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  • Islam Analysis: Islamic enterprise initiatives at risk of underperforming

Entrepreneurial initiatives to provide vital jobs must adjust to the tough enterprise environment or risk underperforming, says Athar Osama.

In many Islamic countries, as much as two-thirds of the population is under the age of 25. This puts tremendous pressure on governments to create economic growth that can provide hundreds of thousands — if not millions — of jobs each year. And the challenge is getting steeper by the day. According to the World Economic Forum, the Middle East and North Africa region needs to create 75 million jobs by 2020 — a jump of more than 40 per cent on the number in 2011 — just to keep employment close to current levels. [1]

SPEED READ

  • Many Islamic countries are promoting entrepreneurship to create badly needed jobs
  • But there are serious challenges such as a lack of financing and wider support for enterprise
  • Social change and reduced bureaucracy are also needed if initiatives are to succeed

With the state and business sectors suffering from stagnation, governments have often turned to entrepreneurship as a way of creating jobs. Dozens of programmes, ranging from entrepreneurship development and support for small and medium enterprises (SMEs) to incubation, 'angel' investment (investment by individuals) and venture capital, have sprung up across the Islamic world.

Entrepreneurial energy

One of the best-known initiatives is the Celebration of Entrepreneurship that has now been held twice in Dubai 2010, and in Amman 2012  as the biggest gathering in the Middle East of leading entrepreneurs from not only Arab and Islamic nations but also from around the world. Private equity firm Abraaj Capital has also launched Wamda: an online platform to support entrepreneurship across the Arab world through such things as education, community building and the sharing of best practice.

Elsewhere in the United Arab Emirates, government-backed entities such as the Khalifa Fund for Enterprise Development and the Mohammed bin Rashid Al Maktoum Foundation have launched mentoring, coaching and financing programmes for entrepreneurs.

Meanwhile, Qatar has embarked upon entrepreneurial development activities at the Qatar Science & Technology Park and through the recent launch of an SME fund estimated at more than US$1 billion. In Saudi Arabia, the King Abdulaziz City for Science and Technology — which is both the national science agency and the national laboratories — has launched a series of incubators under the Badir Program for Technology Incubators.

The private sector has also been the driving force behind a number of enterprise activities. Endeavor Jordan — a branch of US non-profit organisation Endeavor — was launched in 2008 to help create high-impact entrepreneurship in the region. INJAZ al-Arab, which operates across 12 Middle Eastern and North African countries, seeks to engage in its competition more than a million young people by 2018.

Other recent initiatives such as the MIT Enterprise Forum of the Pan Arab Region and the i2 Institute have got the Islamic world buzzing with entrepreneurial energy.

Getting the model right

However, before victory is declared, it is important to see how well efforts to support enterprise in the Islamic world are doing. Although there is a dearth of rigorous scientific evidence, there is a general feeling that many initiatives have hit serious hurdles, such as a lack of financing, a scarcity of role models and trying to succeed in a society that generally discourages entrepreneurship.

The MIT Enterprise Forum of Pakistan came up with a modified process of support. Its Business Acceleration Program (BAP) gets around the problem of early failure among entrepreneurial firms by targeting well-established businesses and focusing on growth rather than on start-ups. This also avoids the problem of having to ensure that a new entrepreneur is really committed to their idea.

The BAP is now in its sixth year of operation and boasts a much better track record than other similar initiatives in the country, according to Azhar Rizvi, the vice-chairman of the MIT Enterprise Forum of Pakistan.

Other models, such as incubators, angel investment groups and venture capital funds have run into similar problems, so policymakers, business leaders and programme designers may be well-advised to take into account the real situation on the ground.

Solving the right problem

A much harder question to address, however, is whether the creation of entrepreneurship programmes actually targets the main obstacle to jobs growth. Such initiatives do not exist in a vacuum. For them to work, they must be accompanied by social and labour market reforms in many Islamic countries, particularly in the resource-rich Gulf countries.

In a number of Islamic countries, a vast majority of the local population receives considerable state welfare payments that significantly reduces their incentive to work or create ventures. [2]

Without some tough love from the state, many of these countries will see little large-scale change in the status quo.

In other places, despite ample talent and incentive to work, bureaucracy and unnecessary regulations hamper the formation of firms. For instance, the Muslim countries with the largest populations and so talent pools, such as Bangladesh, Egypt, Indonesia, Iran, Nigeria and Pakistan, feature in the bottom half of the World Bank's rankings of how easy it is to do business around the world. [3]

On top of all this, a form of inferiority complex that generally pervades the region leads to a preference for foreign entities and a bias against buying from local players, creating an uneven playing field that makes it even harder for entrepreneurs in the region.

While it is correct to focus more on entrepreneurship, chosen interventions must consider the realities on the ground and be modified accordingly. And a failure to address deeper cultural and structural labour issues will only lead to suboptimal results.

 Athar Osama is a science and innovation policy consultant and advisor. He is the CEO of Technomics International Ltd, a UK-based international technology policy consulting firm, and founder of Muslim-Science.com and the Pakistan Innovation Foundation.

References

[1] Accelerating entrepreneurship in the Arab world (World Economic Forum, 2011)

[3] Doing Business (World Bank, 2012)

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