Did you know that 70% of Africa's 1 billion people now use mobile phones? Really? That's more than twice America's entire population. But how is this possible when only 14% of rural sub-Saharan Africans have access to electricity? How do all those Africans charge their phones? This was a question posed to me and my fellow panelists at Columbia University's Africa Economic Forum this past weekend. The answer may also come as a surprise... in 21st century Africa, where there is a need, there is an entrepreneur.
A strange but common sight at thousands of small village shops across rural Africa is banks and banks of mobile phones plugged into large recharging stations powered by small gasoline-powered generators. Shopkeepers offer their homemade recharging stations to local villagers as a marketing tool to draw them to their shops. It is quite a sight to see hundreds of mobile phones all charging at the same time!
I'm a veteran IT/Wall Street executive-turned-development entrepreneur and I had the good fortune to participate on the Africa Economic Forum's Information and Communication Technology panel. The forum brought together more than 400 African and American entrepreneurs, academics and government leaders to discuss the technology-driven revolution that is catapulting Africa into the modern age. Indeed, Africa is calling. The people of Africa are currently experiencing the fastest adoption of new technology ever witnessed in human history. The sweeping pace and sheer magnitude of change dwarfs the release of a new iPhone or iPad here in the United States. As noted by the panel moderator and leading communications strategist, Charles McLean, "Africa skipped the Industrial Revolution and is now leapfrogging into the Information Age."
More exciting still, is that this explosive adoption of modern technology is sparking a wildfire of entrepreneurialism across the continent. Two of the most important emerging fields fueling the fire are 'social entrepreneurialism' and 'impact investing.' These new fields provide more sustainable models for development than traditional humanitarian projects by focusing on maintaining profitability and positive social impact simultaneously. Three years ago, after a career in the technology and finance industries, I founded SmartMoney, a social venture that seeks to expand financial services to the rural poor in African countries.
Our project engages with local African entrepreneurs to introduce a new form of electronic money to rural families called 'mobile money.' Mobile money allows rural people to store and exchange money using their mobile phone instead of cash. This reduces crime and violence and allows for transactions to occur over long distances without the need to travel. During the three years that my team and I have been working in rural Africa, we have had many extraordinary experiences and we have learned many hard lessons. My goal in sharing these experiences and lessons is to encourage others to become social entrepreneurs and to join us in the African revolution.
What Africa needs now more than anything is not Western sympathy or aid, but Western investment. And investment in all forms. Not just investment of capital, but investment of ideas, knowledge, skills and expertise. Africa needs young, talented Americans to bring their curiosity and ingenuity to Africa's problems. The rewards are there. You can make a positive impact in the lives of many people while also earning profits. Yes, I said it. Capitalism and development can not only coexist, but together can actually thrive.
But good ideas and expertise are not enough. Ultimately, financial investment is key. Without capital, even the best ideas founder. Funding is the fuel that supports learning, experimentation and implementation. It empowers social entrepreneurs to venture into rural communities and understand local customs and problems. It empowers new ideas to be tested and refined. Although our project has obtained the capital currently required, finding and securing this capital was one of the most resource-consuming aspects of our work and the single greatest threat to our project's survival. It shouldn't be this way. The American government, philanthropic and finance sectors are missing out on huge opportunities in the realm of impact investing in developing nations.
Hillary Clinton praised socially impactful entrepreneurialism in her remarks to the Center for Global Development in January, 2010. However, the reality is that the vast majority of the USG's investment arms only consider large-scale projects, and even then take years to evaluate opportunities and often fail to follow through. Meanwhile, major donors and financial firms lack the imagination to make a serious investment into small, early-stage African projects, choosing instead to operate through the safest, and least innovative channels.
As a measure of the demand for early-stage financing of innovation in Africa, one can look at a four-year-old organization called the Africa Enterprise Challenge Fund (AECF). The AECF conducts competitions to identify early-stage, for-profit projects that address specific development objectives in Africa. According to the AECF's Nairobi-based CEO, Hugh Scott, "The huge demand for the type of funding on offer from the AECF has been demonstrated successfully and continuously since its inception in June 2008. Over 8,000 companies have registered for our competitions (approximately 500 per competition). The best 90 innovative business ideas in 17 countries across Africa are being supported by grant and loan finance from the AECF. We expect to support a further 40 businesses this year. We estimate that over two million poor rural Africans benefited from the AECF's portfolio of investments in 2011. This figure should increase year on year as our investments mature."
Where the AECF is blazing a trail, American investors and philanthropists alike must follow, or risk losing out on one of the world's most promising growth opportunities. I look forward to sharing more insights and anecdotes from Africa's entrepreneurial front lines in future articles.