VALUING ENTREPRENEURSHIP IN THE INFORMAL ECONOMY IN WEST AFRICA:

A comparative analysis on the theory and praxis of entrepreneurship and social entrepreneurship

C. Sara Minard, PhD.Northeastern University, Social Enterprise Institute

University of Massachusetts-Amherst, Social Entrepreneurship DayNovember 17, 2015

OUTLINE

1. Observations2. Research Questions3. Understanding Social Entrepreneurship4. Methodology5. Data Collection6. Data Analysis7. Implications 8. Applications9. Further Research

INTRODUCTION

Ò “It makes no difference whether Africa has everything or nothing –either its powers are too great, or its problems too overwhelming to engage. Often, what gets ignored are the means by which Africans have learned to compensate for the impossibility of their everyday lives. Despite inadequacies, many African societies improvise with whatever is at hand, and in so doing, often avoid disaster. But Africa’s postcolonial hybrid methods are consistently dismissed. They are seen as either symptomatic of the continent’s loss of tradition or as a collection of death-rattle, knee-jerk reactions…[the question is] how can Africa’s circumstances inform and broaden Western postmodern languages, just as how can the West apply itself more constructively for Africans?”

-David Hecht and Maliqalim Simone (1999)

CRITICAL OBSERVATIONSÒ The push for impact measurement which

champions market-based solutions has masked the messy political struggles inherent in institutional, social change (accounting logics)

Ò Social entrepreneurship/social enterprise models presume market-based solutions despite evidence of weak markets and government (overreliance)

Ò Entrepreneurship (self-reliance) has become a proxy for uncertainty (growth)

THEORETICAL BACKGROUNDÒ Competing theories of social entrepreneurship with a

focus on capabilities (capacity to entreprendre) and social value creation (well-being) and innovation (new ways of solving problems)

Ò Literature on comparative processes of social change, the Polanyian world of embeddedness

Ò Looking at broader domain of informal economic activity and how informal micro-entrepreneurial methods are both efficient and productive and differences between women and men

THEORY“Math doesn’t tell us how to treat each other, neither does physics

or economics” (Steven Hawking)

Ò Other-regarding behavior (Smith, Theory of Moral Sentiments)

Ò Embeddedness (Polanyi)Ò Social capital (Coleman, Putnam, Lin)Ò Capabilities (Sen)Ò Economy of regard (Offer)Ò Linkage effects (Hirschman) Ò Behavioral/Relational economics (Kahneman; Gintis &

Bowles; Woolcock & Nayaran)Ò Social entrepreneurship and social enterprise (Dees,

Santos, Christensen & Mair, Peredo, Nicholls, Nyssens) Ò Ecosystem analysis (Wilson; Capra; Bloom & Dees)

FALSE DICHOTOMIES?

Ò Social value and individual value/profitabilityÒ Formal and informal sectorÒ Market milieu and social milieuÒ Competition and cooperationÒ Self-regarding interest and other-regarding interestÒ Growth and sustainabilityÒ Adaptation and InnovationÒ Impact and profit

MAIN ARGUMENTSÒ Development Assistance, in trying to speed up the modernization

process, is forced to deal with the inconvenient policy consequences [of modernization theory] that the world is not all headed towards to same trajectory; e.g. neo-liberal principles have been absorbed in Northern private sector (SME) development policies in LDCs and focus is on formalizing informality.

Ò Informal economy cannot be relegated to a survival economy (Banerjee and Duflo); it’s a force for social change as: 1) a marketplace for social innovation and 2) a motor for efficient and productive economic development challenging artificial barriers between formal and informal, between business and social sector.

Ò Senegal’s informal entrepreneurs provide the“interior dynamism” of the region by transforming economic opportunities and innovating in ways that bridge market competition and social solidarity models.

Ò Understanding this can inform and broaden Western theories and discourse on social entrepreneurship.

RESEARCH QUESTIONS

Ò In the absence of formal market institutions or governance structures, how do informal entrepreneurs create social value in communities that sustain their embeddedness while also expanding their business models, and thus manage hybridity?

Ò How to think about scaling social impact and yet stay connected to local realities when organizational ambition is required?

Ò When we discuss social entrepreneurs as change agents, which of the theoretical frameworks, models and assumptions in economic and social theory are not applicable to the Senegalese context? Why not and why can we say about the specificity of the Senegalese case?

