Reducing Poverty in Africa through Innovative Financing: Village Enterprise as Effective Model

According to the World Bank Africa Competitiveness Report 2017, Africa is expected to create just 100 million new jobs by 2035, despite a projected increase of more than 450 million in the working-age population. The demographic of 15- to 35-year-olds will experience the largest population growth. This growing population of working-age people represents both an opportunity and a potential threat to Africa's future prosperity. To ensure that these new workers engage in productive activities and avoid significant increases in extreme poverty and civil unrest, governments must facilitate job creation, including scaling up cost-effective livelihood development programs targeted at the extreme poor. Sustaining support for small businesses is one viable strategy for assisting people living in extreme poverty to establish livelihoods. Numerous non-governmental organizations (NGOs) in Africa have developed interventions to combat poverty and raise people's standards of living through the support of small businesses. Certain interventions that policymakers believed were effective for a long period of time, such as microloans, have failed to sustainably increase the incomes of the extreme poor. However, an NGO called Village Enterprise has developed a cost-effective approach that is yielding promising results and scaling via results-based financing. Its graduation program and cash transfer empower beneficiaries to start a business and stay sustainable as they grow and lift themselves out of poverty. Since its inception, Village Enterprise has launched and supported 58,000 businesses, trained 214,000 first entrepreneurs, and impacted the lives of 1,240,000 people through its cost-effective financing model. The puzzle is that Village Enterprise has been far more successful in supporting small businesses, promoting grass-root entrepreneurs, and emancipating people from poverty than other prominent non-governmental organizations that provide "cost-equivalent" cash transfers. In this paper, I will demonstrate why the village enterprise program and financing model are far more effective and successful than those of other non-governmental organizations.