It is hard to shake off the bureaucratic image of government institutions, but try to Imagine the possibilities when they begin to tap into the potential of crowdsourcing, depart from dependence on inner circle of experts to tackle public issues and embrace a more open, creative and chaotic crowdsourcing process to identify innovative solutions. No, it is not a hypothetical assumption, G-20 is taking up that challenge.
Recent announcement of the partnership between G-20 and Ashoka’s Changemakers to launch an online competition to find innovative models that catalyze SME financing in low-income developing countries is indicative of a shift in paradigm. Canada also pledges $20M to assist winners to scale up their programs. Even though it is still early to judge the outcomes but this unprecedented public-private partnership through competition approach reflects 3 key developments that are now translated into tangible action:
1. G-20’s willingness to experiment on crowdsourcing will set the precedent for future large-scale effort, encourage more public-private partnerships and take crowdsourcing to next level. The important thing here is that the willingness to test and learn from it can yield benefits far beyond the insight gained from consultation with selected few institutional experts.
2. Solutions for developing countries do not reside within G-20, there are common benefits to solicit worldwide participation with grassroots innovators and potential winners selected from all representative regions.
3. Ashoka’s Changemakers is chosen as a platform signifies the key roles that social entrepreneurs can play in restructuring private financing to SMEs in low-income developing countries.
Current field of social entrepreneurship has documented a great deal on what microfinancing can do to the poor given its extensive reach and global scale, as well as more urgent and immediate attention to poverty. The attention to SME financing in low-income developing countries is visibly lesser but no doubt significant. Organizations like Endeavor has been at the forefront of this development, funding high-impact entrepreneurs from developing countries. Agora Partnerships founded by Ashoka fellow, Ben Powell fills the gap for promising entrepreneurs who are not ready for VC investment by combining financing and technical assistance to help them to scale.
The work of these social enterprises reveals the fundamental traits of financial innovation needed to assist SMEs to grow in low-income developing countries. Conventional assessment on credit trustworthiness and collateral often needs to be revamped under local context to extend financing to small-scale entrepreneurs. Social impact is also given equal attention as market potential, with greater risk tolerance and longer term partnership to achieve improved social and economic outcomes.
Hopefully the G-20 SME Finance Challenge will trigger a new wave of collaboration and social finance innovation through crowdsourcing.
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