The Business Partnership Portal

Marginalized entrepreneurs and those who have been displaced because of conflict find it difficult to establishbusiness ventures if the rule of law in their countries is weak and if they cannot rely on a network of trusted individuals. Our solution is a platform that provides these entrepreneurs with equal access to information, a level playing field, and enforcement mechanisms, so that they can enter into business ventures with other entrepreneurs, knowing that all parties will abide by the rules without having to always rely on formal judicial systems. Entrepreneurs can use the platform to promote their businesses with investors and business partners.  The platform provides information on how the businesses are run. This allows investors and business partners to take informed decisions. Displaced entrepreneurs will finally be able to set up sound businesses without having to rely on hands-outs from aid agencies or inefficient micro-loans and irrelevant trainings.

Current aid-funded livelihoods interventions in displacement-affected contexts are not effective because aid agencies target inefficient micro-enterprises. Entrepreneurs who have been forced to leave their place of origin because of conflict find it difficult to establish efficient businesses in their place of displacement. This is because they cannot rely on effective regulatory systems and institutions that ensure a level playing field, equal access to information and coordination.

In their place of origin, entrepreneurs would rely on their network of trusted individuals. However, following displacement they have lost their networks and do not have the capacity to navigate through the systems of their host countries, especially if institutions are weak and systems unpredictable.

Aid agencies have sought to address this problem by circumventing it. As the context does not favour the emergence of efficient enterprises that can create jobs, aid agencies have decided to support unemployed displaced labourers to become micro entrepreneurs. This approach can be effective when displacement is temporary, as it provides a short-term injection of capital and skills. However, it has shown its limitations in case of protracted displacement, as short-term injection of income may not be enough to make displaced individuals economically integrated in their host societies.

Our solution is a platform that allows displaced and marginalized entrepreneurs to promote a business idea with investors and business partners. 

Although our platform is based on the principle of crowdfunding, it differs from other crowdfunding platforms that rely on effective institutions for businesses to function.  Our platform provides the rules, accountability and transparency needed by shareholders and business partners to oversee the work the company directors, even in contexts with weak regulatory frameworks. 

Our platform gives all stakeholders equal access to information, a level playing field, and enforcement mechanisms. The platform discloses information on how a business is being run, including detailed financial information on the company bank account, investments, inventories, staffing, procurement etc. As a way to improve transparency and accountability, the platform allows payments through bank transfers and mobile money, and discourages cash transactions (these are still very common in informal economies.) The platform also entails a scoring and review system. (Existing platforms may have some of these features but not all of them.)

Our platform relies on a combination of well-established technologies, e.g. mobile money transfers, content management systems, Interactive Voice Response, banking Application Programming Interfaces, etc., which are used in combination to create an eco-system.

Our solution serves entrepreneurs who have been displaced because of conflict but are eager to use their business skills to set up business ventures in their host countries, as well as marginalized entrepreneurs who cannot rely on established business circles. Our solution also serves investors and other companies who want to engage with non-mainstream entrepreneurs, but are hesitant because they fear that their investments or business ventures will not be protected (as they operate in low-trust societies with weak rule of law). 

Our solution allows all stakeholders in a business to trust each other because they know that each party will abide by the rules, as negative behaviors will be punished through negative reviews, low scoring, and even disinvestments. 

As trust between stakeholders increases, businesses can gain a larger base of shareholders and partners that go beyond the inner circle of the displaced entrepreneurs. 

We engage with our target population by partnering with aid agencies that support displaced populations. As our platform facilitates the creation of multi-shareholders companies that are more efficient than micro-enterprises usually supported by aid agencies, we expect that the income of entrepreneurs that use our platform will be higher than those who do not. 

Our solution is fully aligned with the GOOD JOBS & INCLUSIVE ENTREPRENEURSHIP challenge goal of enabling small and new businesses to prosper and create good jobs. Our solution targets displaced and marginalized entrepreneurs, who have business skills, but lack access to networks of trusted individuals, and, therefore, access to capital. (This is particularly the case in countries affected by patronage and crony capitalism.) By supporting the creation of trusted business ventures, our solution makes the work of aid agencies that support displaced populations more efficient and sustainable. By providing a level playing field we ensure inclusiveness in entrepreneurships.

