The US African Development Foundation (USADF), in collaboration with the Citi Foundation and the US Department of State, recently hosted a youth entrepreneurship summit in Nairobi. The event brought together 58 top social entrepreneurs from 18 African countries.
Financial Standard caught up with USADF board member Iqbal Paroo, who explained what the organisation is doing for the continent’s entrepreneurs.
USADF is an independent US Government agency established to support and invest in African-owned enterprises. Who do you reach out to under this model?
We target recovering communities, smallholder farmers, women and girls, youth and persons with disabilities. Our agile development model allows us to move quickly and invest in conflict and post-conflict areas.
We extend the reach of traditional foreign assistance by working with underserved communities. For instance, in Somalia, we’re providing more than 6,000 youth with job training and the skills to start their own business.
But these populations can be difficult to access, so how do you get around this?
USADF is a US agency, so we’re not a classic non-governmental organisation or venture capital fund. Our historical mission since establishment in 1986 was to focus on a unique model. The model we use moves like a speedboat. Our agency is authorised to work directly with communities.
Our mission was to focus on populations that were left out of mainstream capital and opportunities. These populations tend to be more rural, so a majority of our funding has been around rural projects, with a lot of focus on agriculture.
We reach these populations through African partners. This means we don’t have someone from the United States flying in and saying, ‘Oh, you need this in this village’. In each of the 18 countries we operate in, we use local partners. We read reports, consult with our embassies and local governments, and send in our partners to do due diligence.
What happens next?
Once the partners figure out the opportunities, we fund the community. It could be a church group or a farmers’ group, anything that’s bottom-up and community organised.
One of the great things about our operations is that we don’t go into communities and tell them what they need, we ask them what they need. They could say boosting coffee or maize production.
We’ll then do our due diligence to be sure the need is actual and that market opportunities exist. We then test the strength of the community model and help them form co-operatives that we then fund.
Our partners help these co-operatives build capacity and gain technical expertise, and we send the money directly to these community groups, with no external interventions.
We give them small grants, say $25,000 (Sh2.5 million), and our partners continue working with the co-op to develop capacity.
Does the funding stop with the first grant?
No. A community or group can be successful with the first grant and then ask for a second one to scale up its idea, as long as the capacity is in place. If I gave you money but didn’t build your capacity, then you would want more help.
It’s our model to leave behind enough capacity. We find that this way, the community members will naturally use their training to do something else; one enterprise can birth another.
How long does the USADF selection process take given the volume of ideas that must land on your desk?
There’s a first screening, where we look at things such as how well the community groups are prepared for their ideas, then there’s a second screening and the final selection. When all is said and done, we fund a viable project within 90 days on average.
The key is having local partners doing the due diligence; that is, looking into the idea, local resources, whether local leadership has come together, what kind of training is required to get the idea off the ground, among other things. ?