Can Small Businesses Bring Big Changes in Poor Countries?

Posted by: Steve Hamm on October 12

It has taken 30 years, but microfinance has had a huge impact on the lives of tens of millions of people in the developing world. Still, while the microfinance phenomenon helps lift people out of poverty, it’s not a powerful economy builder. Poor countries need a thriving commercial segment that creates jobs. So one of the new priorities for poverty fighters and economic development organizations is providing capital, advise, and technology assistance to help small businesses grow into bigger businesses. They call them small and growing businesses, or SGBs.

One of the organizations that’s focused on this opportunity/challenge is the Aspen Network of Development Entrepreneurs. Last Friday, I spoke at a conference ANDE held on Long Island. About a hundred people were there—from dozens of organizations. These outfits have many challenges, and a bunch of them are related to the fact that they’re focusing on helping business people rather than poor people. It’s much easier to get foundations and individuals to give money to help poor people than it is to get them to help non-poor people—even if the poor benefit in the end. Trickle down economics just doesn’t pack the same emotional punch as getting a loan to a poor person who they can buy a cow or a sewing machine.

One of the things this group will have to do is brand the concept of the small business as economic growth engine. Microfinance benefited greatly from having an iconic image at its disposal: A poor woman with her sewing machine. Anybody who saw this image got the concept immediately. Michael Chu, a Harvard Business School professor who was one of the pioneers of microfinance as the one-time CEO of ACCION International, told the ANDE members that he recently visited with one of the business people he made a small loan to many years ago. The guy had a tiny print shop. Now he has a thriving shop buzzing with employees and bristling with shiny new Apple computers.

The promoters of SGBs need to come up with an iconic image that captures that man’s story. It will be hard to produce something as simple and easily readable as the lady with her sewing machine, but it’s got to be done if the SGB movement is to take wing.

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