We believe that existing platforms are not suitable to cater for the specific needs of our users. Regardless of their specific model and features, majority of crowdfunding platforms have been established in developed economies with robust rule of law. Users of these platforms can implicitly rely on strong social norms and an effective judiciary. 

Cognizant of this, some innovators from developing economies have created their own crowdfunding platforms. However, even these platforms cater for formal business and are not suitable for the informal businesses that are run by displaced and marginalized entrepreneurs.

As the business model of these platforms is based on a fee on the funds that have been raised by users, all these planforms require that funds transit through their systems. Although these platforms offer an array of modalities to make payments, users still need to be engaged in formal banking. As majority of people in developing economies are financially excluded, these platforms exclude displaced and marginalized entrepreneurs who operate in the non-formal economy.

In order to address this issue, we have partnered with telecom operators that offer mobile money services (in Somalia, where we have piloted our platform, majority of people make payments through their mobile wallets). As our business model does not rely on fees on raised funds, we do not need users send funds through our systems. Instead, users can send the money directly to the mobile accounts of the recipients. Through an interface, our platform monitors these transactions and ensure transparency and accountability.

Our solution makes use of existing and well-established technologies, i.e. content management solutions (CMS), mobile money, Application Programming Interface (API), Unstructured Supplementary Service Data (USSD), Interactive Voice Response (IVR). The added value of our solution is that these technologies are combined into a structured way in order to serve a process.

Differently from other innovations that are technology driven (i.e. first they find a technology and they look for a solution), our solution is driven by an underlining theory of change (see section below). Our process aims at improving trust between business partners in contexts where social norms are weak and trust is low. As such, our focus is on improving the transparency of business transactions and accountability of all partners. By using mobile money, we eliminate cash transactions, which are still widespread in the informal economy, and cannot be tracked. Through API we are able to read in real time in the bank and mobile money accounts of the businesses that use our platforms. Thanks to CMS we are able to disclose key financial information of the businesses that use our platforms so that investors will know how these businesses are run. Thanks to USSD we are able to communicate in real time with the users of the platform, for example by sending short messages to give updates on the businesses they have invested it. Through IVR we make sure that also illiterate or partially literate users are kept informed.

Our solution has already been successfully piloted in Somalia. Our solution is based on a platform, called Sokaab (www.sokaab.com), which has been developed by this team for a project implemented by a leading international organization, the Danish Refugee Council, with funding from the Somalia Stability Fund.

The project, called DIALOGUE through resource mobilization, aimed at improving social cohesion between Somali communities, regardless of their clan affiliation, and improving trust between citizens and the still-emerging state institutions. The project provided matching grants that were in proportion of the funds raised by communities (community investments that entailed a higher level of collaboration across clans received proportionally more funds than investments with a lower level of collaboration). The DIALOGUE project also provided cash transfer for collective action to allow vulnerable members of the target communities to give their contributions.

A Randomized Control Trial carried out by the International Centre for Tax and Development, an independent research institution, found conclusive evidence that treatment communities had a higher level of trust in other clans than control communities, as a result of the project. It also found a significant increase in treatment villages of individuals that had engaged with state officials, a significant overall increase in trust in the district government, and improvements in citizen perceptions of the transparency of the district government. The implication is that it is possible to increase trust between stakeholders in business ventures regardless of clan affiliations.

Our solution entails the upgrade of Sokaab so that it can handle more transactions.

Our theory of change (ToC) is based on the notion that businesses in displacement-affected contexts can succeed only if all stakeholders have equal access to information and can coordinate among themselves. The technology that we use for our solution is meant to provide equal access to information and make coordination more efficient.

Our ToC draws from the work of a prominent economist and political scientist, Paul Collier. In his book Exodus published in 2014, Collier identifies “four pillars of prosperity” that sets apart high-income countries from low-income ones, namely: political and economic institutions; narratives; effective organizations and identity, and social norms. Our solution acknowledges that displaced and other marginalized entrepreneurs are set back by non-conducive social norms, i.e. key norms concerning violence, cooperation and trust.

