Here's this kid on a street in India. Basically an entrepreneur, standing around with a food cart, some fruits bought from a local wholesale dealer. There are millions of him on Indian streets.
Okay, so who helps them get better at their business?
Who helps them create strategies to scale up, procure better quality produce, figure out if moving their mobile street business to a different location would be a smarter & more profitable thing to do, market their produce differently than the other 3000 fruit sellers on that same street?
Micro-financing is a huge deal in the developing world. Every major international agency is in the business of creating these small-scale enterprises, these "micro-entrepreneurs". The Indian government has been drafting policy after policy to give loans under different schemes (collateral conditions, different interest rates etc) to establish these micro-enterprises. Nonprofits have taken to this enthusiastically. There are group lending schemes such as those initiated by that stupendous success we all know about - the Grameen Bank - and there are individual lending schemes. There are hybrids.
And then there are those organisations that combine financial services for the set up of such small scale entrepreneurships with a whole array of services targeting different aspects of running the business - insurance services, union formation. A fantastic and very well known example of this is the Indian organisation called SEWA - Self Employed Women's Organization.
Even a brief experience with actually helping establish these "self-help groups" as they are often called in India made me realise that a big problem wasn't the initiating of these enterprises, it was sustaining them.
Yes, just like with any other project in the social sector, the problem becomes how to keep it going, scale it up, make it successful in the long run. Many of these micro-finance based projects don't have a specific plan to address long-term viability of the entrepreneurships that are being set up.
When I say "viability" I am not just referring to the profits these enterprises bring in to their owners, but also to the potential for such an entrepreneurship to operate independent of the nonprofit that helped set it up. Can these entrepreneurs become and remain successful business owners over time?
Managing an entrepreneurship is difficult stuff!! Look how many blogs in the US are raking in money by doling out advice to wannabe entrepreneurs! (Here's one of my favourites; it's both refreshing & entertaining). Look how bewildering and vast a suite of support services - managing, consulting, financing, marketing, branding - are themselves mushrooming in the US to help sustain this entrepreneurial market!! For god's sake, there are even a million websites that dish out dating advice to entrepreneurs, advice on how to juggle a start up and a relationship, or just any kind of business and a relationship...
And yet out there in the non-corporate sector of the developing world, it's a micro-finance based project initiated by a nonprofit, some government agencies (if lucky) and well, the entrepreneur. That's it. That's it.
This is why it doesn't surprise me when so many people in the nonprofit sector say cynical things about the micro-finance approach, shake their heads and say it's gone bust. Of course it has. But only in its initial - and by now antiquated - form. We need major innovations to the micro-finance approach, better business plans for economic organization of these thousands of tiny "street entrepreneurships", "micro-entrepreneurships", whatever you choose to call them.
Innovative economic organization at the micro-scale, grassroots level. The same set of support services at the micro-scale, grassroots level as one has for bigger firms in the corporate sector. That's what is needed.
I don't understand why conceptually, people separate these enterprises started in the "social sector" by nonprofits from regular business enterprises that are a part of the regular business market. I don't understand why strategies for long term sustainability of these small enterprises would be at their core, so radically different from strategies for long term sustainability of what we call "small business"? Why does this "nonprofit" tag somehow change people's perspectives so much?
Doesn't that little guy in the picture need a consultant as much as that small business owner who is in the business of selling oranges in the local farmers' market here in say, Indiana? That's what I'd like to do - set up micro-consulting services for the micro-entrepreneur in India.
Predictions aside, I really do think this would make a big difference to the micro-finance approach that so many nonprofits and governments are invested in.