A manifesto for entrepreneurship as a lever out of poverty
Breaking the cycle of poverty
As a friend of elea and its unique impact model, Peter Maurer joined the elea Comité de Patronage in September 2022 after his retirement as President of the International Committee of the Red Cross (ICRC). He regards entrepreneurship as essential for breaking the cycle of poverty in fragile regions. During his career as a Swiss Ambassador, and subsequently as President of the ICRC, Peter has often been at the front line of global challenges and taken part in debates about the best response. As a result, he has witnessed promising, as well as less promising, approaches to addressing the key issues of our time, such as poverty, conflict, war, corruption, and climate change.
An essay by Peter Maurer
In visiting the most fragile regions in the world, I regularly observed how often entrepreneurs are at the forefront in responding to peoples’ basic needs, like food, water, health, energy, and education. Consequently, these entrepreneurs are able to offer a perspective on how to get out of poverty from a business point of view.
"Today, people living in absolute poverty are not asking for handouts but rather for jobs that offer their family an income, facilitate a decent life, and allow them to finance their children's education."
They want markets to work and entrepreneurs to strive. Therefore, even in some of the most challenging environments, food stores, chicken farms, soap-vending companies, barbershops, spare-parts traders, construction start-ups, mini-grid providers, and many other innovative businesses emerge, often enabled by new technologies.
Unfortunately, many of these businesses are unsustainable, because they do not get enough support in terms of capital, management skills, and business know-how. They are also constantly threatened by inadequate infrastructure, as well as a lack of public order and rule of law. As a result, a secure and predictable environment, which is a critical prerequisite for the success of any sustainable business, is not available to them.
If entrepreneurs lack sufficient support in serving people who are living in poverty, harmful consequences could arise, e.g., structural dependencies and overreliance on capital providers, and a systemic aid logic where people stay dependent on aid rather than having the opportunity to pursue entrepreneurial solutions for achieving decent levels of autonomy with a fair chance to exit poverty.
Unleashing the dynamics of entrepreneurship in poverty alleviation
Conversely, I have seen that strong entrepreneurship can be crucial in leading people out of poverty. It results in the creation of different types of cooperation, which releases the power of the public and private sectors, as well as civil-society organizations. Entrepreneurship also fosters innovation, skills development, and education while mobilizing risk capital and new, blended financial vehicles.
In my experience, key levers of an efficient response to some of the most pressing problems of our time include:
- Philanthropic, patient capital: This is vital, because entrepreneurial initiatives in emerging and fragile economies do not systematically provide positive net financial returns.
- Entrepreneurship: This is critical because it can mobilize capital and human energy, thus creating sustainable employment and income opportunities.
- Impact measurement: Clear, measurable impact objectives help to monitor and control progress, as well as determine the best time to stop providing support to impact companies once they have become self-sufficient and can grow sustainably.
- Non-financial support: Strong management skills and relevant functional expertise, e.g., in areas such as finance, IT, or people development, are essential to realizing the impact potential of good ideas. Creating communities of entrepreneurs where they can learn from each other can be a valuable catalyst.
- Exit strategies: Thinking about exit opportunities already at the start of an investment can help to prevent the pitfalls of dependency.
Jointly nurturing change
While philanthropic impact investors are essential, we must all engage as responsible citizens, members of society, entrepreneurs, and consumers by shaping policies, regulatory environments, and practices wherever possible to remove investment and entrepreneurship obstacles.
As citizens, we could push for state action, which involves regulatory and tax systems, to recognize impact philanthropy. State action would be helpful for de-risking investments and supporting entrepreneurship more broadly. Countries could then reinforce these concepts in their respective international institutions.
As investors, we could move the needle away from a predominant focus on short-term financial returns on investment, thus allowing more space for enterprises that combine capital return with social and environmental impact.
As entrepreneurs, we should consider that technical innovation, skills, and know-how can be leveraged in frontier, emerging, and fragile economies. We should also recognize the need to expand mentoring, capacity-building, education, and training capacities, so that innovative practices can grow more sustainably.
Unfortunately, too little of this is happening. Acting on two levels is therefore critical, i.e., by making models like elea even more successful through contributions and support and by influencing policy environments to improve both speed and scale, as well as secure broader political and societal support. In this regard, the famous saying “Do good and talk about it” needs to be changed. We need to do good, but rather than just talking about it, we need to act more broadly based on what we learned in doing good, since this will energize us and many others in moving the cursor to address protracted global challenges.
About Peter Maurer
Peter Maurer serves on the Leadership Council of the World Economic Forum (WEF), focusing on global governance and innovative financial instruments like the Humanitarian and Resilience Investing (HRI) initiative. He also holds positions on the boards of Zurich Insurance and is the president of the Basel Institute on Governance.
Peter Maurer earned a doctorate in history and international law from the University of Bern. Prior to joining the ICRC, he held various positions in the Swiss diplomatic service, such as Ambassador and Permanent Representative to the United Nations in New York and Secretary of State for foreign affairs.
Author: Peter Maurer, member of the elea Comité de Patronage