Collier maintains that the capacity to cooperate is fundamental to prosperity. However, sustained cooperation depends upon trust. Whereas high-trust societies are better able to cooperate and face lower transaction costs because they rely are less dependent upon processes of formal enforcement, low-trust societies are, conversely, less able to cooperate. Because of low trust, entrepreneurs are dependent on a small network of trusted individuals. Newcomers, such as displaced and marginalized entrepreneurs, do not have access to these close networks.

Our theory of change postulates that if business actors, i.e. our target entrepreneurs, business partners and investors make use of our portal, then they will have access to information about their own actions. If each user of the portal has equal access to information and have the possibility to flag negative behaviors or rule breaking of other users, then business actors using our portal become more willing to engage in more long-term business ventures because they know that other parties will be discouraged from breaking the rules (rules breakers will be banned from the platform). If users engage in trusted and reliable long-term business ventures, then their businesses will prosper because they will reach economies of scale and reduce transactions costs.

Under the DIALOGUE project (see above), Sokaab supported 4,780 households, which, given the estimated average household size in Somalia, translates into approximately 28,200 beneficiaries. For this project, Sokaab platform served 5,770 “bakers”, i.e. individuals whose financial contributions to community investments were accounted for in Sokaab. To date Sokaab has served a total of 7,737 bakers. 

As it will be explained in the section for the business model, in the first three years we expect to partner with leading aid organizations that support displaced and marginalized entrepreneurs. Thanks to our solution, which is an upgrade of the current Sokaab, aid agencies will be able to leverage private investments with their grants. Based on the experience of the DIALOGUE project in Somalia, by partnering with an aid organization that can avail $1,000,000 in matching grants for business ventures we expect that in the first year of operation our solution will serve some 10,000 individuals. 

Although it is difficult to provide an estimation of the how many people our solution can serve in 5 years, we could tentatively estimate that it could serve up to 100,000 users in the third year, and 10,000,000 users in the fifth year, based on an assumed a ten-fold increase of matching grants in the course of first three year, and a successive yearly ten-fold increase of users in the each of the two following years.

Our goal within the next year is to create a new platform that is an improved version of the current Sokaab platform (see section below). In the same year, we aim to involve at least one aid agency that will use the platform to allocate US$ 1M in grants to entrepreneurs that have raised funds from private investors through the platform. Our partner could be the Danish Refugee Council, with whom we collaborated for the establishment of the Sokaab platform, or another aid agency that may be interested in using our platform. 

In the second and third year, we plan to partner with other aid agencies that will allocate US$10M in matching grants. We expect that aid agencies will partner with us because our platform allows them to see how their business grants are been spent (the same way as DRC could see how the matching grants it provided under the DIALOGUE project were spent by the communities). As the same time, aid agencies will be able to leverage more investments with their business grants, as our platform allow private investors to join the business ventures supported by the aid agencies (the same way as DRC managed to leverage more than US$ 930,000 in community contributions with its US$ 1M in grants).

Starting from the fourth year, we then expect that users will grow exponentially, as we will build on the base of 100,000 users who have been brought in thanks to aid-funded matching grants in the previous three years.

Based on the experience of the DIALOGUE project in Somalia, we have identified key barriers that may limit our impact. At first, we may face cultural barriers. We reckon that our potential users maybe resistant to change. Although displaced and marginalized entrepreneurs know that the micro-grants and the not-always relevant training that they get from aid agencies may not allow them to escape poverty, they may decide not to use our planform and stick to traditional aid, because this is what they know. Similarly, although aid agencies reckon that using the platform will improve the efficiency and efficacy of their interventions, they may decide to stick to their traditional approaches.

As we scale up our solution to other countries starting from the second year, we may face technical barriers. In other countries we will have to partner with other financial institutions for baking services and telecom operators for mobile money, This may mean that the interfaces that we are using with Somali banks and telecom operators may not work in other countries. 

The need for upgrades may require additional investments, which may create financial challenges. Moreover, in order to be able to operate in other countries we will have to either establish subsidiaries, or to partner with local organizations. The first option means that we may face legal barriers – depending on the complexity of registering a business, whether the second option may result in market barriers, depending on whether there are suitable organizations with relevant expertise and operating capacity.

