How do companies and organizations looking to launch businesses in low-income communities identify entrepreneurs? What are the skills of a true entrepreneur? How do you engage them?
My reasoning comes from the last 5 years of working with BOP women in India via Microfinance and my own company, Frontier Markets. I agree with both your points - it is not about whether entrepreneurs exist in the BOP but its identifying the right entrepreneur.
In response to entrepreneurs vs. salaried jobs: In India, there is a larger appeal to have service oriented jobs instead of being an entrepreneur. People prefer working on a farm, in a factory, as a construction worker, etc because its steady income vs. haphazard.
Creating Entrepreneurs in the BOP: Unilever or HUL and other companies will argue that creating an entrepreneur amongst women in villages is not only optimal but responsible (they have done so in their Shakti Model in India selling sache shampoos and numerous Unilever products in rural India) - this is simply not true. There is a huge opportunity cost and risk - if women cannot find people to sell products to, they LOSE their hard earned investment capital, it is a HUGE risk. If women do not know how to market, identify target consumers, and sell products regularly, they are going to take a huge loss by becoming an entrepreneur. There are clear skill sets required to be an entrepreneur and not everyone has it, nor can they be trained. HUL-type models and thinking is in fact dangerous in the BOP...
The Right Entrepreneur: The self-created entrepreneurs can become bigger entrepreneurs - these are the shop keepers, the vegetable vendors, the chai-wallas, the small restaurant owners... they reacted to a market opportunity and built a business. If we show them another opportunity, they would be willing to expand their businesses and take that risk - they have capital to expend, they have an entrepreneurial drive... it is important for us to identify them and guide them... we learned this through microfinance loans... we have seen entrepreneurs grow significantly through business loans - usually used to expand businesses, not create them. Women who herd cows and sell their milk, take a loan to buy another cow to diversify her products to sell milk and now butter. Retailers take a business loan to increase their inventory or try a new set of products because they responded to demand. Tailors take loans to buy a sewing machine to produce more clothing at a faster pace. And the list goes on and on....
At Frontier Markets, we focus on helping these types of entrepreneurs by offering them assistance with market linkages, building demand on the ground for their products, linking them to financial institutions, giving them financial literacy, and building their capacity.
Posted by Monica_Touesnard
See the original post here microlinks.kdid.org/speakers-
Today’s conversation began with the premise that although many people living in poverty must be entrepreneurial in order to survive, in reality they would prefer to have stable employment. The discussion started by making a distinction between a person who is entrepreneurial versus an entrepreneur. There are numerous reasons why people who are entrepreneurial would not want to have permanent, stable employment, for example they may want a flexible work schedule or they prefer not having to report to a supervisor or they perceive that there is less pressure when self-employed. Thus, this type of “self-employment” may be a choice for some, although it does not mean that they are an entrepreneur in the tradition sense.
Those who are self-employed by choice are distinct from those we would consider traditional entrepreneurs – those who are trying to launch new businesses. Therefore, as a business trying to engage with local entrepreneurs, it is necessary to think about the type of entrepreneur you are seeking and their skill set in addition to understanding the context in which they live, work, and conduct business. However, working as an entrepreneur for a large company or multinational, is not without cost or risk. They could potentially lose everything - possessions, status, land, etc. if something goes wrong with their business. It was noted that in many instances entrepreneurs will have multiple income generating activities in order to mitigate risk and ensure a source of income.
Entrepreneurs have a distinct skill set and not everyone has those capabilities. Although someone may be resourceful and entrepreneurial you cannot necessarily train them to become an entrepreneur. It may be that self-created entrepreneurs such as shop keepers, vegetable vendors, small restaurant owners, etc. may be more willing to take risk and an ideal business partner to launch new businesses. Creating the appropriate enabling environment by providing access to markets, credit, and information, is key to ensuring their success.
While participants can continue to build on today’s discussion threads, in my next posting I will launch our next topic.
Monica Touesnard
Associate Director
Center for Sustainable Global Enterprise
The Johnson School at Cornell University
