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Are new enterprise models disrupting growth?

Last week, I attended an Information and Communications Technology for Development conference at the Safari Park Hotel. Participants were largely drawn from the NGOs, research institutions and the donor community.

My panel discussion focused on “impact investment,” an emerging concept that puts emphasis on the changing paradigms of foreign aid.

The Global Impact Investing Network refers to impact investment as investments “made into companies, organisations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.”

It is a form of socially responsible investing that serves as a guide for various investment strategies.

These new models of funding development are effectively disruptions in failed foreign aid funding mechanisms that encouraged dependency at the expense of sustainable development.

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God in His wisdom never wanted humankind to be so dependent on anybody. He lends to us his divine powers and demands of us a little effort to succeed in our endeavours.

It was precisely what he demanded of the children of Israel when he gave them manna from Heaven but failed to deliver it to their feeding tables. Instead, he asked them to go out and gather enough to feed themselves (Exodus 16).

We continue to disappoint God when we fail to supplement his celestial generosities with our own effort to flourish on this earth. God could have attained his aim of saving sinners without our aid but in order for us to develop a character like Christ, we must share in his work.

In order to enter into his joy, the joy of seeing souls redeemed by his sacrifice, we must participate in his labours for their redemption.

We must be labourers together with God. As Ellen G. While argues in the book ‘‘Christian Service,’’ God will not complete his work without human agencies. Humans are tasked to implement God’s will.

I know I sound like a preacher, but it is all for a good cause – to stress the point that aid without effort is a contradiction in terms and serves to distort the mindset of the developing world besides helping to confine many people into abject poverty.

In his 2013 book review article, ‘‘The Dark Side of Foreign Aid’’ published in the The Diplomat, Peter Tan Keo observes that: “Foreign aid’s biggest downside is that no clear, effective system has been put in place to hold aid recipients and their governments accountable for resources illegally taken from public sector coffers – a long-standing, and still very present, trend from Asia to Africa to Latin America/Caribbean to Europe.

Unfortunately, the absence of that system reinforces social inequities and perpetuates cycles of political abuse that have led to a sophisticated new form of authoritarianism – one that empowers the elite few, while keeping a majority of people in abject poverty.”

Africa and the rest of the developing world must reject what has clearly made many of the developing countries dependents. The new push, however, is not coming from countries that are suffering from dependency.

Three forces are driving this new paradigm. They include citizen’s pressure from donor countries to see more accountability on public resources given to other countries as foreign aid; increased need for more resources especially into Eastern Europe after the fall of the Soviet Union, and a desire to see that aid supports a sustainable programme.

Whatever the motive, these new initiatives will be good for the developing world. Unlike in the past, the shift will certainly disrupt how the business of foreign aid is has traditionally been done, giving rise to closer collaborations between donor agencies and recipients.

When this happens, the outcomes of donor funds will also shift from intentions to tangible and sustainable results. Much of the donor funds today focus more on targets that rarely make sense.

Disruption of traditional donor funding mechanisms did not just start recently. Foundations such as Rockefeller; and Bill and Melinda Gates started the donor funding reforms some years back.

Rockefeller even invested in a research study on impact sourcing. The study led to the development of Digital Divide Data, a social enterprise highlighting disparities in access to technology.

Bill and Melinda Gates Foundation’s investments in affordable pharmaceutical products has helped millions to afford antiretroviral medication, and this has led to longer and better lives for people living with HIV.

Given the failed experiences of foreign aid to developing countries, there is renewed hope that emerging concepts like impact investment will make a positive difference.

Impact investment trials by global foundations have shown that the paradigm shift would lead to sustainable development that has been elusive in the past.

The writer is an associate professor at University of Nairobi’s School of Business.

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