Wraparound Business Services: A New Approach to Scale Rural SMEs

We provide rural young entrepreneurs with up to two years of weekly customized business advisory, linkages to markets, and debt financing.

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I confirm that I am fully aware of the eligibility criteria, and based on its description, I am eligible to apply to the CSV Prize 2017.

  • Yes, I'm eligible

Preferred language

  • English

Organization name

Ongoza

Year founded

2013

Initiative stage

  • Growth (the pilot has already launched and is starting to expand)

Annual budget in 2017 (USD)

  • $250k - $500k

Number of beneficiaries impacted so far

  • 500 - 1,000

Organization type

  • Nonprofit, NGO, or citizen sector

Secondary Focus Area

  • Rural development

Headquarters location: Country

  • Kenya

Headquarters location: City

Nairobi

Location(s) of impact

Kenya: Nakuru, Bungoma, Migori

Website

http://www.ongozayouth.org

Facebook URL

http://www.facebook.com/ongozayouth

Twitter URL

@ongozayouth

Problem: What problem is this initiative trying to address?

In Kenya, 800,000 young people enter the labor market yearly, vying for 50-80,000 jobs (Aga Khan Foundation, 2016, World Bank, 2016); college grads take four years on average to find a job (British Council, 2013). Consequently, youth around the country start small businesses to earn a livelihood. But without the necessary skills, most remain small and in survival mode. From our experience, their primary needs are marketing strategy, customer acquisition, and financing, with long-term intensive support targeting growth.

Solution Summary: What is the proposed solution? What do you see as its most promising aspects for creating shared value?

Ongoza recruits high-potential young entrepreneurs across industries through a four-part screening process; we look for entrepreneurial attitude and an existing business earning above $1,000/month. Once admitted, entrepreneurs undergo a business diagnostic to assess gaps and opportunities and build a growth plan laying out goals and Ongoza's support package. Entrepreneurs then receive 10 hours/month of consulting by in-house advisors (mid-level consulting and finance professionals) at a subsidized rate. Our support is broken into 3 packages of 3, 9, and 12 months; after each period, most but not all entrepreneurs are graduated to focus resources. After 3 months, entrepreneurs become eligible for low-cost debt financing through a sister company.

Feedback mechanisms ensure the quality and responsiveness of our services: bi-weekly SMS surveys go out to all entrepreneurs, and a mobile app correlates our business advisory process against outcomes to identify high leverage interventions.

Impact: What is the impact of the work to date? Specify both the social and the environmental impact of your work

We currently engage 27 youth-led businesses that support 411 people who would not have a job otherwise. In 2016, the average monthly increase in revenue across our current cohort was $575 (representing 266% growth), while the highest monthly revenue increase was from $489 to $2,095 ($1,607/month added, 329% growth). Overall, we have supported over 100 businesses. Each has a social mission; so far 25,000 individuals have been reached by our partner enterprises through social services including awareness campaigns and entrepreneurship training.

As an example, we supported a social enterprise named Eco-Safi that sells hand-detailed boutique paper bags from recycled material, funneling profits into life skills training for street youth and employing them in production. We helped them build financial records, a governance structure, and a marketing plan. We worked on their sales pitch and directly connected them to clients, leading to monthly revenue increase from $525 to $1701.

Financial sustainability plan: How is this initiative financially supported? How will you ensure its financial sustainability long-term?

1. Individual donations or gifts (40%)
2. Grants (55%)
3. Earned Income (5%)

Earned income is new for us in 2017, but will grow to encompass more of our budget. We started charging a fee for service at $10/month/entrepreneur in July, which we anticipate raising or shifting to a revenue share (under review). In March we launched a consultancy arm to offer technical assistance to other organizations supporting entrepreneurs. Our first contract was investment readiness preparation of 15 young entrepreneurs that led to two pitches on the Kenyan version of Shark Tank (Lion's Den) with both securing investment. We are looking into offering this service to corporates to improve their supply chains in a sustainable fashion. Lastly, we earn interest from our small debt financing instrument.

Unique value proposition: What makes your initiative innovative? How does your project differ from other organizations working in the same field?

The gap between investors and entrepreneurs exists in part because SMEs in rural or semi-rural areas don't have the structure or capital to get large enough to be appealing. Though other organizations focus on market linkages or financing for many businesses at a time, no one else is working to provide these holistic wraparound services over time for our target market. Our solution enables young entrepreneurs to get larger and build local economies rather than promote extractive value chains.

Founding story: Share a story about the "Aha!" moment that sparked the beginning of this initiative.

Ongoza has a non-traditional background; we were founded in 2008 after the post-election violence in Kenya as an all volunteer peace movement. After mobilizing peace committees to create dialogue, we saw those same young people being paid by politicians to cause conflict in the streets. At that point we realized that the only way to create a more stable and peaceful Kenya was to support young people to thrive economically. While still volunteer-driven, we tried a number of interventions (creating founding teams, shifting to support existing enterprises, providing small business training, providing small business training with seed money) to learn, before formalizing in 2014 and focusing on longer-term business development. The weekly structure (10 hours/month) laid out above was built in 2015 after seeing that lighter touch, monthly support was not as effective for this demographic.

Where did you hear about the Nestlé Creating Shared Value Prize?

  • Upon recommendation from others

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