Tuesday 24 Nov 2020 | 08:18 | SYDNEY
Tuesday 24 Nov 2020 | 08:18 | SYDNEY

What kind of help do developing countries want?

7 April 2010 12:15

Susie Newman is a community development volunteer in Ghana with the Global Volunteer Network.

It's not until you step into a developing country that you start to appreciate where money is needed and what goods and services cost. Some individuals in Ghana want just 50 cedis (A$35) to start a sewing business or register a business or service their taxi, but more often than not, the lack of funds brings good and potentially lucrative businesses to a stand-still. 

I kept thinking while in Ghana that for the A$40 I pay per month to each of my two sponsored children overseas (money that goes to the community and not specifically the individual) I could be helping someone in Ghana start a business each month! This started me thinking – what is effective aid and how can we really help? What method of aid will reduce poverty faster – supporting public services, NGOs, the private sector, or all three?

I recently returned from my first overseas volunteer placement in Ghana where I was tasked with developing a business which will help improve individual incomes, while the profits generated could be injected into youth development projects. 

My business was to find a market for all the magnificent stone that poked out of the ground deep in the jungle in Klefe (see my photo above). The workforce was already established, we just needed some money (about A$2000) for marketing and operational costs. We are still looking for start-up funding.

Small businesses swell in developing countries because they are accessible, requiring little skill and next to no set-up costs, and offer hope to individuals of making some money to get by. 

In Ghana, for example, nearly everyone I saw (along the streets, in the traffic, or out in the field) was running a small business of some sort or another (eg. selling plantain, sim cards, bread, biscuits, DVDs, maps, yam,  palm wine, water, chipped rock etc) to make a daily living. They make enough money to survive but with minimal profits. To reduce poverty, businesses that generate larger profits need to be supported – like the Klefe stone business which would handsomely benefit the whole community.

Kiva, an American organisation, is an online micro-lending platform that links lenders with entrepreneurs in developing countries. With a 98.47% repayment rate by the entrepreneurs back to the lenders, it is not only successful in establishing new businesses (and supporting existing ones), but the money repaid to the lender is then made available again.

I have also read of microfinancing options made available by an NGO in Uganda (with very low interest rates); business owners who have paid off the loan can afford to send their children to school (see here for an example). Bill Gates is trying to reduce poverty by engaging businesses to work with developing countries to create more business and wealth in the developing country without reducing the company bottom line.

AusAID recognises the importance of private sector development in developing countries. If accountability of taxpayer funds can be assured, would offering loans with a repayment process (like with Kiva) using government funds be a possibility to help reduce poverty? Just a thought.