Social Entrepreneurship in Central America

Originally posted on Medium

Central America doesn’t rank as the most active geographic region for social entrepreneurship and impact investing. Yet, as the social enterprise movement becomes more mainstream, it is reaching all parts of the globe. With Central American civil wars from the 1980s having been replaced with entrenched gang violence, it is a region worth understanding and supporting.

In this conversation, Andy Lieberman, Director of New Programs at Miller Center for Social Entrepreneurship, shares his insights about social entrepreneurship in Central America.

How does Central America compare with other regions of the world where Miller Center for Social Entrepreneurship works?

AL: For various reasons, Central America has lagged behind other developing regions of the world in both social enterprises and impact investing, but it’s an up-and-coming locale. We’re talking about seven countries with a combined population of 42 million people. Expanding to include the Caribbean, the population doubles to 84 million. India, Nigeria, and Mexico are examples of countries that each have populations far larger than all of Central America and the Caribbean, so it is not surprising that those more populated countries are further along in social entrepreneurship. Being a laggard presents some exciting opportunities for Central America to leapfrog ahead.

What are those opportunities and how could Central America leapfrog other countries?

AL: The disadvantage of more well-developed infrastructures is that they can have a kind of gravity, an inertia that makes big leaps forward more difficult. To take an often-cited example from the technology world, countries that lacked robust wired telecommunications infrastructures when cell phones became popular were able to jump directly into widespread cell phone adoption. They were able to leapfrog the more-developed United States and much of Europe in cell phone use because they didn’t have to face the “conversion baggage” of an entrenched wired telecommunications infrastructure.

Examples of this kind of leap-frogging in social enterprise include leveraging tablets, mobile data, and cloud-based services to provide better services at lower costs without the large upfront investment that used to be necessary for a technology-based enterprise.

In a similar fashion, Central America’s less-developed social entrepreneurship infrastructure leaves more room for the region to embrace approaches already proven elsewhere in the world. These proven models can be adapt to the local context, which is much faster than developing a new model from scratch.

You’re just back from the Central American edition of the Latin American Impact Investing Conference (FLII). What were your biggest takeaways from FLII?

AL: The potential and the momentum for social entrepreneurship and impact investing in Central America were undeniable. There was a consensus that the time is right for Central America to move from a reliance on development through NGOs and international donors to a new model based on social enterprises and impact investments. It was also the first conference I’ve been to where I felt old! It seemed like everyone was under 30. Not only were the energy and optimism of the young FLII attendees contagious, but also I was blown away by how smart and well prepared they were. It’s a cliché to say that young people are tech-savvy, but it is worth pointing out how seamlessly these new social entrepreneurs are integrating technology into their business models.

Tell us about some of the social enterprises that Miller Center has worked with in Central America.

AL: As the ecosystem has evolved, so have the companies we’ve worked with. In the early days of the Global Social Benefit Institute (GSBI), we had the privilege of working with groups such as Byoearth, which helps women’s groups to start vermiculture (composting with earthworms) businesses. We are now seeing new social enterprises such as Solubrite bringing proven energy access technologies and business models such as pay-as-you-go solar home systems to Central America, including Nicaragua and Panama. It was also nice to see Audra Renyi of World Wide Hearing at the conference — her company distributes low-cost hearing aids, and Guatemala is one of her focus countries.

Is impact capital available to these enterprises?

AL: Impact capital is always available to good social entrepreneurs who present a truly justifiable ask. However, with a few notable exceptions such as Pomona Impact, the region lacks a strong network of impact investors. As a result, Central American social enterprises need to source most of their capital from outside the region. I was pleased to see organizations including Acumen Fund and the Inter-American Development Bank at the conference engaging with the entrepreneurs.

You lived in Guatemala for a number of years. What’s changed since you were there?

AL: When I was teaching in rural Guatemala in the ’90s, the civil war was winding down, but it was still very much a factor that impeded any kind of progress. Once the peace agreements were signed in 1996, a whole wave of international aid began that lasted about a decade. That aid created many short-term gains, such as enabling many people to get a better education, building a strong NGO sector, and creating some rural prosperity through infrastructure and income-generating projects.

However, in the early 2000’s, the world’s attention turned to other hot spots such as Iraq, Afghanistan, and Darfur. Consequently, global aid organizations shifted their priorities, attention, and money to those parts of the world. When this happened, they left a gap in resources and options in Guatemala and throughout Central America. Even so, some projects were able to build in mechanisms to persist. For example, the educational technology project I ran under USAID funding in the early 2000s was able to continue its impact by converting itself into a social enterprise. It is still running with an all-Guatemalan team, but it doesn’t have the national platform it had under the USAID banner.

Who else is Miller Center partnering with in Central America?

AL: Our go-to partner for the region is Alterna Impact, a social enterprise support organization that organized the FLII conference. They are only six years old, but they have already built a huge following and are leaders in the region. Of course, we also work with the local Jesuit universities. I’ve had the chance to work with faculty and program leads in Guatemala, El Salvador, and Nicaragua, and they are getting into the social enterprise space and see it as a synergistic way to combine their social missions with their efforts in entrepreneurship. We also have interesting NGO partners such as ASDENIC in Nicaragua. This summer, through our Global Social Benefit Fellowship (GSBF) program, Santa Clara University students worked with ASDENIC on market analysis for social enterprises in the area of improving access to safe drinking water.

Where do you think social entrepreneurship in Central America will stand in 10 years?

AL: Progress is seldom as fast as we would like, but I expect to see a mature sector, where young people are aspiring to careers in social entrepreneurship straight out of school; where mid-career professionals are launching or mentoring social enterprises as a way to give back; where impact capital is better understood and more available; and where the ecosystem of NGOs and government agencies see social enterprises as strategic partners to help scale and sustain their programs.