MIT Sloan Associate Dean for Innovation Fiona Murray
From City A.M.
Increasingly, it is innovation-driven entrepreneurs who are providing effective and scalable solutions rather than aid agencies or governments.
Traditionally, the focus of entrepreneurship in the developing world has been on creating small- and medium-sized enterprises serving local markets. However, that emphasis must shift from small firms to what MIT calls innovation-driven enterprises: start-ups that can scale for significant impact.
Building an innovation-driven enterprise is full of challenges for any entrepreneurial team. They must find an appropriate beachhead market, prototype and pilot, and recruit and retain top talent. They also require specialised entrepreneurial finance at each stage.
For development entrepreneurs, access to appropriate types of capital is a significant constraint.
Their challenges are not just about the limited availability of institutionalised venture capital, but to the full range of “risk capital” options, from initial financing by friends and family and angel investors to VCs, private equity and commercial banking. The creation of a pipeline of financial instruments is a critical bottleneck.
It’s well known that mobile phones are changing every day life in the developing world — particularly in sub-Saharan Africa. The spread of cell phones coupled with the ease and efficiency of text messaging helps people save, spend, and investtheir money more wisely. Text messages and mobile apps improve health outcomes by teaching people about nutrition and reminding patients to take their medication. They also further education by helping students learn more effectively through virtual tutoring.
We now have evidence that text messages improve civic engagement in emerging countries by encouraging people to vote. A recent study I conducted in Kenya with Benjamin Marx, an economist at MIT, and Vincent Pons, of Harvard Business School, found that get-out-the-vote text messages increased Election Day turnout by as much as 2 percentage points. This increased participation in democracy comes with a condition, however. If voters perceive that elections aren’t free and fair, they lose trust. Put another way: when voters willingly place their faith in electoral institutions — the very essence of voting — those institutions had better make good on their promises.
Democracy in the developing world is a fragile thing. Corruption and fraud are common features of elections and understandably, voters feel disillusioned and angry. In Kenya’s 2007 election, that anger turned to bloodshed. After Kenya’s election commission ignored evidence of vote rigging that kept the ruling government in power, the country erupted into violence and hundreds of people were killed.
The following year, Kenya’s government worked to rebuild trust. The country adopted political reforms and created a new constitution. It also replaced its old electoral commission with a new one: the Independent Electoral and Boundaries Commission (IEBC), tasked with creating a new register of voters across the country. Before the 2013 election, the IEBC purchased biometric voter registration kits, based on fingerprint technology, to mitigate identification issues at polling stations.
I grew up in Nairobi, Kenya, and so my research on M-PESA, the cell phone-based payment system that has spread like wildfire across the country, strikes a deeply personal chord. Most of my research on this has been in collaboration with William (Billy) Jack at Georgetown who lived in Kenya himself for a few years. We both experienced the frustrations of what in the US would be the simplest of money transactions, and felt that M-PESA could fulfill a need of many Kenyans.
In practice, the adoption of M-PESA has been faster than we, and most other observers, had anticipated. In four short years it has been widely embraced by Kenyans, and has already had a big impact on the lives of people I’ve known for years. I did my dissertation on the adoption of farming technologies in Africa, and it’s still a subject that interests me a great deal. I’ve looked at the implementation of seed technologies in Kenya, and the diffusion of improved coffee farming practices in Rwanda. It often takes decades for these kinds of technologies to fully penetrate a population.