Almost one in five people on the planet lives in poverty. Even in lots of industrialized countries akin to the USA, poverty rates are over 12%In an age of breathtaking technological progress and dynamic social change, poverty stays a persistent factor.
As Professor of EntrepreneurshipI’m fascinated with a vital query: Can people in poverty find their very own path to prosperity? In other words, is entrepreneurship a viable tool for fighting poverty?
My work has shown that this is feasible with the fitting support. However, this support is usually lacking.
A giant a part of the issue is ignorance: most individuals simply don't know much about poverty and entrepreneurship. There are many myths concerning the businesses of the poor, partly because there isn’t a hard data on the companies of the poor.
These misconceptions influence politicians, economists and scientists. They are likely to underestimate the essential economic and social role of those firms.
To set the record straight, listed below are six facts about poverty and entrepreneurship that folks should know.
Fact 1: Poor people start businesses – numerous them
It is a myth that entrepreneurship is simply for the wealthy. In fact, many businesses world wide are founded by people from disadvantaged backgrounds – actually, most of them. While hard data is difficult to return by, the evidence we’ve got is telling. In some African countries where poverty is prevalent, for instance, two out of three adults are operate or are within the means of starting their very own business.
Such small firms are probably the backbone many developing countries where over 50% of the population can live in poverty. Even in developed economies, such enterprises can account for a big share of the gross domestic product.
Fact 2: Poor-run businesses create value
Although people in poverty are disproportionately more likely to start “survival businesses” that generate low profits, it’s flawed to assume that these businesses grow to be less invaluable. Such businesses provide jobs for Millions of impoverished peoplewhich represent an economic lifeline. They Creating value available in the marketand occupy niches that should not attractive to established firms.
And they create greater than just economic value: these firms are embedded in the material of communities and represent a source of social stability. They pay taxes and may generate spillover advantages akin to lower crime, higher school graduation rates, and community pride.
Fact 3: Entrepreneurship may help alleviate poverty
A growing body of research suggests that a better level of entrepreneurship is related to greater reduction of povertyFor example, one evaluation found that areas with the very best rate of entrepreneurship among the many poor biggest reduction in poverty over a period of six years.
This mustn’t be a giant surprise. While people in poverty often start businesses that generate little profit, starting businesses is a crucial technique of Human capital development. Entrepreneurs learn the way to organize production, manage money, serve customers, set prices, and coordinate logistics.
In addition, entrepreneurial experience can enable self-employment, Identity developmenta way of pride and purpose and the flexibility to offer back.
Fact 4: Black businesses have value for society
Poor entrepreneurs often start with what economists “informal” firms – Companies that should not registered with the federal government and operate under the radar. These firms often come under criticism.
But although undeclared work is just not legal, the informal sector represents 50% or more of the economy in lots of developing countries, and in some industrialized countries as much as 20%. It is a big incubator that supports the poor while they experiment and find out about business. In my opinion, this hidden entrepreneurial culture must be encouraged.
Fact 5: The biggest challenge is just not at all times a scarcity of cash
It is usually assumed that the important thing to supporting poor people's businesses is to supply more capital. Yet despite the clear need for funding, some entrepreneurs might not be willing to make use of additional money effectively. No matter how motivated or hardworking they’re, the important thing issue for entrepreneurs is the flexibility to translate means into ends.
If an entrepreneur lacks essential skills akin to accounting, sales or inventory management, research suggests that for a successful business, financing must be coupled with other types of support. An investment is more likely to be more productive whether it is coupled with participation in training and mentoring programs. Access to incubators, participation in networking events and related development activities are also essential.
Fact 6: There is a couple of path to success
Entrepreneurs love big success stories. It's all about picking winners. This mindset negatively impacts poor entrepreneurs, who typically start easy businesses that don't use recent technologies and infrequently have very limited resources.
To realize the potential of entrepreneurship, it’s value rethinking the definition of success. For the poor, success can mean constructing their business, generating sales and making a profit. It may mean changing the entrepreneur's economic circumstances, hiring employees – especially others living in poverty – or opening one other location.
It could possibly be that the corporate is kept going for just a few years and leaves a legacy of sorts. Other indicators of success could be reducing dependence on one's own workforce, satisfying customers and the flexibility to offer back to the community.
Ultimately, success means living a greater life. And research shows how entrepreneurship could make this possible.
Starting a business is just not a panacea. Poverty is complex and constructing a sustainable business is difficult. To realize the potential of entrepreneurship, we must move beyond these myths and create supportive environments that level the playing field.
image credit : theconversation.com