A BIG QUESTION

Can one be a very active participant in a capitalist society and still be an ethical person? What

evidence is there from collectivist societies that social entrepreneurship provides a real pathway

to reconcile growth and social value?

SOCIAL ENTREPRENEURSHIP

Ò People of all walks of life are applying their creativity and entrepreneurial talents to mobilizing resources, identifying opportunities and crafting innovation solutions to social problems. - Greg Dees

Ò By increasing their impact, they create new incentives to encourage the development of decentralized decision-making processes that will allow societies to maximize the efforts required to explore alternative ways of [delivering public value]. - Douglass North, Institutions, Institutional Change and Economic Performance

WHY NOT JUST ENTREPRENEURSHIP?

Ò Deliberate set of actions to achieve social outcomes (exclude positive externalities); social risk in a combined return framework (Laing 2012)

Ò Redefining the core assumptions of our economic and financial systems; “I am the market” and I determine suitable return on investment. Commercial Entrepreneurs do not have impact focus so higher opportunity costs

Ò Limitations to neo-classical firm theory and state-market relationship; getting back pre-capitalist value(s) by affecting prices more directly to make capitalism work

Ò Employment as dignity for the most vulnerable populationsÒ Incentives matter for social innovation and cooperation;

not just exploiting opportunities but inciting cooperationÒ Ecosystem approach; building an enabling environment for

public value creation (Bloom and Dees 2009)

STARTING POINTSTRANS-DISCIPLINARY BY DEFINITION

� Smith (1759), Schumpeter (1940), Polanyi (1957), Drayton (1998)

� Drucker (1960), Dees (2000;2001;2003), Offer (2009); Santos (2012)

� Sen (1999’ 2001), Hirschman (1958;1982)

Entrepreneurship, Social and Development Theory

In History, Research and Practice

o Learning from cooperative, self-help movements about mobilizing resources, collective action

o Gift economy, social solidarity economy, informal markets

o Community-led enterprise and microfinance

o Design thinking as complimentary to development practice

ANOTHER BIG QUESTIONHow (and why) do social entrepreneurs facilitate access to markets (material goods) and to public

goods (healthcare) outside of formal market structures and employment, and for people they don’t

know?

INSTITUTO PALMAS¡ 1997: Joaquim de Melo established Banco Palmas, Brazil’s first

Community Development Bank

¡ Local spending has increased from 20% to 85% since Banco Palmas was established; Palmas recognized as legitimate currency by Brazilian government

¡ Expanded to Instituto Palmas in 2003 and PalmasLab in 2012 to harness technology for the community

¡ IP’s banking model been replicated all over Brazil – currently over 100 community development banks

TOSTANÒ 1991: Molly Melching, educator, devised

the Community Empowerment Program (CEP) to bring literacy to villagers in Senegal, West Africa

Ò Using human rights, dialogue-based learning to advance non-formal adult education; focus on women and girls (FGC); expanded to 5 countries

Ò Organized diffusion = premise for scale is participation and shared learning

Ò Responsive listening = organic growth of program

Ò Holistic and integrated, inclusive of networks

Ò Funding is “pooled” for longer-term, integrated work

www.tostan.org

VISIONSPRINGÒ 2001: Jordan Kassalow and Scott Berrie

as a US non-profit to provide ready-made reading glasses to correct far-sightedness

Ò Mission to correct near vision and in turnimprove working conditions of the world’s

poorest who rely on eyesight for incomeÒ Franchise model: Partnered with BRAC

to train Vision Entrepreneurs: employ local women to give eye exams and sell

glasses, $2/pairÒ “Hub and Spoke” model: large pharmacy

chains in India.Ò Focus on quality, affordability and accessibility

Ò 2012: I million eyeglasses sold, 18% total costs recoveredÒ Longer view, 2 million sold, 100% earned revenue coverage

www.visionspring.org

SENEGAL CASE STUDY

HISTORICAL CONTEXT – SENEGAL

Ò Post-independence (1960) state and market formationÒ Historical determinants of growth and development à

evidence of path dependency with impact of colonial public investments in infrastructure, health, education; role of colonial administrators (Huillery 2008)

Ò Democratic and peaceful, 98% MuslimÒ Dominant languages: Wolof and French (national)Ò Two Muslim Brotherhoods: Tijane and Mourid

É Largest is the Mourid, “Baol-Baol” movement as a communication method and social more, facilitates trust and information sharing in broad social network with a global reach (Cruise O’Brien et al.)

