Understanding Entrepreneurship
Senior 1 · Entrepreneurship
Understanding Entrepreneurship
Lesson 4 of 4
25 min
Maraba, in today's Huye District, grows fine Bourbon coffee in volcanic soil on high hills. Yet until 1999 its coffee was graded below grade C, too poor for the world's good markets, and buyers paid about USD 0.33 a kilogram. The farmers had no way to wash and prepare their coffee cherries quickly enough: the sweet, sticky coating round each bean must be removed within about 12 hours of picking, or it starts to ferment and spoils the flavour.
In 1999, 220 growers formed a cooperative and named it Abahuzamugambi, "people who work together to achieve a goal". With help from the National University of Rwanda and a partnership called PEARL, they opened their first coffee washing station in July 2001. In 2002 an American roaster bought an 18,000 kg container of Maraba coffee at USD 3 a kilogram. In 2003 the cooperative made a net profit of USD 35,000: 70% was shared among the farmers and 30% was put back into the cooperative.
Facts from the Wikipedia article "Maraba coffee" (see the credits).
The Maraba farmers did not start with a business plan. They started with a problem that cost them money every harvest. Entrepreneurs look at problems the way a farmer looks at a field: as something that can be worked on.
Definition
Business idea: a suggestion for a product or service that could solve a problem or satisfy a want.
Example: "We could wash our own coffee cherries."
Definition
Business opportunity: a business idea that can actually work: enough customers want it and will pay for it, the resources to provide it can be found, and it can make a profit.
Example: a washing station, once buyers, funding and water were found. Every opportunity starts as an idea, but many ideas are not opportunities.
Definition
Cooperative: a business owned and run by its members, who share its work, its decisions and its profits.
Example: the Abahuzamugambi coffee cooperative of Maraba.
Definition
Value addition: changing a product so that customers will pay more for it than for the raw material.
Example: washing, drying and sorting coffee cherries so the coffee sells as a higher grade.
The flowchart shows the path from problem to business, with each step matched to Maraba.
| Problem people face | A possible business |
|---|---|
| Phones go flat in villages with no electricity at home | A solar-powered phone-charging kiosk |
| Tomatoes rot after harvest, when prices are lowest | Drying tomatoes, or making tomato sauce |
| Plastic waste in towns and markets | Collecting and recycling plastic into new products |
| Parents queue for uniforms every January | A workshop taking early orders (Lesson 1) |
| A long walk to withdraw money | A mobile-money agent in the village (Lesson 3) |
| Farmers cannot get produce to market | A shared transport service run by a cooperative |
Worked example
How much did solving the problem add? (figures from the case)
Step 1: compare the prices. The washed coffee sold for about 9 times the old price per kilogram.
Step 2: value of the first container. , so USD 54,000. At the old price the same weight would have fetched , about USD 5,940.
Worked example
Sharing the 2003 profit
Net profit: USD 35,000. Farmers' share 70%; reinvested 30%.
Check: . The farmers shared USD 24,500, and USD 10,500 stayed in the cooperative to improve the next harvest.
Worked example
Choosing between ideas (illustrative)
A youth group in Kayonza scores three ideas from 1 (poor) to 5 (excellent) on four tests.
| Idea | Customers want it | We have the skills | Start-up cost we can afford | Likely profit | Total (out of 20) |
|---|---|---|---|---|---|
| A. Solar phone charging | 4 | 4 | 4 | 3 | 15 |
| B. Drying tomatoes | 5 | 2 | 2 | 4 | 13 |
| C. Tree-seedling nursery | 3 | 3 | 3 | 2 | 11 |
Step 1: the highest possible total is .
Step 2: idea A scores , the best of the three.
Step 3: think again. Idea B has the strongest demand and profit; its weak scores are skills and cost. Training and a group loan could raise both, so B is worth revisiting later.
Tip
Listen for complaints. Every time you hear "I wish…", "Why is there no…?" or "It's so hard to…", write it down. A complaint is a problem someone might pay to have solved.
CGTN Africa, "Rwanda entrepreneur creates a solar mobile charging kiosk" (2015, under 3 minutes). Watch for the problem the kiosks solve, who pays for the service, and how the franchise model lets other people run kiosks as their own businesses.
Practice
Further reading
Sources and credits
The flowchart, the problem table, the Kayonza idea-scoring example, the activity and the practice items are written by Ganzaa; the Kayonza figures are illustrative.
This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.
