Social Enterprise JournalValuing entrepreneurship in the informal economy in SenegalC. Sara L. Minard

Article information:To cite this document:C. Sara L. Minard, (2009),"Valuing entrepreneurship in the informal economy in Senegal", Social EnterpriseJournal, Vol. 5 Iss 3 pp. 186 - 209Permanent link to this document:http://dx.doi.org/10.1108/17508610911004304

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Valuing entrepreneurship in theinformal economy in Senegal

C. Sara L. MinardInstitut d’Etudes Politiques (Sciences-Po), Paris, France

Abstract

Purpose – The purpose of the paper is to provide a theoretical reflection on existing and emergingliterature on social entrepreneurship as it applies to the developing country experience, andspecifically to the informal economy in Senegal, West Africa.

Design/methodology/approach – The paper adopts an exploratory, multi-disciplinary approachgrounded in economic and social theory, including open-ended interviews and focus groups. The dataare complemented by field observations and analysis.

Findings – Socio-religious networks in West Africa like Mouridism, with its strong emphasis onwork and giving of one’s personal financial gains back to the Muslim brotherhood, has actuallycreated a non-capitalist spirit of commerce, and to some degree entrepreneurialism, among SenegaleseMourids who are majority Wolof.

Research limitations/implications – As an initial exploration into this topic, the paper lackssufficient empirical data and therefore the research results may lack generalizability.

Practical implications – The paper helps draw comparisons between what we know and what wedo not know about social entrepreneurship in the informal economy, moving beyond the conventionalneo-liberal notions of competitive markets to explore entrepreneurial activities at the “Bottom of thepyramid” that establish economic exchange value which is socially embedded.

Originality/value – The paper seeks to address a perceived gap in the theoretical and empiricalliterature on the emerging phenomenon of social entrepreneurship. By analytically framing the debateon the role of markets in the social sector through a developing country lens, we are looking at socialentrepreneurship as the intersection of embedded social and economic realities of the majority ofworkers who operate in the informal economy in Senegal.

Keywords West Africa, Entrepreneurialism, National economy, Social economics, Senegal

Paper type Research paper

It is the mark of an educated mind to rest satisfied with the degree of precision which thenature of the subject admits and not to seek exactness where only an approximation ispossible (Aristotle).

No coherent moral justification was ever suggested for throwing out a system providinginvaluable and irreplaceable novelty, problem-solving and exploration, thus personal growth(Edmund Phelps).

It makes no difference whether Africa has everything or nothing – either its powers are toogreat, or its problems too overwhelming to engage. Often, what gets ignored are the means bywhich 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 sodoing, often avoid disaster. But Africa’s postcolonial hybrid methods are consistentlydismissed. They are seen as either symptomatic of the continent’s loss of tradition or as acollection of death-rattle, knee-jerk reactions [. . .] How can Africa’s circumstances inform andbroaden Western postmodern languages just as how can the West apply itself moreconstructively for Africans? (David Hecht and Maliqalim Simone).

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1750-8614.htm

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Social Enterprise JournalVol. 5 No. 3, 2009pp. 186-209q Emerald Group Publishing Limited1750-8614DOI 10.1108/17508610911004304

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SummaryIn the emerging literature on social entrepreneurship, a central focus is on the capabilityof an individual to combine a passion for a social mission with the business-likediscipline, innovation and determination of, for example, the high-tech pioneers ofSilicon Valley (Dees, 2001). Individuals are social entrepreneurs, because they havedecided to:

. take risks without being limited by resources;

. engage in a process of continued innovation, adaptation and learning; and

. be acutely aware of the impact on the constituencies involved or targeted, and theoutcomes created (Elkington and Hartigan, 2008).

Social entrepreneurs are a “rare breed” (Dees, 2001).When we apply this definition to the West African Senegalese context, we are faced

with a common dilemma whereby the African experience seems ambiguous, changeable,and negotiable when one tries to describe it against Western economic theories(Guyer, 2004) of entrepreneurship. For example, when does the Mourid brotherhood[1]and the Baol Baol business activities whose actions are embedded in a socio-cultural andreligious network that provides collateral and access to economic opportunities becomean entrepreneurial initiative? When does a street vendor in Dakar move from thecategory of survival income generation to the category of social entrepreneur or socialinnovator within the informal, or popular, economy? Perhaps, this is a false bifurcation?At what point would we determine if the activities of micro-entrepreneurs (as innovatorsand employers) in the informal economy create real social value? Can small businessowners working in extreme poverty, who have little to risk and to invest and yet areaptly responding to market failures, qualify as social entrepreneurs?

