Palestine has long suffered serious water shortages. So a Palestinian startup, Flowless, has created technology that helps water utility companies and farmers to pinpoint leaks and reduce waste. It now has customers as far afield as Ireland and Kenya. 

In Lebanon, where poverty has tripled in the past decade, FabricAid collects donated clothing and sells it at low prices. With 14 stores in its home country and in Jordan, the social enterprise has pioneered the region’s second-hand clothing market. 

And in Egypt, Delta Oil collects used cooking oil to be turned into biofuel for export, reducing waste and preventing carbon emissions while providing paid work to hundreds of women.

> FabricAid
> Flowless
> Delta Oil

They’re just three examples of Middle East ventures responding to problems in their own communities – neatly combining green innovation with creating jobs or boosting livelihoods. That dual focus makes a lot of sense. Carbon emissions are rising sharply in the region. The impacts of climate change are staggering: the Middle East is warming twice as fast as the global average, and combined with North Africa is the world's most water-stressed region. And, while not poor overall, it is the only part of the world where poverty has been consistently rising since 2014. “We’re going in exactly the wrong direction,” says Myrna Atalla.

• Read an update from Alfanar and others in Lebanon following the escalation of conflict in early October

Atalla is the outgoing executive director of Alfanar Venture Philanthropy, which provides funding and management support to social enterprises in Palestine, Lebanon, Egypt and Jordan – including Flowless, Delta Oil and FabricAid. Created 20 years ago, it now has an explicit focus on environmental sustainability, alongside education, empowerment and employment. 

Other champions of entrepreneurship also combine these objectives. Spark, a Dutch nonprofit that helps young people in crisis and conflict zones, runs Green Forward, which aims to strengthen business support organisations in seven countries in the Middle East and North Africa, aiming to nurture a green and circular economy. And the UN-backed SEED: Promoting Entrepreneurship for Sustainable Development programme has supported what it calls “eco-inclusive” enterprises in 40 countries over the past two decades, and since 2022 operates in Morocco. David Waibel at Adelphi, a German consulting firm that is implementing the SEED programme, says the programme works with enterprises that are “directly responding to the problems they see day to day”. 

Yet social enterprise is not widely understood in much of the region. Backing green innovation is often seen as too risky, and many investors from outside the region are wary about getting involved there. That, say both social entrepreneurs and their longtime supporters, needs to change.

From ‘grantpreneurs’ to self-sufficiency 

Small and medium-sized businesses are widely considered a powerhouse for economic growth and employment. They play a particularly important role in low and middle-income countries. In Morocco, youth unemployment is high and female participation in the labour force is low, says Waibel; any business that trains or employs these groups can quickly make a big impact. 

There is plenty of support for commercial startups in the region, Atalla says, particularly for early-stage ones. What’s often missing is help for growing social enterprises, which is where Alfanar – described as “the first venture philanthropy organisation in the Arab world” – sees its role. (Alfanar prefers the term ‘Arab world’, or ‘Arab region’, referring to the 22 countries in the Arab League; some others refer to the more loosely defined Middle East and North Africa region.) 

Its flagship Sustain programme typically involves three to five years of patient, flexible grants or zero-interest loans of around £250,000, plus management support and help with impact measurement. Where in-house expertise is lacking, Alfanar brings in outsiders: law firm Hogan Lovells, for instance, provides pro bono legal support to social enterprises. A newer Seed programme supports earlier-stage social enterprises for up to eight months, aiming to get some of them onto the Sustain pathway. The Seed stage also allows Alfanar to gauge entrepreneurs’ openness to hands-on input, which is a key feature of the venture philanthropy approach. That doesn’t mean you have to follow every piece of advice, Atalla explains, “but if you’re just looking for a cheque, you should definitely go elsewhere”.

Read more about the venture philanthropy approach in our interview with Isabelle Irani of Sumerian Partners 

Backing startups is appealing to many funders. It’s so popular, in fact, that some insiders talk of “grantpreneurs” – founders who rely on jumping from one grant to the next. “A lot of green SMEs kind of suffer from this grant dependency,” says Moritz Blanke, a manager at Adelphi.

Prior to Alfanar, Atalla worked in international development in Lebanon and the region, where she found it “really disheartening” to see organisations adapt their focus as donor priorities shifted. She became obsessive, she says, about finding ways to invest in organisations that are accountable, not to donors, but to their customers or employees.

Grant dependency is particularly pertinent in places like Palestine, which has attracted billions of dollars in aid over the years. Many see that as deeply problematic. For instance, BuildPalestine, a homegrown initiative focused on social innovation, calls “for an alternative to traditional aid, one that directly empowers Palestinians to respond to the needs of their community in a more agile and resourceful way”.

