Micro Enterprise
Helping poor community members start small businesses is a daunting project. Many micro-enterprise projects are faced with project participants who can't read, who can't add and subtract, who have no startup capital, have no products to sell or services to offer, and have no visible markets to approach. And yet this is what many in the developing world feel is the key to economic development.

The United States, frequently thought of as being one of the most entrepreneurial countries in the world, really only has about 5% of its workforce that represents business owners who hire employees. You could expand upon that to say that roughly 5% of the US workforce is entrepreneurial.

These individuals may be highly talented, perhaps they grew up in an entrepreneurial household, perhaps their very well-educated, or perhaps they spent 20 years working for a business learning all of the tricks involved in that business before they then went off to start their own. But they represent only five cent of the workforce. How can we expect a cluster of poor community members to be successful starting businesses.

At a micro-enterprise conference recently one presentation outlined that there is a greater likelihood for a successful corporation with a social conscience to be successful in launching a social enterprise then it was for a nonprofit organization to launch a social enterprise.

They felt that the corporate background allowed decision-makers to analyze markets and risks before investing their donation of startup capital in the new social enterprise. And their management experience could continue to help the new social enterprise from the background.

So how easy can it be for non-entrepreneurial staff members of a nonprofit to help unqualified community members without products or markets start a small business -- how successful are they?

Let's take for example community-based tourism. For the past 20 years or so community-based tourism has been a very popular type of project for nonprofits to launch. A study of more than 200 community-based tourism (CBT) projects in Latin America by Rain Forest Alliance and Conservation International showed that many CBT accommodation providers only have 5% occupancy rates.

Another example of this is illustrated in a paper written by The Overseas Development Institute called ‘A misguided quest: community-based tourism in Latin America”. ODI points out that CBT rarely relieves poverty and points out that mainstream tourism may have a more beneficial impact on poor communities and traditionally thought.

Many CBT projects fail due to lack of financial viability; many of these initiatives collapse after donor funding dries up. Collective management structures which tout gender equity and inclusion often turn out to be cumbersome and too complex to work effectively; they're inefficient business models.

The collapse of a CBT project can be hard on a community and push them into deeper poverty than before the project. ‘Consultants and owners can move on, but the supposed beneficiaries may have invested their own assets in the tourism project and may have abandoned alternative livelihoods.’

The paper suggests that it is more important to link poor people to major tourist flows rather than to pursue a quest for alternative tourism. Capturing even a small share of mainstream tourist activity can often have larger and more sustainable impacts on poor communities than owning 100% of small and financially fragile CBT projects.

Connecting the poor to a professional tourism business can provide them training for full-time jobs within the business, and can create a trickle-down effect for an even greater number of jobs in craft stalls, taxis, and local food providers. Supporting poor communities to access direct jobs in the tourist sector is the quickest and most effective way of achieving sustainable benefit flows to poor communities

This means working with the private sector to understand how the poor can begin to participate in tourism and how this productive participation can be increased.

In conclusion it may be a more effective strategy to approach an established tourism business about the idea of opening a lodge as a private business near a community and provide employee training. An established tourism business will have links to travel agencies, they will have transportation to get tourists to a distant location. and they will have the experience to develop a good reputation. This could have a much more beneficial impact on the community than a nonprofit with no tourism business experience can have starting up a community-based tourism project.

So on a section of the website we will be presenting papers such as these that point out not only potential challenges and economic development, but also, what works and economic development in developing nations.