TechnoServe Transforms Lives by Investing in Rural Guatemalan Entrepreneurs

by Marianne Taflinger
Intern, The WIP
– USA –

To people born in the highlands of Guatemala, life choices look bleak. While about 69.1% of Guatemalans attain literacy by the time they are adults, they have limited or no health care and have never been to a bank, let alone had savings enough to need an account. Guatemala has a population of 12.5 million, and nearly half of the population lives on $1 a day. Of those 6 million living in dire poverty, 61.4% live in rural areas, according to the World Bank. Probably 80% of those in villages live on less than $1 a day, and nearly all eke out a meager living in what can only be called subsistence farming. But life is precarious for subsistence farmers: a drought, an extended illness, an unexpected death, or any other event may upset the fragile balance.

So how do you change your own life and the lives in your community? Enter TechnoServe, a nonprofit dedicated to creating business solutions to rural poverty. TechnoServe‘s answer is to give hundreds of aspiring entrepreneurs a hand up. It helps them develop businesses that will lift their entire community out of poverty. But how do you find, encourage and develop such entrepreneurial talents? In 2005, TechnoServe sponsored Idea Tu Empresa, a national business competition supported by the Guatemalan government and USAID, the official development arm of the United States.

In its very first year, 380 people proposed business plans and registered them on an Internet site. Considering that in Guatemala, only 79 of 1,000 Guatemalans have Internet access, this was a stunning accomplishment. Of the 380 applications, TechnoServe and 20 business analysts from local banks winnowed the application pool to 60. Bank analysts considered the business ideas on their merits alone, without knowing the identity of any plan’s author, the amount of their assets, or their family ties. (TechnoServe employs “author-blind” evaluations because it creates a more business-friendly climate for the poor.) Since TechnoServe guarantees the capital seed loan monies, the banks felt more confidence in offering support.

Then, to develop these business plans fully, TechnoServe assigned one consultant to work with five entrepreneurs each over a 12-week period. The business plans had to cover the full “value creation” chain, beginning with market identification and opportunity analysis, to processing of the product, through branding and finally, distribution. Each week, the entrepreneur developed another chapter, then delivered it for analysis and review by their business consultant. After completion and final revisions of the 60 plans, TechnoServe, with the help of its bank analysts, chose twelve winners. Each winner received $10,000 in seed capital to help start their businesses.

How are the winners chosen? TechnoServe’s criteria are that the businesses must create ten new jobs in the economy in the first year, and must create $100,000 in income by the fourth year. Success of the programs is also measured in revenue growth, employment growth and the level of technology that’s been implemented. The key metric, however, is the return on TechnoServe investment. In TecnoServe’s El Salvador program, the success has been $7 in revenue created for every $1 spent in comparable official development assistance, according to Dr. Lionel Lopez, country director of TechnoServe in Guatemala. The success rate for these businesses has been 70% for established businesses where TechnoServe helps them to grow, and about 45% for newly established businesses, three years after their launch.

In Latin American countries where TechnoServe has worked for a longer period of time, what are the important life improvement indicators of their successes? The social indicators used as measures of improvement include – life expectancy, calories consumed, household income or sometimes household consumption (as a measure of real income) and help to reflect evidence of an improved life. Lives in countries like El Salvador, Nicaragua, and Honduras are said to have been improved by about 30%. Another informal indicator of life improvement is whether or not girls are sent to school rather than staying home to work, and this, too, reflects the improved lives of the communities in which TechnoServe works.

What are the businesses that have been started, and who started them? The twelve winners for 2006 represented a wide range of interests. Manuel Yax man started a lettuce processing operation using a new flash-freezing method which allows him to ship lettuce for export to Japan. A 23-year-old female entrepreneur, Ana Carolina Aragón Bustamante, just recently graduated from college, started an organic food business. Two young men created a biodiesel business from fruit that was unfit for consumption, while a second female entrepreneur created a process for commercial plastics.

But incubating small to medium scale businesses is only one of TechnoServe’s programs in Guatemala. They also work on broad national programs in conjunction with the Guatemalan government and designated partners, such as one initiative which will create biofuels without competing with food sources. The TechnoServe initiative ranges the entire country and as such, all of Guatemala was geomapped with a focus on unproductive land and underutilized and deforested areas, even in the highlands. This allowed TechnoServe to identify, for example, how many hectares were available for planting so that the previously mentioned biofeul operation’s plantings would not compete with food source plantings.

A third initiative supports community-based entrepreneurial projects, particularly those run by women in rural villages. One such project is the Ramon Nut project where 59 women in northern Guatemala will be processing ramon nuts. The Ramon nut or the “Maya nut” was used by the ancient Mayans as a powder used in bread, tortillas and soups. The project aims to employ 200-300 people to collect the nuts and dry them for processing. TechnoServe pays for the training costs, the equipment, the technical assistance and lab analysis of the finished goods. In mapping the country, the joint TechnoServe/Guatemalan government found that there are 100,000 hectares with ramon nuts. These trees require ten years to grow, so mapping proved crucial in determining the viability of the project.

The goal is to create a Maya nut cookie and drink marketed in a scheme similar to the “Avon ladies”. The women themselves will sell the Maya nut products, thereby giving them employment. Because the Maya nut has high caloric content, selling it to primary schools will address the hunger gap for children. Thus, both business needs and community needs are addressed in this one program. In its first year, Ramon Nut employed 30 full-time women as well as employing 300 nut collectors; and then, in addition, it increased the food security of undernourished primary school children. Call this a triple win! But the biggest win of all is that because of TechnoServe’s ability to bring large US companies to the bargaining table, Pepsi Cola plans to create a “Maya power drink” for market and sale in Central and North America.

Successful initiatives such as these suggest that in the developing world, with a “hand-up”, the poor can transform their societies through their own imagination, talents and energy. Visit www.TechnoServe.org to see what other promising entrepreneurs and community businesses they are cultivating around the world.

About the Author

Marianne Taflinger worked in higher education publishing for colleges and universities for over 20 years in a variety of capacities – as salesperson, sales manager, and director of marketing. For 16 years, she was an editor for psychology products including books, CD-ROMs and DVDs as well as online courseware.

Marianne also published a number of books, some of which include: Barlow/Durand’s Abnormal Psychology: An Integrative Approach, Mash/Wolfe’s Abnormal Child Psychology, Carroll’s Sexuality in a Diverse World and Crooks/Baur Our Sexuality. As an editor of psychology and special education books, Marianne was vitally interested in the alleviation of human suffering. That interest lead her to enroll in a Master’s of Public Administration program in international development at the Monterey Institute of International Studies.