These questions elicit a broader question for socio-economic research and policy:when we discuss social entrepreneurs as innovators and “change agents,” which of thetheoretical frameworks, models and assumptions in economic and social theory are notapplicable to the West African Senegalese context, and why not?

The purpose of the paper is to provide a theoretical reflection on existing andemerging literature on social entrepreneurship as it applies to the developing countryexperience, and specifically to the informal economy in Senegal, West Africa. The paperhelps to draw comparisons between what we know and what we do not know aboutsocial entrepreneurship in the informal economy, moving beyond the conventionalneo-liberal notions of competitive markets to explore entrepreneurial activities at the“Bottom of the pyramid” that establish exchange value which is socially embedded(Granovetter, 1985, 1973). The paper argues that the informal economy – rather thanbeing confined to the standard economist view as merely a survival economy – shouldbe considered, first, as a marketplace for enterprising social innovation, and second, as amotor for efficient and productive economic development, thus challenging the artificialbarriers between formal and informal, business and community, street vendor andentrepreneur. We are interested in outlining some of the main arguments and competingtheories of social entrepreneurship from an inter-disciplinary perspective of economics.

We start with the postulate, advanced by Amartya Sen, that “interdisciplinary” meansemploying a broader use of the discipline and thus, by employing a broader concept ofhuman being than the rational, utility maximizing individual, we are not outside the realmof economics but merely broadening its application. This Polanyian view – accepting the

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embeddedness of economics in sociology and vice versa, and between market and society– provides the compass for our exploration of the disarticulation between economic theoryon social entrepreneurship and the praxis of social entrepreneurship in the informaleconomy in the contemporary West African context.

From a critical discussion of the theory, the paper analyses first the dominantAnglo-European literature on social entrepreneurship, specifically its role as a bridgebetween market competition and social solidarity models. Then, placing this notion ofsocial entrepreneurship within the political economy context of informality in Senegal,West Africa, the paper explores theoretical and empirical ideas of social entrepreneurshipas it relates to social networks, and to issues of capability, trust, redistribution andreciprocity as key instruments of poverty reduction, collective action and social innovation.

The paper seeks to address a perceived gap in the theoretical and empirical literature onthe emerging phenomenon of social entrepreneurship. By analytically framing the debateon the role of markets in the social sector through a developing country lens, we arelooking at social entrepreneurship as the intersection of embedded social and economicrealities of the majority of workers who operate in the informal economy in Senegal. Thisframing has the potential to raise theoretically interesting questions in terms of socialentrepreneurship and engage disciplines and approaches in two key areas:

(1) Understanding the dynamism of the informal economy, and existing strategies tounleash the potential of social innovations at the bottom of the pyramid (BOP).

(2) Identifying new types of approaches, i.e. hybrid organizational models andsustainable institutional solutions, in order to orient the social value-added ofinformal activities bordering the economic and social sectors to be used in theservice of collective action (Ostrom, 1990), social inclusion (Sen, 1999), andpoverty reduction (Yunus, 2007).

Outline

(1) Introduction.

(2) Review of existing literature and key theoretical concepts on social enterprise,social entrepreneurship and workers in the informal economy.

(3) Developing country perspective: the Senegalese, West African context of socialentrepreneurship (the political economy and cultural specificities of informality,social enterprise and social entrepreneurship).

(4) Drawing comparison between what we know and do not know about socialentrepreneurship in the informal economy in West African context(Counter-arguments for chosen theories and how to respond to implicitcriticism: how do we get from point A to B, and eventually to point C which isending poverty through profits and citizenship?).

(5) Moving beyond the bifurcation of market competition and social solidaritymodels: implications from theoretical and empirical literature on the drivers ofsocial change and innovation.

