Working for a world where economic opportunity reaches everyone

Friday, January 7 2011

Eliot Marcus, Grassroots Business Fund

About a year ago, the USAID Trade Hub welcomed Eliot Marcus of the Grassroots Business Fund to its office in Accra, Ghana, a win-win partnership for both organizations: the Fund would provide access to finance to companies that receive technical assistance from the USAID Trade Hub. Tradewinds invited Marcus to explain how the Fund has worked to overcome the challenge of access to finance, perhaps the most significant issue many entrepreneurs face across West Africa.

It feels like 2010 might have been a turning point. The McKinsey consulting company was only one of several groups that put out reports this year projecting a new awakening and strong growth in the African economy. The rest of the world seems to be getting over its idea of Africa as a charity case, and foreign investors are starting to see it as a place to make money.
 
Eliot Marcus of Grassroots Business Fund explains the organization's approach.
Eliot Marcus of Grassroots Business Fund explains the organization's approach.
The Grassroots Business Fund is already here. We’re an impact investment fund, looking to finance enterprises that create sustainable economic opportunities for large numbers of people. We work for a world where economic opportunity reaches everyone.
 
As GBF’s representative in Ghana, my job is to find companies that show both financial promise and high social impact.
 
For example we have an investment in a handcrafts producer here called Geolicrafts. A GBF loan enabled Ghanaian entrepreneur George Akologo to buy raw materials and pay worker salaries in order to produce shipments of musical instruments for export to Europe. Geolicrafts is transforming European demand for African products into jobs and income for Ghanaians. Visit the Geolicrafts facility in Accra and you’ll see it’s a hub of activity, with workers rushing to finish orders in time for shipment – it’s where people with few other opportunities find good jobs.
 
Now Geolicrafts is facing the challenges that come with growth. George needs skilled people he can trust in order to expand his management team. As he gets new orders from new buyers he needs to grow his supply chain; and to protect his margins, he needs capital at the right time to buy raw materials when they are seasonally available. To control the growing inflows and outflows of cash, and to administer borrowed capital, he needs to formalize the company’s financial management.
 
George recognizes each of these challenges and is tackling all of them with support from GBF and the USAID West Africa Trade Hub business team. In addition to financing for raw materials, we’re helping to develop a management information system that will help Geolicrafts track its income and expenses, and measure the profitability of its different product lines. That’s why GBF packages its investments with technical assistance – to ensure that entrepreneurs like George have both the capital and the support they need in order to realize their businesses’ potential, bringing new jobs and greater income to Ghana.
 
GBF is looking for more opportunities in Ghana where the right combination of financing and support can make a big difference. We work not just in handicrafts, but in a number of sectors. For example, in a country where most people are farmers, we’re considering enterprises engaged in agricultural processing. Because most agricultural goods are exported raw and processed abroad, Ghana unlocks only a portion of the potential value of its goods.
 
But compared to firms abroad, local agricultural processors benefit from reduced transportation expenses and closer relationships with their farmer suppliers. Instead of selling their produce to small-scale traders at the farmgate for low prices that don’t reward better quality, farmers can develop a long-term relationship with a nearby processor. That means all at once, successful, self-sustaining businesses can help farmers improve quality, increase farmer incomes, and create jobs in rural areas. Those are the kinds of opportunities that GBF supports.
 
So far GBF has invested over $3.4 million in high impact businesses in Africa – about half of GBF’s global portfolio. These businesses have impacted the lives of over 660,000 people in the artisanal and agribusiness industries as well as financial services and base of the pyramid services (including clean energy and mobile banking.) As the world wakes up to the business opportunities that exist in Africa, GBF will be making more investments here, taking risks on companies with the greatest potential for social impact, and encouraging other investors by demonstrating the profitability of financing African companies.
 
We are looking for more partners in Ghana and elsewhere who have found workable, commercially self-sustaining solutions that enable people to earn better livelihoods and save for the future. We think that GBF financing can help scale and multiply these innovative enterprises that are bringing the chance to earn a living to people around the globe – working toward a world where those economic opportunities are available to everyone.
 
GBF is an active investor that helps its portfolio companies reach their full potential through comprehensive post-investment business support to strengthen the businesses. These critical focus areas include financial management, operational improvements, corporate governance and human resource development. To learn more about GBF’s investment criteria or its capacity building programs, visit www.gbfund.org.
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