Incubating Peace? Business Incubators in Conflict Settings

Small- and medium sized enterprises (SMEs) have the potential to empower and benefit rural communities as well as marginalized members of society, such as youth, women, and internally displaced people (IDPs). Moreover, the United Nations Security Council proclaimed in 2004 that domestic SMEs can create employment opportunities to demobilized fighters.

Notwithstanding their potential benefits, the creation and long-term operability of SMEs face numerous challenges, causing many to go bankrupt soon after their establishment. Business incubators constitute strategic instruments that help reduce the high mortality of SMEs, while also growing their entrepreneurial base. As such, they have emerged as a promising tool in (inter)national development and peacebuilding.

Business incubators around the world are modelled along the spectrum of for- and not-for profit initiatives. Commercial incubators provide investment (training, financial and otherwise) in return for start-up equity shares. Not-for-profit incubators tend to offer training and advice, often coupled with selective grants or soft loans.

In the MENA region, several new business incubators are modeled as not-for-profit initiatives that pursue broader macro-economic and social ambitions, ranging from large-scale job creation and private sector development to the re-integration of ex-combatants and women empowerment.

Reflective of this broad array of goals, is the diversity of actors involved in the implementation of business incubators. They include companies, international organizations, financial institutions, national and foreign governments, as well as NGOs.

The use of business incubators as a development and peacebuilding tool indicates a shift in the development discourse, away from short-term humanitarian support and aid toward the long-term building of capacity and domestic economic development. It also builds on recent research suggesting that local business people may have a far more proximate and vested interest in positive peace than transitory international peacebuilding officials.

Yet, for business incubators to actually contribute to development and peacebuilding, the right balance between private and public sector interests must be found: to effectively achieve public interest goals, incubators must apply business rigidity and expertise.

In countries such as Egypt and Jordan, many business incubation projects aim to create jobs and foster economic development. Among other initiatives, these countries have utilised the “Start and Improve Your Business” (SIYB) program, designed by the International Labour Organization (ILO).

In other countries, business incubation has been applied as a peacebuilding instrument. In Lebanon, for example, the ILO adapted its SIYB program in early 2018 to help Lebanese and Syrian youth start joint and income-generating initiatives. The resulting employment opportunities and business collaborations were thought to decrease tension among host communities and Syrian refugees.

The idea to establish businesses across conflict lines to create shared economic interests and maintain peace has long been applied and tested – in Ireland and South Africa in the 1990s, for instance. Like the current Lebanese example, business centres in Ireland aimed to create space and activities that brought together individuals from both conflict parties. The board members of these centres were both Protestant and Catholic, for instance, gaining first experience in working together.

Likewise, entrepreneurs with different religious affiliations had the opportunity of working in the neutral space of the business centre. The fact that ‘incubating peace’-initiatives are still ongoing in the MENA region 20 years after the Ireland experience indicates their popularity, if not success.

A further rationale underlying ‘business for peace’ incubation programs is to eradicate material grievances that have contributed to the outbreak and persistence of conflict. In Libya, for example, explicit efforts have been made to re-integrate ex-combatants through the creation of alternative income sources and livelihoods. In 2012, the Libyan Programme for Reintegration and Development (LPRD) began constructing multiple business centres across the country, offering entrepreneurship training to former fighters, among others. Participants learned how to create, evaluate, and implement a business plan, and, if successful, received funding and mentoring to start their own business.

While the OECD and others described the LPRD project as promising, the establishment of incubation projects in conflict settings comes at a risk. Spark, a Dutch NGO, for instance, had to evacuate its business centre in Benghazi and end its incubation project prematurely in 2014 due to renewed conflict there. Notwithstanding this experience, the organisation has begun implementing the LEAD project (Local Employment in Africa for Development) in Libya, as well as Tunisia and Somalia in 2016. Other incubators continue to appear in Libya, Iraq, as well as other countries marked by conflict and fragility. For instance, ‘Orange Corners’ was set up in Erbil and Baghdad in early 2020. These developments point to the resilience and the potential of entrepreneurship in conflict situations.

Clearly, starting a new business amid simmering or overt conflict is not easy. Aspiring entrepreneurs face a series of challenges, including failing infrastructure (e.g. power cuts and slow Internet), a lacking or malfunctioning financial system, lacking access to equipment, a weak market, insufficient entrepreneurship education, general instability and insecurity, and a lack of financial support and investment. The last point is likely to become more challenging with the outbreak of Covid-19, as investors grow increasingly reluctant to spend money on risky start-ups.

While difficulties are to be expected, existing narratives of opportunities are more surprising. Participants and stakeholders involved in incubation programs in Libya, Iraq and Syria highlight possibilities and impact which they say render continued incubation efforts worthwhile. In particular, modern technology (where available) has proven to be a great enabler in growing start-up communities. The collapse of established economic systems leads to new openings and dynamic new economies. Established companies are closing, while new needs are appearing. Those who are familiar with the problems of their communities, have the chance to create small, easy, intelligent and cost-efficient solutions. If they can secure funding and navigate their challenging business environment, they face little competition and benefit from relatively low start-up costs and the abundant availability of skilled labour.

Entrepreneurial spirit stays resilient in the context of conflict and state fragility. In fact, the Guardian reported in 2017 that entrepreneurship was actually growing in war-torn Syria, especially among women who developed new ways to support their families. While these forms of necessity-driven entrepreneurship tend to be less innovative, with limited scalability, they nevertheless lead to the establishment of new and important SMEs.

The use of business incubators in development and peacebuilding brings together the public and private sector: business principles are applied to achieve more than profit goals. To be successful, these incubator initiatives must strike the right balance between private and public sector rationales. Anecdotal evidence suggests that some ‘development incubators’ tend to prioritise social goals over business principles. The resulting projects are at risk of being financially unviable, producing largely unmarketable items.

On the other hand, Venture Capital firms and for-profit incubators show little to no care for social goals. While their work may nevertheless contribute to development and peacebuilding, it may also do the opposite, at least in the case of peacebuilding. Importantly, not all business is good for peace and not all business people are in fact interested in it. While the complementarity between business and peacebuilding is of course context-specific, it is clear that the public and private sector must join forces to effectively ‘incubate peace’.

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