Entrepreneurship for the Developing World
Development economists emphasize the need to nurture the legal and cultural structures that encourage and enable entrepreneurship so that poor regions can meet their wants and needs through enterprise and grow their way out of poverty.
Entrepreneurial start-ups can help poor regions in several ways, most directly by meeting the wants and needs of a market that has been overlooked or underserved thus far. For instance, since the mid-1990s, Kenyans have enjoyed greater variety and reliability in the foods available at local supermarkets. This improvement is at least partly a result of the success of Nakumatt, a domestic supermarket chain whose story is told by June Arunga and Scott Beaulier in Lessons from the Poor. Nakumatt has grown in two decades from a small blanket and mattress store to a regional giant with 3,000 employees. The company fostered human capital through extensive employee training and developed profitable networks through innovative tactics such as subletting space within its stores to other businesses.
Entrepreneurship in the developing world also can encourage traits such as thrift and perseverance, while business success stimulates a sense of capacity and self-worth in environments previously marked by dependency and a sense of fatalism.
Successful entrepreneurial activity also tends to generate new wealth. This wealth supports entrepreneurs and their families, much of which gets channeled back into other regional businesses, creating additional jobs and profit (what economist refer to as the multiplier effect). In Peru, for instance, Aguilino Flores, struggling to make ends meet by washing cars, began selling t-shirts. Flores noticed opportunity by understanding his customers’ needs and the culture of the local workers. His business grew into a textile and clothing multinational that now provides jobs for 5,000 people and enriches the local economy through the local goods and services these workers can now afford, as well as by annually exporting goods worth tens of millions of dollars.
Entrepreneurship, Economic Growth and Human Flourishing
Without entrepreneurs, economies tend to stagnate. French economist J.B. Say described the role of the entrepreneur in technical terms in 1800: “The entrepreneur shifts economic resources out of lower and into higher productivity and greater yield.” In other words, entrepreneurs find ever more efficient and effective ways of meeting people’s wants and needs, thereby freeing up resources to be applied to additional wants and needs. Entrepreneurs are, thus, key drivers of economic growth.
Of course, entrepreneurs can fill wants that are damaging to the human person. Entrepreneurship is not a magic bullet for achieving a thriving society. Enterprise must exist with a moral framework if the creativity of the entrepreneur is going to be channeled, more often than not, into enterprises that enhance human dignity and freedom for excellence. This means that institutions essential to a rich moral culture need to be cultivated alongside market freedom if the goal is to encourage sustainable human flourishing.
Entrepreneurship and Culture
At the level of culture, religious and other social institutions can inculcate positive or negative attitudes toward entrepreneurship. For example, in Christian thought there is a long history of skepticism toward business activity on the part of theologians and clergy. At the same time, there is a strong tradition of Christian thought that sees ethical business enterprise as a legitimate and worthy fulfillment of humanity’s role as steward’s of creation. Rev. Robert Sirico articulates this positive vision in The Entrepreneurial Vocation. “An entrepreneur is a kind of impresario,” he writes, “one who organizes numerous factors and brings things into connection so as to produce. This creative aspect of the entrepreneur is akin to God’s creative activity as we read it in the book of Genesis.”
In the political sphere, protecting economic freedom creates a climate within which entrepreneurship can flourish. Corruption, excessive and byzantine regulation, and weak enforcement of laws and contracts discourage people from devoting time and energy to starting and growing business enterprises, especially poor people who lack the material resources to navigate a complex system rigged in favor of established insiders.
Countries with a political climate more favorable to entrepreneurship tend to enjoy stronger economies. Two indicators of business environment are number of days necessary to start a business (to complete paperwork) and the percentage of average per capita income required to start a business (to pay licensing and permit fees). According to figures from the World Bank’s annual report, World Development Indicators, wealthy nations such as Canada (2 days, 0.4%), Ireland (3 days, 0.2%) and New Zealand (1 day, 0.3%) top the list, while less developed nations such as Haiti (12 days, 200.2%), South Sudan (12 days, 305.0%) and Venezuela (20 days, 351.6%) lag behind.
Entrepreneurship, Microfinance and SMEs
One practical method of stimulating entrepreneurship is microfinance. The microfinance movement itself is an example of entrepreneurship in the charitable, a product of fresh thinking by non-profit workers who recognized the ineffectiveness of conventional models of aid and charity in bringing about sustained material improvement among the poor. With due attention to the dangers and potential abuses, the provision of credit to individuals in marginalized communities can be a fruitful way to draw the poor into commerce and set them on the path to development. Churches, charities and other institutions sometimes organize and administer these kinds of micro-loans, or partner with organizations that specialize in this work. Other non-profits or low-profit organizations focus on capitalizing promising small and medium-sized enterprises (SMEs) in the developing world, spurred by data that shows that such a focus has the potential to multiple regional wealth by more than ten-fold.