The Dynamics of Small Entrepreneurs and Their Importance in Developing Countries

Entrepreneurship Means Many Things

Whenever we think of the terms, entrepreneurship and entrepreneurs, there are several images that are conjured in the mind. For instance, the most common feeling is an individual or a set of individuals coming together to launch a new business with stars in their eyes and full of passion.

Next, we think of how such entrepreneurs can indeed become big businesspersons provided they have a compelling idea or an innovative product in addition to oodles of hard work and commitment.

Added to this is the emphasis in recent years about the so-called startups driving the next wave of growth and entrepreneurs changing the world with their brilliance, commitment, and passion with generous help from investors and the governments.

Indeed, given the fact that the Unicorns or the startups that have garnered Billion Dollar valuations have taken the centre stage in the news, we can be forgiven when thinking that entrepreneurship is glamorous and enticing.

Small Entrepreneurs are Equally Important

However, is it the case that entrepreneurship is all about startups and the glitz and glamour of becoming the next Mark Zuckerberg or launching the next Uber? Likely not as any businessperson with an idea and some funding can be thought of as an entrepreneur.

This means that while not all businesses go on to become Facebook, Uber, and Google, their contribution to economic growth and development is as important as the Biggies among the entrepreneurs.

Indeed, the fact that in many developing countries such as India, we depend on the business skills of the small entrepreneurs to keep our lives going and our existence well oiled means that small entrepreneurs are as important as the big names who succeed.

This is the reason that this article makes the case for all possible help to be extended to the small entrepreneurs instead of launching schemes and tailoring policies for the benefit of only those who are in the tech or associated fields.

As Hindol Sengupta writes in the book, Recasting India, more often than not, countries such as India run because of the commercial exchange between the people and the small entrepreneurs such as the newspaper delivery vendors, the milkmen, the neighborhood grocers, the vegetable vendors, the courier companies, and most importantly, small businesspersons such as the service agencies who handle everything from plumbing to electrical repairs to those who specialize in arranging pickups and drops of goods and services.

Governmental Policies

However, while developing countries such as India has traditionally offered governmental assistance and support to the SMEs (Small and Medium Enterprises), of late, there has been a tendency to cater to those with high budgets.

Indeed, the fact that it is easy to get lost in the media hype as well as succumb to the temptation to pamper the glamorous and the glitzy means that many Third World countries are pursuing policies that benefit some entrepreneurs and not all entrepreneurs.

Having said that, it is not entirely the case that small entrepreneurs have been ignored. Schemes such as Microcredit and Small Business loan provisions have meant that even the entrepreneurs who are small and fledgling are offered some support to run their businesses.

However, given the fact that it has become fashionable to wine and dine the Unicorns and forget about the others calls for a serious correction in the direction that the governments in Third World countries are taking and demands a shift in their priorities back to the days in the 1980s and the 1990s when small entrepreneurs were encouraged.

Not a Return to Welfarism

This does not mean that governments must again turn to welfare and free loans to the small businesspersons. Indeed, this is something that must be avoided at all costs since such welfare attitudes only promote Moral Hazard where the tendency to retain the profits and pass on the losses to others would land us in a mess that some say catalyzed the shift from socialism to capitalism.

Therefore, what we are saying is that while it is alright for investors and governmental agencies to pamper the biggies among the entrepreneurs, it is also incumbent upon them to hand hold and incubate the small entrepreneurs as well.

Think of how difficult it would be if the categories of small businesspersons mentioned earlier were to skip work or close their ventures due to lack of support and sustenance. Research has shown that such small entrepreneurs above all need financing on a day to day or weekly or monthly basis which translates into shorter term liquidity and working capital requirements.

Indeed, while small entrepreneurs might not need Millions in funding, they are also individuals who are often at the mercy of loan sharks and usurious lenders for their day to day financing needs.

Conclusion

This means that the government can indeed help such entrepreneurs without great costs and polices that make it easier to access financing from banks, some subsidies to offset their costs, speedy approvals and faster clearances of their applications, and above all, encourage such small entrepreneurs to use technology so that they can scale up as well as benefit from the synergies and the efficiencies of the economies of scale.

More than anything, small entrepreneurs must not be harassed simply for the reason that they do not have major connections or the ability to flaunt their ideas in a media friendly manner. In conclusion, it is clear that developing countries on growth trajectories should have both macro and micro enablers of growth and the small entrepreneurs who fall under the latter category are as important as the marquee names.