Poor people are business owners, too—but myths around poverty and entrepreneurship hold them back, says researcher

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Poor people are business owners, too—but myths around ******** and entrepreneurship hold them back, says researcher

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Nearly 1 in 5 people in the world lives in ********. Even in many developed countries such as the U.S., ******** rates

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. In an age of breathtaking technological progress and dynamic social change, ******** ******** stubbornly persistent.

As a

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, I’m interested in a critical question: Can people in ******** create their own path to prosperity? In other words, is venture creation a viable ******** alleviation tool?

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has shown that it can be—with the right kind of support. However, that support is often lacking.

A big part of the problem is ignorance: Most people simply don’t know much about ******** and entrepreneurship. There are plenty of myths when it comes to the ventures of the poor, due in part to the lack of hard data about the businesses of those in ********.

These misconceptions have influenced public policy officials, economic development professionals and academics. As a result, they tend to undervalue the important economic and social role that these businesses play.

In an attempt to correct the record, here are six facts that people should know about ******** and entrepreneurship.

Fact 1: Poor people start businesses—lots of them

It’s a myth that entrepreneurship is just for the rich. In fact, many ventures across the globe are started by people in disadvantaged circumstances—actually most of them. While hard data is difficult to come by, the evidence we do have is suggestive. For example, in some high-******** sub-Saharan ******** countries, as many as two out of three adults

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.

Such small businesses are

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of many developing economies, where

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of the population can be in ********. Even within developed economies, such ventures can be responsible for a meaningful component of ****** domestic product.

Fact 2: Businesses run by poor people create value

Although people in ******** disproportionately create “survival businesses” that generate small profits, it’s wrong to assume that makes these ventures less valuable. Such businesses provide jobs to

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, representing an economic lifeline. They

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, filling niches that aren’t attractive to incumbent firms.

And they create more than just economic value: These businesses are embedded in the fabric of communities, providing a source of social stability. They pay taxes and can

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such as reduced ******, increased school completion rates and community pride.

Fact 3: Entrepreneurship can help alleviate ********

A growing body of research suggests that higher levels of entrepreneurship are associated with

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. For example, one analysis found that areas with the highest rates of entrepreneurship among the poor demonstrated the

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over a six-year *******.

This shouldn’t come as a major surprise. After all, while people in ******** often create survival businesses that generate small profits, venture creation represents a critical vehicle for

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. People who start businesses learn how to organize production, manage cash, serve customers, set prices and coordinate logistics.

What’s more, the entrepreneurial experience can enable self-sufficiency,

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, a sense of pride and purpose, and the ability to give back.

Fact 4: Off-the-books businesses have value for society

Poor entrepreneurs often start what economists call

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—enterprises that aren’t registered with the government and that operate under the radar. These often attract criticism.

But while off-the-books businesses may not be legal, the informal sector represents 50% or more of the economy in many developing countries, and

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. It represents a vast incubator that sustains the poor as they experiment with businesses and learn. In my opinion, this hidden enterprise culture should be nurtured.

Fact 5: The biggest challenge isn’t always lack of money

People often assume that the key to helping the ventures of the poor is to provide more capital. But despite a clear need for funding, some entrepreneurs may not be ready to make effective use of additional money. Regardless of how motivated or hard-working they are, the core issue for entrepreneurs is the ability to convert means into ends.

When an entrepreneur lacks key abilities, such as bookkeeping, selling or inventory management, research suggests that to be effective, funding should be coupled with

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. An investment is likely to be more productive when it is tied to participation in training and mentoring programs. Access to incubators, attendance at networking events and related developmental activities are also important.

Fact 6: There’s more than one way to succeed

People in the world of entrepreneurship love a big success story. It’s all about picking winners. That kind of thinking works against poor entrepreneurs, who generally start basic businesses that don’t employ novel technologies, and who often have severely limited resources.

To realize the potential of entrepreneurship, it’s worth rethinking the definition of success. For the poor, success could be getting the business established and making sales, earning a profit. It could be changing the entrepreneur’s economic circumstances, hiring employees—particularly others in ********—or adding another location.

It could keep the business going for some number of years, providing a kind of legacy. Other success indicators can include reducing the dependency on one’s own labor, satisfying customers and

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.

In the end, success is about having a better life. And research is demonstrating how entrepreneurship can make this possible.

Venture creation is not a silver bullet. ******** is complex, and building a sustainable business is difficult. Realizing the promise of entrepreneurship requires that we get past these myths and develop the kinds of supportive environments that level the playing field.

Provided by
The Conversation

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Poor people are business owners, too—but myths around ******** and entrepreneurship hold them back, says researcher (2024, September 4)
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