Entrepreneurship is perhaps the most effective form of development because it empowers ownership of the solutions to a community's problems. Businesses provide income for entrepreneurs, jobs for others around them, economic development for the community, and solutions to local problems. And all of this without on-going aid from the outside world.
Ownership also changes the way people think of themselves: it moves self-concepts from “I am a person who needs help” to “I am a person who can change my world”. Dignity like this, even more than financial independence, can end the cycle of poverty.
A country is “developed” when there is a healthy middle class and plenty of Small and Medium Enterprises or businesses (SME’s). Most of any economy is in this SME space, and it is what allows anyone to grow from poverty into wealth. But this “middle” is missing in developing economies. If a developing economy is going to change for everyone including the poor, there must be viral, sustainable SME growth to fill the “missing middle” of the economy.
All entrepreneurial programs are ultimately good and help people. But most social entrepreneurial efforts do not address the problem of the Missing Middle. The two most common efforts in the developing world are:
Part of the reason so few efforts are made in developing the SME space is that it is risky. Unlike Microbusinesses which are relatively easy to build, and Impact Investing which starts after companies are stabilized, SME development at the start-up level is a very uncertain place with lots of possibilities for failure. But to fill the middle, we need to give new entrepreneurs with potentially transformative ideas the resources to try. Without this SME development in the Missing Middle, we may still help individuals, but we aren't transforming economies and communities.
Building Entrepreneurial Ecosystems is one of the best ways to transform developing communities through connecting local entrepreneurs, empowering them with knowledge and resources, and providing a supportive environment for new businesses to grow (see this explanation from GIZ). As we grow Entrepreneurial Ecosystems, we are helping change developing economies because we aren't just building a few businesses at a time, we are fostering an ever-expanding, virally-growing environment where multiple growth-oriented businesses can launch and fill the Missing Middle, creating jobs and possibilities for a wide swath of the population.
At ECatalyst, our goal is not only to produce sustainable, locally-owned, growth-oriented businesses, but also a sustainable, locally-owned ecosystem with local ecosystem builders who create an environment where more businesses grow. Each ecosystem that ECatalyst builds is a for-profit, sustainable reality that continue to grow the ecosystem across more and more local communities.