might want to have an ad with a woman entrepreneur to signal that women are welcome in the program. Other techniques include having flexible timing for workshops to make sure women can participate and to pair women entrepreneurs with women business advisors, ensuring that they feel comfortable and understood.

We strive to apply a gender lens to our work […] we identify opportunities to make our programs welcoming and supportive of women entrepreneurs.”

Is microfinance the most viable means of funding small and medium-sized enterprises (SMEs), since they’re often not eligible for impact investments?

– Kiki; Colorado, USA

Microfinance can be a great tool for some entrepreneurs, but it can be quite expensive, with a 50 percent interest rate or above in some cases. Microfinance doesn’t make sense if the expected return on the assets that the loan will fund is not above the cost of the funding. Microfinance and most other forms of lending may also not be advisable if the expected cash flow is uncertain. For example, cash flow with start-ups can be unreliable, so unless the lender is willing to forgive the debt if things go wrong, microfinance would not be a good option. In addition, because SMEs represent a huge range of companies (up to 250 employees by some definitions), the microfinance offering may be too small for some people’s needs.

The type of funding that makes the most sense for an SME will depend on a number factors, including: its size, where it is in the business cycle, and the risk of the expected cash flow. TechnoServe suggests that entrepreneurs should first understand their finances, then look at the funding options available. Microfinance will work for some people, but for others, private capital or government subsidies/grants might be better. In addition, we have found that entrepreneurs can often fund businesses with their own savings if they understand their financial flow and can optimize their business for long-term success.

In Latin American countries, it’s very important to support youth entrepreneurs with resources and technical assistance in such a way that they develop as sustainable entrepreneurs and not as permanent [recipients of] assistance. Can you detail the characteristics of your intervention model that considered this position?

– Sergio F. Sierra Romero; Mexico City, Mexico

The entrepreneurial culture is growing in Latin America and young people are particularly well-positioned to identify opportunities to create value for the region through new business ventures. This young generation is one of the best educated in Latin America. In addition, they have increased exposure to the new economy and are the most comfortable using technology and social networks for business opportunities. TechnoServe has some youth-specific entrepreneurship programs in the region, such as Crece Tu Empresa in El Salvador, Guatemala, and Panama. Our programs also support young entrepreneurs in Mexico, Chile, Brazil, Peru, Nicaragua, and Honduras.

Entrepreneurs can often fund businesses with their own savings if they understand their financial flow and can optimize their business for long-term success.”

Through these programs, we have learned that young entrepreneurs face a number of critical challenges. They often lack access to resources, market networks, and the managerial experience necessary to grow their businesses. TechnoServe’s programs help them overcome these knowledge gaps. However, above all, we have learned that the key to entrepreneurs’ long-term success is to give them the skills they need to cope with business challenges on their own. In this regard, the use of behavioral change methodologies and technology has been particularly useful in our journey to make our programs effective and efficient.

How could you address access-to-finance challenges for small businesses?

– Yohannes Tesfu; Addis Ababa, Ethiopia

Access to finance is one of the biggest challenges for entrepreneurs in developing countries. Often, we meet entrepreneurs who have great ideas for businesses, but do not have access to funding. Many entrepreneurs tell us they have put their business goals on hold because of lack of funding, and they are eager for help raising the capital they need to unlock their potential. We often start by switching the focus. Instead of helping our clients’ businesses obtain immediate capital, we work with them to build a realistic implementation plan for their enterprise – one that can eventually be financed with the capital they currently have or could more easily obtain, sometimes just by understanding their financials and optimizing their business model.

Young people are particularly well-positioned to identify opportunities to create value for [Latin America] through new business ventures.”

For instance, in 2014, I met a man named Mauricio who lives in a small town in Chile. He dreamed of expanding his fish retailer business, but didn’t have the funding he needed to get started. After receiving business training through the Emerge program, a collaboration between Anglo American and TechnoServe, Mauricio decided to grow his business incrementally. He worked with us to improve his sales and marketing strategies, which increased his profits and allowed him to save for his next phase of expansion – opening a small seafood restaurant. In this gradual way, he eventually increased his sales fourfold – at which point he could start planning for the level of growth that he had initially dreamed about.

[For would-be entrepreneurs who live in areas that are remote or difficult to access], how do we get funding to work with fringe communities in order to enable them to reach the level where they can hold their own?

– Gwynne Foster

Connectivity can be a significant challenge for many communities that are remote or difficult to access. TechnoServe has always had a presence in rural areas, and a number of programs have helped us build our capacity to better serve remote entrepreneurs. Two particularly recent examples are our Potencia Patagonia and BeniBiz programs, which support entrepreneurs in Chilean Patagonia and rural Benin.

To make sure we reach as many entrepreneurs as possible, we use a blended approach that includes online interaction, group workshops, and one-on-one advisory services.”

Key learnings from these programs have been to develop a local implementation team when possible, use technology such as mobile apps for communication and training when available, and plan logistics strategically to keep the implementation costs down. For example, in Patagonia we work with communities that are at least one full day of travel away from our home base. To make sure we reach as many entrepreneurs as possible, we use a blended approach that includes online interaction, group workshops, and one-on-one advisory services as needed. These programs have been highly valued by communities with historically little access to business support services.

Do you have other questions for our development experts? Our next “Ask a TechnoServe Expert” interview will be with Director of Impact Kate Scaife Diaz. Stay tuned to submit your questions about the methods and challenges of measuring development impact.