What Holds Back Poor Entrepreneurs?

(Photo: Stefan Geens, Flickr.)
(Photo: Stefan Geens, Flickr.)

Within the development community, there is a growing consensus that encouraging entrepreneurship is one of the best approaches to reducing poverty. But what do entrepreneurs in developing countries need to succeed?

Discussion of this topic has often focused on the debate over skills versus capital. Do would-be entrepreneurs lack the know-how to get ahead and grow their business, or simply the money and resources? Chris Blattman sums up some of the recent research on this topic, which suggests that capital (and risk) is a much bigger constraint than skills.

What’s missing from this discussion, however, is the institutional environment — the rules, regulations, norms, and political structures that comprise the entrepreneurial ecosystem. Poor institutions make it harder to access capital and riskier to start a business, and also contribute to social attitudes that discourage potential entrepreneurs. To really help entrepreneurs succeed, in the long term and at scale, these fundamental weaknesses also need to be addressed.

Jon Custer is Social Media Coordinator at CIPE.