As we continue to celebrate Entrepreneurship Month, the U.S. African Development Foundation (USADF) is proud to highlight African entrepreneurs we support to develop solutions to some of Africa's biggest challenges while creating employment opportunities in their communities. Beyond this, USADF is proud to share the Foundation's vision for its Entrepreneurship Portfolio and how it's evolving its practices to support these innovators better and help them bring their ideas to life.
According to the United Nations, three of every four Africans are below the age of 35 and, from this population segment alone, 12 million people enter the workforce every year. To meet this employment need, the International Monetary Fund concluded that Africa needs to create 20 million jobs every year through 2030. This number is twice as large as what the region produced annually from 2017 to 2019.
Small and medium enterprises (SMEs), often led by young entrepreneurs, are the drivers of most African economies, many creating the jobs needed to meet the growing workforce demand. Estimated at 44 million and constituting approximately 90 percent of the private sector, SMEs provide more than 80 percent of total jobs across the continent. However, for them to grow, create more jobs, and generate increased economic growth, SMEs need access to capital and right-sized capacity building support stage of growth.
At USADF, we understand these challenges well and are doing our part to create pathways to prosperity for Africa's bulging youth population. That is why, as we close out 2021 and plan for the future, USADF is reimagining how we deploy grant capital and provide entrepreneurs capacity-building support, with the end goal of accelerating job creation across the continent. As we continue to make direct grants to social entrepreneurs and early-stage SMEs, USADF is harnessing new ideas and partnerships to deepen our capital's impact to strengthen grantee resilience and growth. The COVID-19 pandemic has crystallized a critical need for innovation as business ecosystems and funding paradigms are disrupted and impacted in ways never seen before.
Evolution of the Entrepreneurship Portfolio
In 2014, the USADF Entrepreneurship Portfolio began as a pilot initiative in the inaugural year of President Obama's Young African Leaders Initiative (YALI). The goal was to leverage USADF's awarding of small amounts of grant capital to a cohort of early-stage social entrepreneurs to test our ability to develop, grow, and scale viable entrepreneur-led businesses.
Fast-forward to 2020, USADF has awarded over 515 entrepreneurship grants in 35 countries exceeding $13.4 million in grant capital. This unique initiative started by testing a simple concept via YALI entrepreneurship grants and has evolved both in its objectives and sources of prospective entrepreneurs to now include Ashoka Fellows, Echoing Green Fellows, and Whitaker Peace and Development Initiative (WPDI) Peace through Entrepreneurship grantees. Additional entrepreneurs come from USADF’s matching funds partnership with the Lagos State Employment Trust Fund, the U.S. Department of State's Academy for Women Entrepreneurs (AWE), Stanbic Kenya Foundation, and the Citi Foundation supported Youlima Youth Incubator Entrepreneurship Program. Through these partnerships, and others alike, USADF is funding and supporting promising young Africans to not only start, but scale businesses.
As USADF’s entrepreneurship portfolio continues to grow and evolve, the Agency is becoming more intentional with how we make strategic investments in promising entrepreneurs while embracing lessons learned and opportunities for growth.
Capacity Building Right-sized and Customized to Entrepreneur’s Needs
Every entrepreneur’s journey is unique, with challenges faced and success achieved at different stages along the way. Many grantees come to USADF in their ideation stage, researching and presenting potential solutions to a problem or need faced in their own community. Through initial seed capital, USADF grant funding supports their shift from ideation to incubation, where their idea is further developed, tested, and validated.
Over the last year, USADF has conducted conversations with early-stage entrepreneurs and SMEs across our portfolio, with the end goal of better understanding their individual needs, challenges faced, and where we can better offer support beyond capital. These conversations have further provided empirical context and recognition that financing alone, regardless of funding level, is often not enough to ensure long-term success.
In 2022, based on the feedback received, USADF will deepen its focus on enhancing the entrepreneurial, financial, and managerial skills of grantees, ultimately equipping them with the tools necessary to build, grow and scale their businesses in a sustainable manner. The end goal, as it has always been, will be to ensure growth past USADF’s initial investment, including eligibility for follow-on, innovative, debt-like products such as zero-interest loans and recoverable grants. This emphasis on "follow-on funding" serves as a proof point and has been an essential outcome for developing a graduation model for our grantees, with the goal of creating pathways to their prosperity to support underserved communities.
To this end, we would like to highlight our partnership with Stanbic Kenya Foundation (SKF), a subsidiary of Standard Bank. The goal of the partnership is to pilot an approach that supports SMEs to be more productive, profitable, and globally competitive, thereby increasing levels of employment and income for many Kenyans. Through the program, USADF and SKF intend to catalyze the growth of selected SMEs in Kenya by providing interventions that improve their business competitiveness, identify ways to access affordable finance and markets while exposing them to the use of digital technologies. For the pilot program, over 530 applications were received from Kenyan SMEs with great potential, but whom SKF felt fell just short of investment readiness. SKF and USADF will address this challenge by linking demand with supply. The partnership creates an opportunity for USADF to facilitate the investment readiness of selected SMEs, enabling them to access the follow-on market investment that may otherwise remain unreachable, and by extension increasing the pool of investable businesses available to Stanbic Bank, and funders beyond. Guided by the USADF graduation model, selected grantees will receive both capital and capacity building as they seek to build resilience, the ability to accelerate, and scale. This customized support will also help grantees refine their business plans and provide a bridge from grant capital to commercial investment. This partnership is just one example of multiple customized capacity-building programs that USADF is supporting. We are excited to be working directly with our entrepreneurs and meeting them where they are to ensure their resilience.
We look forward to collaborating with you as we create communities of practice to enhance social entrepreneurs' success across Africa. Follow us on social media to learn more about USADF's entrepreneurs and impact.