Yet social enterprises – because they operate in complex markets, or are developing new concepts – often need a boost before becoming self-sufficient. BuildPalestine offers bootcamps, fellowships and help with crowdfunding. Alfanar tries to balance the need for long-term, flexible funding with a more businesslike approach, by providing a mix of grants and zero-interest loans. In the current financial climate, zero-interest effectively means subsidised loans, offering a gentle introduction to repayable finance. Alfanar says the social enterprises it supports benefit on average 37% more lives and generate 34% more revenue by selling goods or services as a result.

“War starts, and you need to think again”  

Atalla is no stranger to challenging situations: she took on the top job at Alfanar in 2010 following the untimely death of the founder, and just months before the Arab Spring – a wave of pro-democracy protests and uprisings across the region – kicked off. Despite this, she has expanded Alfanar’s reach from one country to four; since she joined, it has helped more than 185 impact enterprises and provided over £6m in funding, and another £6m worth of management support. In 2022 it made its first equity investment, in Lebanese second-hand clothing business, FabricAid, having supported the business since 2018. “We knew there was a bright spark there,” Atalla recalls.

Alfanar itself relies on donations, and this has become one of its biggest challenges. Events of the past few years – earthquakes in Turkey and Morocco, floods in Libya, war in Sudan, Gaza and Lebanon, and rising numbers of refugees in many countries – have added to the strain on donors in the region. “I won’t lie – fundraising is very difficult,” says Atalla.

Even more difficult is working with enterprises in a war zone. Until 2023 Spark had been running several programmes in Palestine to help strengthen the wider environment for startups, including in Gaza. “We built a great ecosystem there,” says communications manager Ibrahim Banat, but then, “out of nowhere, war starts, and you need to think again”. Since the Hamas attack on Israel on 7 October 2023 and the subsequent, devastating retaliation in Gaza, much of Spark’s work in Gaza has been suspended, although it continues in other parts of Palestine.

Read more stories of social enterprise amid conflict: Can social entrepreneurs help pave the way to peace in Yemen? 

Alfanar currently supports just a handful of social enterprises in Palestine; among them is Flowless, which is based in Ramallah. Atalla recalls the farmer who described leaving his home every morning at around 5am, and spending four hours at Israeli checkpoint on the way to tending crops in his greenhouse. Further delays at the checkpoint would mean his crops could die under the intense heat, but using Flowless’s technology meant he could schedule irrigation remotely. “Here’s innovation enabling livelihoods in the face of massive obstacles,” Atalla says.  

In September 2023, Alfanar approved investment in Flowless. Then came 7 October. “At a moment of unbelievable tragedy and loss, it can be hard to know what to do as a venture philanthropy organisation, which is not humanitarian in focus,” says Atalla, adding, “sometimes the most disruptive thing we can do is stick to our mission and keep doing it.” Flowless received its first chunk of money from Alfanar at the end of October 2023.

Investors hesitant

Entrepreneurs are less fazed than one might expect by the immensity of conflict and instability. Lebanon has endured a litany of upheavals: the massive explosion in Beirut in 2020, the Covid-19 pandemic, currency collapse, and now war. But FabricAid founder Omar Itani – speaking to Pioneers Post in early September – shrugs these off as issues facing every business there: for him, the real challenge is tied with the social enterprise model. For Flowless co-founder Baker Bozeyeh, the issue isn’t so much what’s currently going on in Palestine as the excessive caution of investors to get involved.

For green businesses, the challenge is magnified. Although it varies from country to country, a lack of awareness among governments of what’s at stake for the planet, and of the potential solutions, is one of the big barriers, says Afef Ajengui, a programme manager at Spark. Investors still haven’t grasped the potential returns they could gain from green ventures, or are concerned about what they see as risks associated with untested technologies or business models, according to a 2023 report by Spark. 

Support organisations are trying to change all this. VC investors are fairly common, but social entrepreneurs rarely get to meet them – one reason why Alfanar has been supporting the launch of a regional impact fund. BuildPalestine had planned to launch its own impact fund in October 2023; it has paused this for now, but continues its support in other ways. Hogan Lovells has advised both Alfanar and some of its investees; Rahail Ali, managing partner at Hogan Lovells' Dubai office, says social enterprise is “such a powerful tool for impact, often in the most difficult of circumstances... we see investing in the sector as an important use of our legal skills”.

Successful startups sometimes move abroad where regulations are more favourable, says Banat, so Spark works on encouraging appropriate government policies. And Adelphi’s SEED programme works with banks and other financial institutions to ensure the availability of finance for green business, particularly in Morocco’s smaller cities, where opportunities are more limited. Both Spark and Adelphi emphasise the importance of nurturing local partners – creating a whole network of business support organisations that will continue long after any project funding has run out.

Atalla believes there’s plenty of room for more impact investors from outside the region. “You don't have to ‘go big, or go home’. The best way to learn what's in the market is to put out some funding and see what comes back.” And she reckons the potential is huge. “There are so many ambitious, promising, investable social enterprises. These changemakers give us mounds of hope and inspiration.”