With regard to cultural barriers we plan to adopt a two-fold approach that combines financial incentives with extensive communication. Somalis have a long tradition of crowdfunding, which is facilitated by clan leaders. For decades, Somali communities have been able to raise money, both locally and from diaspora, to fund communal investments and services that were not provided by the government. (The limitation of this system is that fundraising takes place within kinships.) In order to incentivize these leaders to use the platform to crowdfund for business ventures, we will allow leaders who have facilitated a crowdfunding to take a small fee out of the funds they have raised on behalf of an entrepreneur. Communication through traditional means (radio and community meetings) and social media will showcase the success of businesses that use our platform.

With regard to technical barriers, we will adjust the mix of technologies that we use so that our interface will be able to fetch financial data from the banks and mobile wallets of the users from new countries. We will fundraise with traditional donors to cover related financial costs (as Sokaab has been funded by a traditional donor we are confident that we can overcome financial barriers). 

With regard to legal and market constraints in new countries, we will assess the cost of opening a subsidiary vs the cost of engaging with local partners, as well as the potential to raised funds from institutional donors. We expect to have a mix of subsidiaries and local partnerships.

We already have 5 core staff (see section below) who will work on a continuous basis on our solution. Two of them (ASID director and learning & partnership officer) will work on the solution on a full-time basis. The other three (ASID Chief Technical Officer, Shaqodoon deputy director and Shaqodoon communication for development specialist) will work on the solution on a par-time basis. We plan to bring on board in the next few months three other key resources (ASID project manager based in Somalia, communication officer and operations manager) who will work full time on the solution.

The team is composed of highly qualified professionals who have spent most of their professional careers to find solutions to the problem of low collective action in low trust societies.

The team will be led by Ivanoe Fugali, an expert in state-building in post-conflict contexts, with a focus on of Somalia. Ivanoe is the director of ASID Consulting. He has worked for a number of international organizations, including the United Nations Development Programme, World Bank and Danish Refugee Council. More recently he has worked as a consultant for the Stabilisation Unit of the UK Government, as well as private organizations, namely Mott MacDonald and Adam Smith International.

Arab Salem, a highly experienced IT professional who has developed a number of IT systems for the Danish Refugee Council and other aid organizations, will lead the development of the platform. 

Kyle Jacques, a committed professional with experience with the UN Peace-Building Fund, will document lessons learned. He will establish partnerships with research institutions.

Mustafa Otman will lead the Shaqodoon team that will roll out the use of the platform in Somalia. Mustafa is a highly experience professional who has played a leading role in the development of Sokaab and has led many other projects for Shaqodoon. 

Mohamed Khalif, the deputy director of Shaqodoon, will provide overall guidance and oversight to the work carried out by Shaqodoon. 

Arab, Ivanoe and Mustafa have worked together in several occasions in the course of the last 10 years to develop solutions to difficult problems in Somalia.

Our organization, Advanced Solutions for International Development Ltd. (ASID Consulting) a private company based in UK, is currently partnering with Shaqodoon, a Somali based organization with proven track record in technological solutions aimed for Somali job seekers and businesses.

For the purpose of the DIALOGUE project in Somalia, ASID and Shaqodon have partnered with the Danish Refugee Council (DRC), a leading international NGO with headquarters in Denmark. DRC support refugees and internally displaced persons in 40 countries around the world. DRC has used the Sokaab platform, which has been designed by ASID and created by Shaqodoon, to track the matching grants that it provides to Somali communities. The DIALOGUE project, which has been funded by the multi-donor Somalia Stability Fund (SSF) and implemented by DRC, entailed an innovative approach that has allowed the Somali government to channel funds to communities in a transparent and accountable way, and communities to monitor the work of their leaders who were in charge of the implementation of community investments, including public private partnerships. 

We plan to continue partnering with DRC on this solution by: (i) availing our new platform (i.e. the upgraded version of Sokaab); (ii) providing technical support to DRC field staff and the displaced and marginalized entrepreneurs they are assisting on the use of the platform; (iii) providing support to DRC management in the design of projects that entail the use of our platform, which will be funded by institutional donors. 

Our business model is based on increasing the profitability of the businesses that use our portal. We expect that our users will be able to increase the size of their businesses as they will be able to establish business ventures with other entrepreneurs. We also expect that they will be more likely than non-users to attract investments from private investors, as their business are managed more transparently than business that do not use the planform. Although our users are not more likely than non-users to receive grants from aid agencies, we expect that they will be able to generate higher returns on the grants than non-users, because they will be more likely to pool their grants - and achieve bigger economies of scale, than non-users.

