Create Platforms for Connecting: Fostering NGO-Business Partnerships
Mar 20, 2017 | Development |
Facilitate communication between the aid sector and the private business sector by creating platforms for connecting.
From before the 2010 earthquake and beyond 2016’s Hurricane Matthew, foreign aid represents the largest opportunity cost in the Haitian economy. Aid and development agencies are currently misaligned to the needs of the local market. As a market economy, the situation in Haiti can only be improved through trade.
Over the course of our surveys and interviews for From Aid to Trade, we discovered a shocking information gap between NGOs and local businesses. Energy initiatives seemed unaware of local solar manufacturers; housing programs ignored or were ignorant of the local construction sector’s capacity.
Case in point, in the hours and days following Hurricane Matthew, people across social media scrambled to share information about trustworthy local suppliers, businesses, and organizations that could support the immediate disaster response. But why is so much of this essential work taking place on Facebook? Aren’t NGOs and local suppliers already connecting through formal channels?
Lack of communication is a clear barrier to NGO-business transaction. But this failure presents a great opportunity for us to tackle one important improvement we can make to foreign aid in Haiti. If we can create platforms to connect NGOs and businesses, we can accelerate aid effectiveness in the local economy.
The multiplier effect of NGO-business partnership—
Consider a project to house those displaced by the hurricane. The more prefabricated materials and foreign expertise imported to build these shelters, the greater the opportunity cost to the local economy. Haitian industry loses the opportunity to transact and meet demand.
But the more the NGO procures labor and materials locally, the greater the multiplier effect. Donor spending supports local business growth and meets the needs of impacted populations: hurricane victims are housed and Haitian workers earn wages that will go back into the economy. This practice can amplify donor effectiveness.
If the NGO running the project contracts with a local design firm or supplier of construction materials, that business has an opportunity to create a balanced transaction. In a field racked by corruption, local businesses and NGOs have the opportunity to meet the most pressing human needs demand ethically and sustainably.
When NGO demands are aligned with local capacities, those capacities can grow. Paying appropriate taxes throughout this process can contribute to a stronger Haitian government, one in which local entrepreneurs have a stake.
So, how can we connect NGOs and businesses so that they can create balanced transactions that meet needs sustainably and produce the greatest multiplier effect for the broader economy?
Building Markets: a case study—
As we studied the failures and successes of NGO-business partnerships, our interviews identified four interrelated barriers to transaction: price, quality, quantity, and delivery time. Both NGOs and businesses brought these challenges up again and again.
According to NGOs, many local firms and businesses were not meeting quality standards, could not produce the necessary volume, demanded high prices, and failed to meet delivery times. According to Haitian business owners, many NGOs had unreasonable demands for quantities and delivery times that were impossible without cash advances to purchase materials and equipment. In short, businesses and NGOs were living in different worlds when it came to quality and price.
While these barriers had many causes, they had one effect: NGOs continued to import; local businesses continued to struggle for months and even years following the earthquake. Fortunately, these barriers also shared one key solution: communication.
Between 2009 and 2013, Building Markets, a global business-oriented non-profit organization, created and shared two key databases that had a measurable impact on NGO-business partnerships in Haiti.
First, they created a one-stop-shop for NGOs to post their contracts. Updates to the database were announced to local businesses via SMS. Then, Building Markets collected information from local businesses and registered them in a database with easy-to-navigate profiles for potential NGO buyers. Now NGO staff could more easily contact local businesses before importing resources and expertise from abroad.
For example, in October 2010, the UN Development Program needed 4.5 million bars of soap for their efforts to combat the cholera outbreak. Building Markets project director Salim Loxley received notice just days before the order was needed. Using their database, Loxley was able to identify a Haitian company that could meet this demand: Carribex. 72 hours later the contract was filled. Carribex went on to win a 600,000USD contract with UNICEF after that.
Despite successes like these, donors suspended the project in 2013. The staff who had worked tirelessly to build the databases were given six months to transfer the project to the Haitian Ministry of Commerce.
Is this a story of another ambitious project failing due to donor fatigue and the deficiencies of the Haitian government? While both factors played a part, we believe that this is actually a story of success.
According to Loxley, in total, 30 million USD of contracts were completed between NGOs and local firms because of the Building Markets’ databases. How many Haitian businesses are alive today because of a few years of basic information management—a platform for connecting?
When NGO staff and local entrepreneurs communicate, the barriers to transaction become surmountable. When both parties better understand one another, they are more capable of formulating agreeable compromises. These are the kinds of common-sense innovations that NGOs can apply to align themselves to the Haitian market and amplify the multiplier effect of donor funds.
Of course, closing the information gap is only one part of the story. For NGOs and local businesses to perform balanced transactions, both must agree to international standards. NGOs must hold their ground against price gouging and corruption, but they must also have the long-term vision to understand that a smaller impact now can have a greater effect in the future.
Haitian businesses need the training to present their work to buyers digitally and in multiple languages. NGOs must be more willing to provide advances to fund projects, more conscientious about paying contracts promptly. However, businesses can only expect this kind of partnership when they have built a profile of past work to justify this trust.
Finally, we must never ignore the importance of respect.
In spite of rampant corruption, many Haitian entrepreneurs are honest, brave, and resilient individuals who strive for excellence in the most dire of economic contexts. NGOs are sometimes ineffective, and some have done real harm, but these organizations are staffed and funded by people who care deeply about human life and dignity, people who have dedicated their careers to the fight against poverty. We must never forget this.
As always, please share your thoughts in the comments below and join us next time for a look at ways we can advocate for policy change. If we can transform the legal and political frameworks to fight corruption and mobilize industry, we can spur ever-more sustainable growth.