TODAY’S CONTEXT: SENEGALÒ West Africa is the fastest growing regional population in the

world É 380 million (2010) to 750 million (2030)

Ò Majority urbanÉ 3 out of every 4 persons will live in a city by 2030

Ò Poor and vulnerable population…with strong vibrant informal economy, majority womenÉ Income per capita per annum is approx, $650; Large influx of Diaspora

funds used for consumption not investment (approx. 150% more than foreign aid)

É ~75% urban households have informal workers, of which ~60% under 30 years old, 40-60% women;

É Informality provides 43% of regional GDP (non-agriculture); É Represents a new class of informal-to-formal entrepreneurs, so no clear

statistical distinction can be made

RESEARCH DESIGN AND METHODOLOGY

Social capital(capacity)

Human capital(capacity)

Routine opportunityidentification

Attainment

Use of Contact

H1

H2

H3

H4

Social Entrepreneurship Framework using a Capability Approach

Informal Entrepreneurship

:Autonomy and Embeddedness

Social and Political Economy

Context

Means for Mobilizing Resources; Defining Value; Identifying Opportunity and Risk; Being Innovative and

Adaptative

Enabling Environment and Opportunity Structures in the

Social Enterprise Space

Capability to Achieve Social

Impact

Available Strategies

DATA COLLECTION

Mourid

Female FemaleMaleMale FemaleMaleFemale

Formal entrepreneurs

Male

Informal entrepreneurs

Tijane TijaneMourid

DATA COLLECTION AND MEASUREMENT ISSUES

Ò QualitativeÉ In-depth interviews (30)É Case studies (8)É Focus groups (working with local NGO Tostan)É Local competitiveness and capacity-to-act mapping

(CTA)

Ò QuantitativeÉ Two national employer’s organizations’ dataÉ Survey data on informal entrepreneurship (n=300)

RESULTS

Ò Social entrepreneurs are not necessarily the brilliant few but the front line of the team

Ò Linking social capital is stronger among men Ò Women’s bonding social capital support entrepreneurshipÒ There is a complimentarity and inter-dependence between

informal and formal entrepreneurs, between urban and rural Ò Mouridism as a movement (Baol Baol) helps launch

entrepreneurs in similar types of businesses and provides social, financial and institutional capital and social protections

Ò Women (both Mourid and non-Mourid) develop parallel informal business networks alongside the Mourid network (which tends to favor men’s relationships in the longer term)

COMMON CORE CHARACTERISTICS

Ò Reflect on Purpose within ContextÒ Focus on Strengths and Local AssetsÒ Adopt Critical Inquiry-based Learning with User at

the CenterÒ Nurture Deep Empathy linked to EmploymentÒ Develop a ‘Maker’ ModelÒ Adaptive EfficiencyÒ Transformative ActionÒ Mutual Accountability

INSTITUTIONAL APPLICATIONS: ADAPTIVE EFFICIENCY

Ò Building on Douglass North’s concept of adaptive efficiency which concerns a society’s dynamic ability to solve problems over time.

Ò “Creating effective solutions is not simply sorting out what works from what does not work, and then scaling up what works. It is a matter of understanding what works under which circumstances and for whom.”

× J. Greg Dees, “Toward an Open-Solution Society”, 10th

Anniversary Edition, SSIR, Spring 2013

PARTICIPATORY RESEARCHÒ Engage Market and Non-Market Stakeholders

É Systems design-thinking and dynamic mappingÒ Assess Government Capacity for Action

É Case studies, interviews, surveysÒ Map Social Market Infrastructure and Capacity

É Visioning, social network analysis, surveysÒ Equip Organizations and Enterprises for Growth

É Collision workshops and knowledge partnershipsÒ Define Mobilization Strategies to Direct Social Finance for

DevelopmentÉ Integrated dashboards

RECOMMENDATIONSFOR RESEARCH & DISCUSSION

Ò Clarify assumptions & objectives rooted in local definitions –weave historical context, social values around work and efficiency and social economy into the research designÉ Ask the question: how does your view of the “good life” affect

what you make?

Ò Follow a Human Centered Co-Design process to identify how social entrepreneurs navigate complex development problems

Ò Pull inspiration from local cases, market research & regularly carry out new research to understand new trends in social entrepreneurship and innovation from the South

Ò Situate definitions of entrepreneurship and social entrepreneurship where the ‘social’ is not static but locally negotiated within existing market and institutional structures

THANK YOUC.MINARD@NEU.EDU