In exchange of the value of our services we will ask our users a fee that will be equivalent to 3% of their yearly operating profits (as our system reads into the bank accounts of the businesses that are registered into our portal, the fee will be calculated automatically). 

We expect that displaced and marginalized entrepreneurs want to use our platform because they know that, if they do not, they would be doomed to continue running businesses that are too small and that can just cater for subsistence needs (grants provided by aid agencies are usually very small). We expect that they will sign up for our services as they know that they will have to pay a fee only if they make a profit.

In the first year we expect that the development costs to upgrade Sokaab will be met by grants (including SOLVE) and equity.) We expect that traditional donors will fund the upgrade of Sokaab, because they know that the aid agencies that they fund can improve the efficiency and effectiveness of their livelihoods programmes. This expectation is based on our past experience with the development of Sokaab, which has been funded by the Somalia Stability Fund and used by Danish Refugee Council. We also seek to obtain grant for a research component (this could be funded by The Andan Prize – see section below).

In the second and third year we expect that running costs will be met by equity and services that we provide to aid agencies that use our platform. In the fourth and fifth year, we expect that our users will start paying fees, as they will start seeing the benefit of the platform in terms of increased capacity to raise investment from private investors, receive grants from aid agencies and join up with other entrepreneurs. 

We expect an exponential growth of the users of our platform, as we know that our users will bring non-users, either as their investors or their business partners. As our base of users grows, we expect that an increased number of aid agencies will use our platform. New users that are recipient of aid-funded grants will bring new users as their investors or partners, who are not necessarily recipients of aid. 

We believe that SOLVE can provide great value to our solution through mentoring, technical support and facilitation of partnerships. Although we are seeking funds from Solve and the The Andan Prize for Innovation in Refugee Inclusion, funding is not our main motivation for applying to Solve. As a team with extensive experience on Somalia and other displacement-affected context we can rely on an extensive network of donors that could continue funding our platform (the same way as Somalia Stability Fund has funded Sokaab, the first iteration of our solution). However, we are cognizant that most of the funding that comes from traditional donors may not be suited for innovations with long-term focus. A short-term injection of funds may serve the purpose of developing “something fancy”, but it will not address issues of sustainability. As we have seen in the course of the last two decades too many deserving initiatives who were started by well-intentioned individuals collapsing because of lack of proper follow up, we are keen to ensure the sustainability of our solution. Being committed to long-term engagement, we value the long-term benefits that equity and mentoring can bring.

Our partnerships goal is to be able to partner with other organizations from the private sector who provide on-line services to entrepreneurs in more developed economies. We believe that we can maximize our added value if we bring together their expertise and our knowledge of conflict-affected contexts. The advantage for these companies is that, through their partnerships with us, they can start building a presence in what could become their future markets (though countries like Somalia, Syria, or Libya may not seem to be promising markets now, they offer great opportunities for growth for our potential partners as these countries start from a lower base in terms of on-line services to local entrepreneurs).

We do not have specific names in mind, so we are open to explore different avenues. We expect that our partners can advance our solutions by providing us with access to relevant expertise and technologies. For example, this could be getting access to proprietary ERP (Enterprise Resource Planning) software or CRM (Customer Relationship Management) software, which have been developed for companies operating in developed economies. Our developers can adapt the software to different contexts in less developed economies in Africa and the Middle East, so that these ERP and CRM can be used by displaced and marginalized entrepreneurs with low literacy and numeracy skills, and the aid agencies that support them.

We believe that our innovation should be driven by evidence. As such, we are keen to establish partnership with research institutions that can rigorously test through randomized control trials our innovation vis-à-vis traditional approaches. 

We envisage that we will need support from Solve to establish contacts with research institutions that may be interested in testing the effectiveness of our approach. To date we have partnered with researchers from the International Centre for Tax and Development, a research outfit hosted by Sussex University, U.K. However, as their focus in on taxation and public policy, and not on private entrepreneurships, we will have to partner with other research institutions.

