Entrepreneurship and poverty

Woman working at Mitticool pottery factory in India.

Woman working at Mitticool pottery factory in India.

Poverty is a complex sustainability problem, which has an impact on the lives of people on many different levels.  On a societal level, social structures maintain poverty. Instead of having equal opportunities, poverty has a negative impact on the lives of people born in conditions of poverty and it tends to be inherited from one generation to the next generation. Therefore, solutions to poverty ideally challenge the structures of the current system and break the cycle of poverty.

Living in conditions of poverty has also an impact on the community level. This is demonstrated for example in the lack of basic services such as education, energy, health care and clean water. These can be completely absent or the underprivileged part of the population has access only to poor quality services. For example, in low-income communities schools might have crowded classrooms, unqualified teachers and not enough materials for each student.

While these conditions are challenging, these can also act as an inspiration for innovations and entrepreneurial solutions. Since the infrastructure is incomplete, it also means that there is no legacy systems slowing down the adaptation of new technologies and it is possible to leapfrog to a more advantageous system. Further, solution to poverty alleviation should also provide access to services and create jobs, which provide income to the low-income population.

On an individual level, it means that due to a limited budget people are less mobile, are more vulnerable in case of illness or injury and have fewer possibilities to participate in activities, which require a payment. Poor individuals are isolated due to the location of their housing, the available infrastructure and sometimes because they do not speak the language prevailing in society. In addition, they face resource-scarcity in everyday activities and do not know about issues going on in society. Peers from the same community tend to have a similar background and thus not able to provide answers to the many unknowns.

The strenuous situation leads to poor people to be forced into entrepreneurship. This so-called necessity entrepreneurship means that entrepreneurial individuals buy a stock of goods in the morning and sell it throughout the day. The profit made in one day has to be enough to buy something to eat, to pay children’s education and other expenses like that, to buy a similar stock the next day and maybe even to save a little. These entrepreneurs have little growth potential and the impact on poverty alleviation is minimal. On an individual level, one solution to poverty is to empower local actors with entrepreneurial qualities and aspirations to become entrepreneur. These entrepreneurs can then provide jobs to other people.

These perspectives are explained and demonstrated in more detail in this video: Creating frugal innovations to solve global sustainability challenges.

Text and photo: Marleen Wierenga