Yunus Centre Team Travels to Timor-Leste to Introduce Social Business

• Miscellaneous
• 02nd March 2011
• YC

From February 14th to February 19th, a team from the Yunus Centre visited the small island nation of Timor-Leste to explore the possibility of introducing a family of social businesses. The United Nations Development Program, who hosted the trip for the Yunus Centre representatives, built a very productive schedule for the team.

The YC held in depth meetings with various government officials and ministers, leaders of a number of NGOs and nonprofits based in Timor-Leste, and heads of various international aid organizations. Field visits to rural villages gave the YC staff an even deeper look into the problems and opportunities for the nation.

Timor-Leste, sometimes called East Timor, was a Portuguese colony until it declared its independence in 1975. However, within months, Indonesia invaded and subsequently occupied Timor-Leste. After years of sporadic violence and instability, resulting in the destructions of most infrastructure and government institutions, Indonesia relinquished control of the territory and Timor-Leste gained independence in 2002. Despite a properly functioning democracy, however, 8 years later, the country remains quite undeveloped, and the government is still in the process of rebuilding its institutions and administration.

Petroleum is the only major source of financing for the government of Timor-Leste, and these exports pay for 90% of government operations. Coffee is the only other developed industry, and it generates only $8.3 million annually in exports. Currently, roughly 80% of people are subsistence farmers. Roughly half of the population is illiterate, half is malnourished, and more than half earns less than $1.25 per day. Roads, electricity, and clean water do not reach many regions of the nation. However, the government is beginning to welcome foreign investment and spends about $700 million annually on infrastructure development, thus showing that Timor-Leste could potentially see the early stages of development in the near future.

The YC team visited two microfinance operations. They studied the government's program, named INFUSE, as well as the Moris Rasik microfinance institution. Combined, these organizations have over 15,000 borrowers as well as branches in every district of the country whose population is around 1 million people. It became immediately clear that both programs are quite successful, holding an annual interest rate of under 20% and an almost perfect repayment rate. Statistics show that borrowers have the tendency to gradually lift themselves out of poverty, with the building and stocking of small shops proving to be the most successful economic activity.

The representatives from the YC expressed great appreciation after holding a very productive meeting with the Vice-Prime Minister of Timor-Leste. It immediately became apparent that the Vice-PM envisages a future where a comfortable middle class will be prevalent, arguing that "creating only a very rich elite will be useless." It appears that the government of Timor-Leste has properly identified and prioritized their goals and objectives. And when the YC team explained social business to the Vice-PM, he responded very positively by expressing his optimism regarding the potential for this concept and by promising government support with future endeavors.

After studying the social problems of Timor-Leste, the YC staff began pondering potential social business solutions to these issues. Most of the government's $1.3 billion annual budget is delegated to various development projects that are managed by companies within Timor-Leste. However, there generally no local Timorese individuals to supervise these assignments, and the companies are forced to hire foreign contractors as managers. In an effort to provide professional employment to Timorese, the YC team began conceptualizing the development of a vocational training school, which would run using the social business model. This school could provide an education in an array of highly demanded skills. Possibilities include various construction or development methods, plumbing or electrical expertise, language skills, proficiency in hospitality services, etc. The focus will be on whichever skill set will have the highest demand in upcoming years.

Another potential social business idea would have the overarching aim of fighting malnutrition, which has a particularly large presence in rural areas and for children. The YC staff created the idea of introducing fruit juice carts throughout the country. The mobile stands, which would be equipped with a juice machine, would sell made-to-order juices. In order to fight malnutrition, the juice will be enhanced with a powder containing a wide array of essential nutrients and vitamins. The product would be sold on a cross-subsidized pricing model; the price charged in wealthier, urban areas would be high enough to ensure that the rural poor can purchase the juice for as cheaply as possible. As the mobile juice carts would employ abused women, this social business would have three social effects for Timor-Leste: The nutrient-enhanced juice, which would be provided at low cost to poor people, would have the potential to drastically reduce malnutrition.

Additionally, the social business would give abused women the opportunity to become financially independent, and it would also support local fruit farmers who would be paid a fair wage for their products.

Many other ideas are being discussed, including projects aimed at boosting the tourism industry in this beautiful nation. The YC team has also begun pondering the ways in which rural farmers can be connected to urban marketplaces, how to provide affordable mosquito nets in malaria prone regions, and what strategies could be utilized in order to increase the benefits that local people receive from the coffee industry.

If you are anybody you know may be interested in collaborating with the Yunus Centre to introduce social businesses in Timor-Leste, please contact us at: nadina@yunuscentre.org.