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177 C H A P T E R 8 Fighting Poverty or Promoting Development? Is business ownership for low-income families a good idea? As we have seen, from the point of view of most of the entrepreneurs in this study, the answer is an enthusiastic “yes.” Most said that they preferred owning their own business to working in the labor market and believed that they and their families gained from the experience. Even after five years during which many had closed their businesses, the majority still preferred microenterprise to a “good” job. Most entrepreneurs expressed enthusiasm for business ownership and believed that their businesses made important economic and non-economic contributions. At the same time, the anti-poverty effects of microenterprise are less apparent . Although most of the businesses earned at least some income—and in a few cases, substantial income—for the entrepreneurs’households, most entrepreneurs remained low-income. The analysis suggests that the majority of entrepreneurs were realizing only modest financial returns from their businesses. The average business contributed about one-third of household income. A little less than onehalf of the households’incomes rose above poverty (defined in this study as 150 percent of the official poverty line), while more than half remained below, including about one-third whose household incomes declined between 1991 and 1995. Most of the entrepreneurs probably could have earned as much or more in labor market jobs. These findings suggest a dilemma. Microenterprise does not consistently raise household incomes, but it appears to enrich and help in other important ways. Modest income gains raise serious questions about the direct anti-poverty benefits of microenterprise. But the financial success of some of the businesses, combined with enthusiastic endorsement by the entrepreneurs, make the microenterprise strategy difficult to dismiss. This dilemma poses public policy choices. We first turn to theory and evidence for help in evaluating and charting a future course for microenterprise. After that, we tap the findings of this study for program and policy directions. Beyond Profits Alone Why did these individuals choose microenterprise, and what were the outcomes ? Microenterprise looked attractive to many because they had been unable to find decent jobs. Many of the entrepreneurs said that the available jobs were characterized by low wages, insecurity, poor working conditions, poor benefits, and little mobility. In addition to factors that limited their access to better jobs (e.g., low levels of education and training and geographic location), some pointed out that that their access to jobs and mobility were blocked by gender or racial discrimination (Bates, 1997). This suggests that many of the entrepreneurs were indeed “disadvantaged workers” (Tomaskovic-Devey, 1993). Did they choose microenterprise for the “wrong reason,” that is, because they were pushed out of the wage labor market? Some undoubtedly did. Many of the entrepreneurs reported choosing business because they thought they had the skills, experience, creativity, and motivation to operate successful microbusinesses. Most were confident about the quality of their product. In many cases they also believed they could earn a better return on these skills in self-employment than they could in the labor market. They believed their product skills were in large part responsible for the times when their businesses performed well. The ideas behind theories of human capital resonated among the entrepreneurs who were highly motivated, worked long hours, and had a range of business skills. They also understood that they needed start-up and expansion capital. For some, the availability of microenterprise loans was a key factor in the decision to open a business, but many pointed out that their businesses would have performed better if they had better access to capital, in the appropriate amounts, and at the right times. Access to formal loans and more education were associated with higher income from the business , supporting the idea that access to human and financial capital are critical factors for success (Bates, 1997). The interviews also suggest that asset accumulation was a factor in the choice of microenterprise and in their business success. Some entrepreneurs began their businesses with an eye toward earning enough money to purchase a house. Others said they started businesses because they wanted to own their own business, have more control over their work lives, and have financial assets to pass on to their children. The empirical evidence, while not overwhelming, indicates that household assets increased for most entrepreneurs. Many of the entrepreneurs helped to finance their businesses from small savings and home equity. Although the mechanisms are...

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