Jose Ordonez installing an electrical meter at Comunidad Nueva Alianza.
Many rural communities and urban shantytowns in developing countries do not have public services, such as energy, sanitation and clean water. The residents of these communities also tend to lack access to the capital and training that would let them solve these problems themselves. Due to scarce government resources, they often must rely on help from aid organizations or resort to poorly constructed stop gaps.
AIDG believes that in order to develop affordable services for underserved communities, local enterprises need to be fostered and supported. Small renewable energy, sanitation, water, and other innovative firms need financing and training to build the power systems, schools, toilets, water systems, biomass, agricultural processing, communications and other forms of infrastructure that can change the basic standard of living for people currently living in poverty.
The goal of AIDG’s Business Incubation Program is to create independent locally-owned enterprises that can serve the needs of impoverished communities using appropriate technology. Currently the program focuses on business creation in the following arenas: Energy, Water and Sanitation. Future arenas under consideration include Communications, Housing, Transportation and Agricultural Processing.
The AIDG provides each incubated business with:
- Training
- Seed Capital
- Technical and logical support
- Equipment and material procurement
- Aid in business planning
- A 2-year incubation commitment
- Access to a talented base of international volunteers and interns
Program Model
We operate the Business Incubation Program through five steps: Talent and Opportunity Identification, Investment Lending, Tools and Equipment Provision, Training and Research and Contracted Services.
- Talent and Opportunity Identification
Starting in 2008, AIDG began conducting business plan competitions in Guatemala and Haiti to identify entrepreneurs for the Business Incubation program. Teams with the most promising business ideas receive 2 to 3 years' worth of training, in-kind equipment and material donations, an initial start-up grant to help them incorporate their enterprise and begin early operations, and access to low-interest loans ranging in size from $10,000 to $100,000 (median $50,000).
In our 1st competition in Haiti, Konkou Biznis Ayiti, we searched for businesses that could commercialize biogas technologies in Northern Haiti.
Guateverde, our business plan competition in Guatemala, focuses on access to water, energy or sanitation through the use of green technologies or services.
Outside the competition cycle, entrepreneurs that have a particularly strong business plan are also reviewed.
- Investment Lending
AIDG’s business financing takes the form of grants and low-interest loans. Loan amounts which can range from $10,000 to $100,000, depend on the enterprise’s scale and scope. We offer a very favorable fixed interest rate ranging from 0% to 5% for most of our loans. The loans have very generous repayment terms and schedules to accommodate the enterprises we support, which operate in difficult market environments. Since our goal is enterprise success and not fund return, loans made by AIDG are intentionally below market rate.
- Tools and Equipment Provision
Most of the enterprises that we aim to incubate require some level of specialized equipment (e.g. foundries, milling machines, computer aided circuit design software). Depending on an enterprises needs, AIDG may provide an additional equipment donation of $2,000 to $25,000 of either purchased or donated equipment to help the enterprise get itself on its feet.
- Training and Research
Our training involves direct mentor pairing between members of our internship program and member of the enterprise. To date this has revolved around skills assessment and skill building exercises in both technical and business realms, ranging anywhere from electronics to accounting. We are in the process of developing a standardized training curriculum for each skill set. Additionally, we are working with teams of experienced professionals who can come to the field for shorter terms and give very specific skills based training to augment the intern mentorships.
AIDG also acts as a research and development arm for our incubated enterprises working to solve individual technical challenges based on customer feedback and ideas about product improvement.
- Contracted Services
Much of AIDG’s outreach work is done by contracting our incubated enterprises to perform infrastructure projects in local communities. This provides us with real world environments to train the business team as the enterprise is getting started. It also builds awareness of AIDG’s work and programs in the region and serves direct charitable purposes for schools, daycares, orphanages and other community organizations. During the 2 to 3 year incubation period, our incubated businesses are responsible for implementation and product delivery while AIDG acts as project manager and monitors project quality on contracted work. Outside of this period, the businesses do both project management and execution.
The benefits of investing in such businesses include:
- Sustainability. Locally based businesses produce lasting change and ensure long-term access to sanitation, electricity and clean water in the communities they serve.
- Wider Distribution. Our businesses establish distribution channels to disseminate their products as effectively as possible to the people who need them the most.
- Lower Cost. Local production means cost-savings for the farmer, development NGO or community organization that wants access to our clean or renewable technologies.
- Lower barriers to entry. There are many barriers that would prevent businesses aimed at serving lower income communities from getting off the ground. Our incubation program helps remove some of those obstacles.