We will also explore the possibility of partnering with the International Initiative for Impact Evaluation (3ie).

We believe that our solution strongly contribute to the Andan approach of “foster[ing] self-reliance among displaced populations through economic and financial inclusion, education and vocational training, employment, and entrepreneurship”.

In line with Andan mission to “support academic research into new models and solutions and assist with the development and implementation of scalable pilot projects for refugee integration”, we will use the Andan prize to carry out a research on the effectiveness of our solution. We will commission randomized control trials (see section on partnerships) where we will test our assumption that displacement-affected entrepreneurs who use our platform are better off (i.e. increased turnover, higher profits, and more positive outlook for the future) than entrepreneurs that receive traditional support from aid agencies (usually micro-grants with short-term vocational trainings).

As explained above, our solution is meant to make aid support to displaced entrepreneurs more efficient. By making a process more efficient, our solution has the potential to change the business model on how aid agencies provide support to displaced-affected entrepreneurs. Current approaches do not allow aid agencies to address problems of coordination and access to information. Besides the more traditional business grants and trainings, the best tool that aid agencies have at their disposal is organizing events where entrepreneurs can meet other entrepreneurs and investors. However, facilitating exchanges does not really address the problem that prevents the emergence of business partnerships in contexts where the rule of law is weak, and institutions are ineffective: the lack of trust and enforcement systems. 

We believe that our solution qualifies for the Future Planet Capital Prize as it is definitely to scalable and has the potential to significantly impact millions of lives. 

There is an untapped and huge demand from small entrepreneurs from countries affected by conflict, or just countries with weak social norms and a weak state, to receive services that allow them to engage in business ventures in full confidence with like-minded entrepreneurs. With appropriate investments in IT systems, our platform can cater for millions of such entrepreneurs. 

Once scaled up, our solution can positively impact millions of people. Many of these entrepreneurs run inefficient informal micro-businesses in petty trade and artisanal production, often because they cannot find employment in the formal sector. Support from aid agencies is short-lived and not enough to allow them to escape poverty. Grants provided by aid agencies allow these entrepreneurs to restock their inventories, but not to make long term investments that can increase their productivity. Training provided by aid agencies are not very effective either. Most of aid-supported trainings focus on providing low-level technical skills (namely carpentry, masonry, mechanics, tailoring, tie and dye, or hairdressing). As most of aid agencies use similar curricula, the result is an over-supply in the market of such skills. Aid agencies also provided training on business management. While these trainings provide some skills that allow micro entrepreneurs to improve their bookkeeping, they do not do much to increase the productivity of their businesses.

On the other side, upstream interventions promoted by international financial institutions, such as the World Bank, have failed to build a vibrant formal private sector that can absorb the millions of youth that enter the job markets in Africa and the Middle East every year. These interventions aim at improving the business climate through policy reform – notably by removing red tapes, and at boosting the private sector through access to credit, equity and technology. However, these policies have a technocratic focus and fail to acknowledge that the many red tapes that choke businesses are, actually, the result of a low trust society with weak social norms.

We believe that social norms cannot be changes with policy reform. At the same time, we cannot accept that, in 2020, low trust societies have to undertake the same long evolutionary paths that were undertaken centuries ago by the now more developed economies. We believe that we have at our disposal powerful technologies that can address the problem of low trust and limited cooperation. 

We believe in the power of the peer economy, where business actors can work together even in the absence of a third party (usually the state) in full confidence. Companies such as AirB&B have made it possible for travellers to sleep in the house of a perfect stranger without risking being robbed, raped or killed. We want to make it possible for entrepreneurs from low trust societies with a weak state to engage in business ventures with perfect strangers without risking being defrauded.

We also believe that our solution is potentially highly profitable. Our platform can increase the profits of the entrepreneurs that use our services, as it makes their businesses bigger and, therefore, more productive. Our revenues will come from a fee on the profits of our customers (this means that if our customers do not make any profit, they will not pay any fees). Our business model means that our goal is fully aligned to the goal of our customers. By helping our customers to succeed we can succeed. And we know that, in order to succeed, we have to work hard to make our customers succeed. As our interests are our customers’ interest, we will not face the business model dilemma of other companies (for example dating sites) that loose revenues when their customers achieve their goals.