IntroductionEconomists are often dominated by schools of thought with established linesof thinking[2] that are, depending on where the particular school of thought falls

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on the theoretical spectrum, either “obsessed by” or “committed to” quantification[2].The same can be said for sociologists, anthropologists, geographers as well ascontemporary thinkers of business and management in that they are committed tomeasuring what they can according to the level of precision that their particulardiscipline allows. What we have seen from discussions around the world and in recentliterature on the notions of social enterprise and social entrepreneurship is somethingremarkable by identifying social entrepreneurs as drivers of change. Byacknowledging, as Dees (2001) does, that “entrepreneurs mobilize the resources ofothers to achieve their ends” and that a social entrepreneur measures efficiency andproductivity not strictly in market terms of financial return but by their impact onsocial change, we have taken a business term out of business and challenged theneo-liberal orthodoxy of a self-regulating market. This new language has broadenedthe playing field as social entrepreneurs look for the most effective methods to servetheir goal, ranging from for-profit to non-profit methods, or somewhere in between.It has also marked a fundamental shift in our understanding of “interdisciplinary,”where it has become clear that by using a broader conception of human being asentrepreneur, we are merely broadening the discipline of economics, not outside of it.The same applies to informality and the market, where it is clear that the bulk ofproductive activities in developing countries take place on a spectrum betweeninformal and formal on the border of the economic and social spheres of society.

Societies today co-exist in a global economy and are moving towards a redefinitionof the relationship between the individual, the institutional structures of the socialeconomy, including civil society and the private sector, and the state. Developingregions like West Africa, in particular, have witnessed this shifting articulation ofsocial, civil, private and state over the last few decades where non-profit,non-governmental (NGO) service providers have employed market-based methods totransform charity and thereby redefining the world’s majority as the working poor(International Labor Organization (ILO)), and as business partners, producers andinnovators, instead of development aid beneficiaries. The development industry hasunderstood that the poor are not homogenous, and workers in the informal economy,constituting between 40 and 75 percent of the population in West Africa, need to bedifferentiated on the basis of income, skill, access, vulnerability status, as well as interms of their capacity for enterprising social innovations and driving economicdevelopment.

In the emerging literature on social entrepreneurship, a central focus is on thecapability of an individual to combine a passion for a social mission with business-likediscipline, innovation and determination (Dees, 2001). Individuals are socialentrepreneurs, according to Dees, Elkington and Hartigan (2008), because they havedecided to:

. take risks without being limited by resources;

. engage in a process of continued innovation, adaptation and learning; and

. be acutely aware of the impact on the constituencies involved or targeted, and theoutcomes created.

Over the last decade, and coinciding with the rise in popularity of corporate socialresponsibility as a compromise between the private sector’s desire to harness globalmarket forces and the social sector’s desire to find new strategies to deliver more

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effective social services to a growing global population while generating socialdividends from business, the non-profit[3] and international development cooperationsectors caught on to what the business sector had discovered long before: that there isnothing as powerful as a new idea in the hands of a first-class entrepreneur. What isnot as easily discussed, debated or written about however is how the two-thirds of theworld’s population who are poor and working in the informal economy, the intended“beneficiaries” of development assistance, might also fit into this esteemed category,either as first-class entrepreneurs or first-class social entrepreneurs.

There are theoretically a few critical assumptions in the literature that cause this, aswe will argue, unjustified omission:

(1) The first assumption is that entrepreneurship is an individual initiative arisingfrom within a functioning free-market economy where there are strong publicinstitutions and a competitive private sector.

(2) The second assumption is that social entrepreneurs must have somethingquantifiable to bargain with or risk, namely personal assets or the assets of afirm.

(3) The third assumption is that social entrepreneurs must be able to developscalable social innovations in order to have a visible social impact, while alsomaintaining a certain degree of profitability.

We will look at these three assumptions as they are presented in the literature andrespond to them based on what we know and what we do not know about socialentrepreneurship in the context of the informal economy in Senegal. To do this, adiscussion defining our theoretical framework is needed.

Entrepreneur and social entrepreneur: theoretical definitionsThe term “entrepreneur” originated in French economics as early as the seventeenth andeighteenth centuries and is explained in the nineteenth century by French economistJean Baptiste Say as “the venturesome individuals who stimulated economic progressby finding new and better ways of doing things”[4]. Entrepreneurs “shifted resourcesfrom lower to higher yields.” In sum, “entrepreneurs create value.” The economistSchumpeter (1942) further refined the concept in the twentieth century describingentrepreneurs as “innovators who drive the creative-destructive process of capitalism.”Schumpeter’s entrepreneurs “reform and revolutionize patterns of production.” They arethe change agents in the economy by serving new markets or creating new ways of doingthings. For Schumpeter, free enterprise and social enterprise go together[4].

