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Thomas Mukoya/Reuters/Landov

Investment opportunity

Money | Connecting capital with opportunity in the developing world takes Job-like patience and ingenuity

Issue: "Your right to vote," July 31, 2010

NEW YORK-Chief Yusuf Ole Petenya says out in the sweeping plains of Kenya, cows are like ATMs: Put food in, get daily sustenance back. So when drought choked Kenya and killed 90 percent of the livestock in 2009, it devastated the chief (also known as Shani) and his people, the Maasai. Speaking to a group in New York City, Shani showed the audience pictures of a farmer using branches to prop up his last cow and a zebra lying dead because the Maasai are eating trees instead of cows. The Maasai usually cross the border to their kin in Tanzania if they need help. "When they have a drought they come to us. When we have a drought we go to them," said Shani. "But last year, we didn't have a place to run to."

Everyone was suffering. It was time to find another cash machine.

After an elder told him the droughts were more aggressive and frequent now than they were years ago, Shani decided he and his people had to find a new way of living to survive. He pointed out the intricately beaded necklaces looped around his neck over his purple robe, the loops of beaded earrings in his ears, and the beaded staff in his hand. He said his goal was to help the 10,000 Maasai women begin a sustainable business creating beaded clothing and accessories and selling them to tourists.

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Shani's visit to New York coincided with the UN's Commission on Sustainable Development, where leaders came together to figure out how to help developing countries. In one side panel, investment managers and officials from USAID spoke of investing in private enterprises like Shani's-combining Wall Street investment techniques and government dollars with entrepreneurial drive to create a "double bottom line"-a venture that creates both a social good and a financial return. "Philanthrophy's a wonderful thing but at the end of the day there's just not enough capital on the ground," said one investment manager. You have to bring investment techniques to business to create capital.

Shani completely agrees. He said, "No donor is going to give you money forever. At some point they will get tired and say, 'Hey, go somewhere else. I'm sorry. My coffers are running out of money.'" His people have to have businesses that sustain themselves instead of waiting for others to give them aid.

But there are obstacles to good entrepreneurial ventures. Bad business plans can accompany the best of intentions, just as well-meaning nonprofits can keep people in a state of dependence. If the developed world is going to recover some of the billions it has spent on foreign aid, investment managers will have to ask probing questions. Both Yale graduates and creative Pakistani farmers have to learn from each other to surmount the barriers to a successful enterprise.

When I told Burt van der Vaart about Shani's bead-selling enterprise, van der Vaart said he would ask a few probing questions. Van der Vaart is co-founder and CEO of the Small Enterprise Assistance Fund (SEAF). Unlike more famous enterprise investment funds that are newer to the game, SEAF has been quietly investing in entrepreneurs worldwide since 1992 and has done about 335 investment deals.

Van der Vaart said he would first ask if the labor force is already skilled or if it needs training. The women are doing a handicraft that has spanned generations but as one audience member pointed out when Shani spoke, the women may have to adjust their designs to make something wearable in a Western world-instead of a souvenir that a tourist won't wear outside of Africa.

Van der Vaart asked if the tourists will pay in cash and if so, how will Shani prevent stealing? What is the competition? African vendors sometimes import cheap tribal trinkets that are actually made in China, which has a huge labor pool and an extensive labor infrastructure. Will the Maasai's high-quality handiwork be able to compete? Shani is counting on a global market, but van der Vaart said it's easier if the market is regional or local so Shani won't have to worry about transporting his products across bad roads and through tolls to the ocean. Western countries tax imports steeply, which adds to the cost.

And will the tourists come? Shani looks at Kenya's stark safari plains and exotic animals, and sees tourism as its main hope of income. But he also knows the global financial crisis is decimating the tourist industry. The talent is there. The desire is there. The Maasai want to make money for themselves, he says. They don't want to beg.

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