Thank you, Richard, for the kind introduction.

Good morning, everyone.  I’m pleased to be here today, especially to celebrate 15 years of the Shell Foundation’s pioneering work advancing market-based solutions to end poverty, and to be with so many experienced impact investors and entrepreneurs.

In these remarks, I will hopefully set the stage a bit and perhaps say a few things to help spark a great discussion during today’s meetings.  Shell Foundation and its community of partners, many of whom are also here today, has achieved some great successes over the years;  catalyzing the clean cookstoves sector, to its influential role building inclusive markets for off-grid energy. 

Shell Foundation has also – as we all have – seen its share of challenges, and even failures.  And you have always responded with a willingness to change course, evolve, and innovate.  On top of that, your openness about these challenges has helped the entire development community learn, change, and grow. 

It is in that spirit I want to speak today.  None of us have all the answers, but if we share the lessons-learned from our successes and our failures with each other, and ask the right questions, we can work together to harness the immense power of entrepreneurship to end extreme poverty within a generation.

But, entrepreneurs can only make a small impact on their own. To achieve transformative change, we have to strengthen entire sectors, bringing in the right stakeholders with the capabilities to scale a product or innovation.

Shell Foundation’s report emphasizes all of these points, laying out a helpful roadmap for scaling inclusive, high-impact markets.

The report first looks at the importance of growing the supply of social-impact products and services.  At USAID, we have emphasized this as well, dramatically increasing our investment in promising early-stage innovations over the past few years.  We are also increasing our use of prizes and other “pull mechanisms” to source innovations in critical areas, like agricultural technologies.  All together, initiatives such as Development Innovation Ventures and the Grand Challenges for Development have helped more than 400 entrepreneurs and innovators refine their business models and become investment-ready.

Our experience affirms that early stage innovators need significant time and resources to allow for testing of new technologies, refinement of business models, and extensive iteration and adaptation.  That requires flexibility from funders, which is why we have structured our Development Innovation Ventures program so it can provide multiple rounds of funding as evidence accumulates and scaling progresses.  It also requires partnership with other donors and foundations, both to share risk and provide hands-on incubation support.

For example, through our partnership with Shell Foundation, Factor (E), and Sangam, we are testing incubation models for clean energy entrepreneurs that address risks related to the market, technology, and execution. 

We also agree with Shell on the importance of stimulating innovation not only on end-user products, but all along the supply chain – particularly in areas such as last mile distribution and financing.  The economics of selling one single $25 product in sparsely populated areas just doesn’t add up – so we need to be creative around things like supporting intermediaries which can sell baskets of products.  And also leveraging technology and digital financial services to drive down the cost to serve low-income rural customers. 

In supporting innovations, USAID also believes it is critical to zero in on those solutions that get us to impact most cost-effectively.  New technologies can help decrease the unit-cost it takes to get to a desired outcome, but I think that is only useful if the scaling cost is modest, and the time to scale is reasonable.  In essence, I think we have to zero in on the solutions that maximize the “net present impact value” to coin a phrase.

We must ensure innovators and entrepreneurs are thinking through a scaling strategy from the start.  This speaks to Shell Foundation’s smart emphasis on strong management.  Even though the pathway to scale is likely to change along the way, our experiences show that innovators that start planning for scale early find the most success.  Early planning for the scaled distribution of chlorhexidine, a low-cost antibiotic that helps prevent newborn deaths, helped ensure our partners in governments and the private sector were anticipating the right challenges, and is smoothing the path to full-scale distribution.

Even as we focus on growing supply, we must also help build demand for the products and services being developed.  This is not always an easy task for donors, who are at risk of being too focused on supply, and not spending enough time understanding the needs of the customer.

Entrepreneurs are hugely valuable here.  With an intimate understanding of the local context, they can share critical insight into the customer’s needs and decision-making processes.  As donors, we need to listen carefully to insights from the front lines, and then help address the remaining obstacles keeping people from gaining access to life-improving goods and services.

But governments and donors can also be important sources of demand to catalyze inclusive markets, using our own purchasing power through advanced market commitments, grants or transfer payments.  That’s how USAID and our partners have helped create markets for vaccines, and it is why we have encouraged governments to digitize social payments, which drives demand for mobile money and other digital financial services that can help revolutionize entire sectors.

There is more to do here, and the development community can help address policy and regulatory issues, financial literacy, and other factors to allow innovative solutions to flourish.  But the fact is that demand side and/or distribution issues are increasingly becoming the binding constraint in inclusive markets.  As we look to expand base of pyramid markets well beyond the current hotbeds of East Africa and South Asia, we will need to determine new ways to tackle these constraints.