More recently, Peter Drucker in his writing on business and management theories ofentrepreneurship, in providing a response to the Say-Schumpeter definitions andmodels, does not require entrepreneurs to cause change but instead views them as“exploiting the opportunities that change creates.” Thus, the notion of “opportunity”has become central to many current definitions and theories on entrepreneurship. ForDrucker, not every small business is entrepreneurial and not all entrepreneurship musthave a profit motive.

In relation to Say, Schumpeter and Drucker, Dees (2001) builds on previous theoryto build his own line of thinking around the links between social entrepreneurship andsocial innovation to contribute an important clarification of social entrepreneurshipwhich he defines as “a species in the genus entrepreneur.” Dees is concerned with

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refocusing the definition of social entrepreneurship on social impact as opposed toincome generation:

Earned income is only a means to a social end, and it is not always the best means. It can evenbe detrimental – taking valuable talent and energy away from activities more central todelivering on the organization’s social mission.

He makes a point that development industry critics often make of NGOs working toalleviate poverty in Africa: that social sector organizations seem to be more concernedwith attracting funds from the newly enlarged basket of private resources andsustaining their organizations instead of assessing, sustaining or improving theirsocial impact. For Dees the solution is to extend the ideas of Say, Schumpeter, Druckerby applying them as easily to the social sector as the business sector. He makes theclaim that:

[. . .] social sector leaders can blend business methods with social objectives; what makesthem entrepreneurial is not the source of income, but their innovations and their impact.Social entrepreneurship must be about creating social value, not simply about makingmoney.

Dees advances a commonly held belief among economists that the theoreticalfoundations for social entrepreneurship lie in theories of entrepreneurship dating backto Say, Schumpeter and Drucker which are “describing a mind-set and a kind ofbehavior that can be manifest anywhere.”

When we try to apply the Schumpeter-Say definition to the West African context,we are faced with a common dilemma whereby the African experience seemsambiguous, changeable, and negotiable (Guyer), especially when one tries to fit it intoWestern theories on entrepreneurship. For example, when does a Baol Baol businessactivity become an individual initiative if the political identity, collateral and actionsare embedded in a social network versus in formal institutions? When does a streetvendor in Dakar move from the category of survival street merchant to the category ofsocial entrepreneur in the informal economy? Broadly speaking, at what point can theactivities of micro-entrepreneurs in the informal economy be considered to be creatingreal social value?

Developing country perspective on entrepreneurship and socialentrepreneurshipFrom the developing world perspective, a pivotal evolution in the notion of socialbusiness and social entrepreneurship has come from empirical evidence as bestillustrated by the accounts of Bangladeshi economist and Nobel Prize winner Yunus(2007) in Creating a World Without Poverty:

Many of the problems in the world remain unresolved because we continue to interpretcapitalism too narrowly. In this narrow interpretation we create a one-dimensional humanbeing to play the role of entrepreneur. We insulate him from other dimensions of life, such asreligious, emotional, political dimensions. He is dedicated to one mission in his business life tomaximize profit. He is supported by masses of one-dimensional human beings who back himup with their investment money to achieve the same mission [. . .] I think things are goingwrong not because of “market failure.” It is much deeper than that. Let us be brave and admitthat it is because of “conceptualisation failure.” More specifically, it is the failure to capturethe essence of a human being in our theory.

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Bill Drayton’s organization, Ashoka: Innovators for the Public, along with Yunus’Grameen Bank Group, have responded to an observable trend, which is also feltstrongly in West Africa, to link the growing diversity in philanthropic financialservices for the poor to new employment opportunities, not just to credit and savings.Like Dees, the emphasis on social entrepreneurship for Drayton and Yunus should beplaced more on the systems that entrepreneur’s change, namely, technology, socialnetworks, and consumer preferences.

Yunus’ view of the poor, and of all people, as potential social entrepreneurs, socialinnovators, and change agents marks a critical point of divergence where thedisarticulation between the theory of social entrepreneurship and social enterprise fromthe “West,” and praxis is revealed. The social and economic returns of socialentrepreneurship in the developing world context, when it is the poor who are harnessingmarket forces in the service of the poor, requires a deeper, more critical analysis. How dothe theoretical frameworks we use to understand social entrepreneurship in developedcountries help or hinder our understanding of entrepreneurship and its relation to marketsand society, or the social economy, in poor countries?

