This article is part of a Global Entrepreneurship Week (#GEW2021) series putting a spotlight on policies designed to help entrepreneurs start and scale, and the crucial role policy makers play in building a strong entrepreneurship ecosystem.
Launched in 2011, YouWin! (Youth Enterprise with Innovation in Nigeria) is a large-scale national business plan competition for young entrepreneurs that has attracted almost 24,000 applicants. A pool of US$36 million in grant funding has provided each winner with an average of US$50,000. Notably, not all the winning applicants are selected by judges. Many are chosen at random.
The initiative is a collaboration between Nigeria's Ministry of Finance, the Ministry of Communication Technology, and the Ministry of Youth Development – with support from the UK’s Department for International Development (DFID) and the World Bank. The government’s objective is to propel innovation and job creation by providing needed capital to new and growing small companies. (See, GEN Atlas.)
Capital is a critical element of new business creation and a key pillar of the Kauffman Foundation’s America’s New Business Plan. According to the Foundation, “too many entrepreneurs lack the funding required to grow their companies,” so governments must support their ability to access the right kind of capital.
Many entrepreneurs in Nigeria want to grow businesses, but cannot hire more than one or two employees due to lack of capital. Kauffman surveys of U.S.-based entrepreneurs have found that between 90 and 95 percent of those who hire employees required financing. Unlike the U.S., however, Nigeria’s banks and investors face steep challenges assessing the risks of new and small companies. Most often, investors put their money into safe, well-established companies, leaving entrepreneurs who are poised to grow starved for cash.
The Foundation notes that many government capital access programs fail because they do not target “support to entrepreneurs launching new businesses.” David McKenzie conducted an impact study of the program for the World Bank. Because “almost all firms in developing countries have fewer than 10 workers,” he evaluated YouWin! to determine whether Nigeria’s entrepreneurs have the potential to grow their companies and how public policy could be used to remove the barriers that prevent these entrepreneurs from doing so.
He found that the Bank’s surveys tracking YouWin! applicants over three years showed that winning the competition led to “greater firm entry, higher survival of existing businesses, higher profits and sales, and higher employment,” and increased the likelihood of a firm having 10 or more workers by more than 20 percent. YouWin! created 7,000 new jobs – with each job costing about $8,500 to create, which is much less expensive than other job-creation policies.
Using random selection to award runners-up (all of the highest scoring plans get funded automatically) proved to be a good strategy. It reduced opportunities for corruption among the judges and, like a scientific experiment, it allowed the government to measure success against a control group. McKenzie found that as a result of being selected, the chances of a company still operating three years later increased by 37 percent. “These effects,” he concluded, “appear to occur largely through the grants enabling firms to purchase more capital and hire more labor.”
The program has transformed lives in Nigeria. Just ask Lariat Alhassan, the founder of Larclux Paints in Abuja. Things weren't going great: she had no staff, no office and was selling her paints out of the back of her car. When she first heard about the competition on the radio, she believed it was a scam. But, after hearing the radio ads a few more times, she decided to apply. From a pool of more than 24,000, she made the semi-finals and was invited to participate in a four-day seminar on how to develop a full, comprehensive business plan as part of the program. When she finished, hers was 10 pages long. It won her a $65,000 grant. She hired people, leased a showroom with office space, and bought a vehicle to make deliveries. Today, she has 10 full-time and more than 100 part-time staff. She recently bought land to build a paint manufacturing plant. “We are looking to become one of the biggest paint producers in Nigeria and Africa.”
According to Chris Blattman, a professor at the University of Chicago, YouWin! may be the “most effective development program in history.” Looking at the entrepreneurs who did not have a registered firm before the competition, “93 percent of those who got the grant have a firm after three years. And these firms are bigger and more profitable.”
After Nigeria’s current president, Muhammadu Buhari, took office in 2015, his administration reformed the program. It is now YouWin!Connect, a multi-media enterprise education initiative that provides tools and skills required to support Nigeria’s next generation of entrepreneurs. It is accepting applications for the 2021/2022 round.