As you all know, we also have to look at how to finance the growth of inclusive markets.  This finance market is already growing, with a projected $12.2 billion to be spent by impact investors in 2015 alone.  But that still pales in comparison to other sources of financing like domestic private investment and official development assistance.  It is clear we need to work together to make more capital available for social innovations to transition to commercial viability.

One aspect is that we will have to address the shortage of funding at the seed stage.  The economics of seed-stage investing simply do not work for most investors, with even impact-first investors finding them too risky.  One promising approach may be to develop partnership models that can help leverage capital into this space via smartly targeted subsidies.

For example, through our Partnering to Accelerate Entrepreneurship Initiative, USAID is helping enable small investments in start-ups through innovative approaches to seed stage financing.  By helping cover the operating costs of a new early seed-stage investment fund, we made it possible for our partner Village Capital to crowd in investment from private investors, including a wealth management firm that had never before invested in this space.  If we can replicate models like this, we can demonstrate the viability of early stage investing and attract new types of investors to our work.

As the Shell report points out, small and growing businesses also face challenges accessing affordable debt financing, particularly in sectors like off-grid energy.  In response to this, USAID is increasingly utilizing on our Development Credit Authority to catalyze lending, offering partial credit guarantees backed by the full faith and credit of the United States Treasury.  This allows us to share risk with commercial lenders so they can feel more comfortable investing in the new markets that are so important for achieving development results.

At the same time, it might be worth discussing the following challenge today: many products may have to be created by social entrepreneurs, but yet the only way to scale to billions is via large-scale commercial capital.  So, in my opinion, the only way to make the jump is to have well-thought out scaling plans and economics from the start so that at full-scale, the products are commercially viable.

Turning to the final theme of the Shell framework, innovators and entrepreneurs can rarely achieve large-scale success without the necessary infrastructure and institutions that make inclusive markets possible.  We’ve seen the impact that field building institutions like CGAP in the microfinance sector have had in addressing policy issues, setting standards, and driving technical insights and learning. 

And we also have seen the benefits of public-private partnerships to serve as platforms for aligning interests and channeling stakeholders towards collective action.   

In our experience, building inclusive markets requires a systems change approach, which we have applied to sectors that are priorities for us, by creating broad-based partnerships.

For example, the New Alliance for Food Security and Nutrition created a framework for governments and the private sector to accelerate agricultural development.   Under this alliance, governments committed to making important policy changes that promote growth in the agricultural sector, and that was linked to $8 billion of investment commitments from more than 200 global and local African companies to invest in smallholder farmers.  This multi-stakeholder approach is also at the core of the Power Africa initiative, where government and donor commitments are used to unlock much larger flows of commercial capital.

Power Africa is working closely with DFID, the African Development Bank and other partners to determine how we can best replicate the successes of companies like Off-Grid Electric, Mobisol, and m-Kopa in bringing rooftop solar solutions to millions of Africans at scale.   These companies are adding thousands of new customers each month, but mostly in East Africa.  There is no reason that these types of companies cannot operate anywhere else in Africa or the world.  We are working with the companies to find out what the ideal operating environment is for them and then sharing that feedback with governments, so that governments can make the necessary regulatory changes that would encourage these companies to enter new markets.   Responding to the input and feedback of the private sector regarding what they need in order to conduct business in a country and create jobs is at the heart of the Power Africa model.

These programs recognize that the pathways to scale may start with entrepreneurs but may not always end with them.  So, as we move from reaching thousands of people to millions to billions, we need to be proactively engaging those stakeholders with the capabilities and infrastructure for scaling.

In some cases, this is host country governments, which can be anchor clients - catalyzing demand for new solutions or incorporating entrepreneur-developed solutions in their own programs.  In other cases it can be corporations, whose global supply and distribution chains can serve as powerful platforms for scaling.  It could even be a combination of both.

No matter the stakeholder, it is our responsibility to continue growing linkages between governments, corporations, and those in the entrepreneurship and impact investing world to advance whole market, systems change approaches.

I know I speak for everyone at USAID when I say we look forward to working with all of you to tackle these challenges and answer these questions.

The first step to that is to build a stronger evidence base for our work.  For example, there has been rapid growth of accelerators and tech hubs in developing countries, but we don’t yet know if or how they are helping entrepreneurs succeed. 

Even if we had all the evidence we needed, this work would be difficult.  It takes time, and it takes collective action.  But now, with the advent of the Global Goals, it is more important than ever for us to set a shared vision of what we can achieve together.

That’s why I’m looking forward to today’s discussions, and to our continued collaboration.  Please know that USAID shares your commitment to harnessing the power of entrepreneurs to end extreme poverty.  Know that our doors are always open to discuss partnering.  And know that our ears are open to you and – critically – to the communities you serve in the developing world.

Thank you.