Sanergy has spent much of the past several months learning the ins and out of land rights in the Mukuru and Viwandani areas, where we’ll be expanding throughout the rest of this year. Gaurav Tiwari, Sanergy team member and the Hernando de Soto Fellow at the Fletcher School of Diplomacy at Tufts University, has led much of this process. Here, Gaurav shares some insights from the past few months.

In Nairobi’s slums, enterprise is thriving.  Business-savvy entrepreneurs work hard to deliver goods and services to their community – but they often do so in the shadows of the formal economy as many lack secure property rights.

Vincent Mutuku, Sanergy field manager and Mukuru Kwa Njenga resident.

Across the developing world, people are ensnared in a similar poverty trap: In my prior research on regulatory barriers to small businesses in New Delhi, India, I found that street vendors were considered illegal since they did not possess licenses or property rights to vend.  Government licenses were in short supply, and getting one could take several months.  As such, the cost of doing business remained extremely high, and the economic loss from being outside the formal economic system was and continues to be significant.

Peruvian economist Hernando De Soto rightly argues that land in developing countries is dead capital and can only come alive with legal and property rights reform.  Here at Sanergy, we witness such challenges in the slums of Nairobi, and we recognize the power of secure property rights in accelerating economic growth.

I’ve spent the last month interviewing entrepreneurs in the slums to learn about their businesses and access to financing.  I found that most entrepreneurs are opportunistic – they work with the hand they have been dealt. In Nairobi’s case, property rights are typically opaque. Corruption is pervasive, so one pays a high price to function in the shadow economy.  In sum, entrepreneurs who have less are forced to pay more to succeed.

Moses Wahor, Sanergy field manager and Mukuru Kwa Ruben resident.

As we scale Fresh Life toilets up across Nairobi, we are taking a different approach.  First, we have hired from within the community – Moses and Vincent are both well-respected citizens who have credibility with officials, elders, business owners. They are working closely with community leaders to secure support for the implementation of Fresh Life toilets. Second, we are recruiting our first class of Fresh Life toilet operators to specifically be respected community members. Our innovation may be new, but the people behind it won’t be.

These partnerships will help entrepreneurs move away from the informal economy to one that is formalized – built on a foundation of secure property rights and economic freedom.

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