Yunus states that social entrepreneurship is not a question of assets as collateral,firm size or scale – but a question of social capital, trust, cooperation, ingenuity, andcollective need. This view has been at the forefront of the political economy debates indevelopment literature on, for example, informal credit markets (Bardhan), socialexclusion (Chen), and marginality (Guyer), and is more in line with actual conditions indeveloping countries than the Schumpeter-Say definition allows.

InformalityIn an effort to understand the origins, forms, and impacts of social entrepreneurship –as a “species” of the “genus” entrepreneurship – from within a developing countrycontext, we have to take a closer look at the value of work and the notion of informality.

The term “informal economy” according to the ILO[5], refers to:

[. . .] all economic activities by workers and economic units that are – in law or in practice –not covered or insufficiently covered by formal arrangements. Their activities are notincluded in the law, which means that they are operating outside the formal reach of the law;or they are not covered in practice, which means that – although they are operating withinthe formal reach of the law, the law is not applied or not enforced; or the law discouragescompliance because it is inappropriate, burdensome, or imposes excessive costs.

Thus, informal work is work outside the modern, formal sector including activitieswhich traditionally fall into both the private sector and the social economy[6].

In contrast to the “parallel” (Lindauer, 1989) economy, which refers to the movement oflegal goods through illegal or unofficial channels, and the “shadow” or “underground”economy (Schneider, 2006), which can refer to criminal activities through official andunofficial channels, the term “ informal economy” in accordance with the ILO definitionadopted in 2003 by the 17th International Conference of Labor Statisticians states thatinformal employment and the informal economy are comprised of informal smalleconomic units (informal sector) and informal jobs in formal economic units. Informalemployment is thus comprised of these two components, small economic units on the onehand, which are examples of dynamic private initiative as well as survival strategies, andinformal, precarious, unprotected jobs on the other hand, which often result fromstrategies of formal enterprises to cut labor costs in the face of international competition[7].

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In a recent report by the Organization for Economic Co-operation and Development(OECD), “Is informal normal?,” the authors attempt to clarify some commonperceptions of informality, using empirical evidence from developed, emerging anddeveloping countries, the value of work in economic growth and poverty reduction:

Informality is above all an expression of the lack of trust in public institutions, the negativeperception of the role of the state and the limited understanding of the benefits derived fromsocial security. It is basically a sign of a broken social contract.

The report addresses one of the critical problems with false perceptions of informalityrooted in human behavior. “Long-term sustainable change requires a transformation ofpeople’s attitudes and beliefs.”

In a recent interview with Martha Chen, an international expert on the informaleconomy with Women in Informal Employment: Globalising and Organising(WIEGO)[8], she noted:

[. . .] it’s not necessarily true to say that if you develop and grow an economy you create jobs,and it took a long time for the UN to realize that if you are going to talk about poverty, youneed to talk about employment.

Dr Chen narrows in on the root of informality when she states that “national governmentshave very little say in how people are paid,” and that it is the private sector that caninfluence the degree to which jobs are formalized, particularly in a globalised world inwhich multinationals can have a greater say in who gets employed to produce their goods.“We need more corporate social responsibility and we require a mindset change in laborregistration,” she said. “So much of the world is operating without it”[8].

The informal sector may also provide opportunities and a safety net in a way thatgovernments cannot. “Informal work can help to free budding entrepreneurs from redtape,” Duncan Green, Head of Research for Oxfam, said:

It is often the paperwork and hassle rather than taxation that make people choose not to be inthe formal sector. The informal market is particularly important where there is no welfarestate to offer alternative sources of security and income. We’ve seen in places like Colombiathat without the informal sector, people enter into criminal activities, such as the drugsbusiness ((The) Times Online, 2009).

The prevailing view of a large informal sector is that it can pose problems forpolicymakers and the overall economic development of their country. As a recentOECD Development Assistance Committee paper notes:

[. . .] while informal enterprises may provide a short-term solution to a household’s livelihoodneeds, creating an economy with a higher proportion of formal enterprises and jobs isimportant to long-term welfare creation, stability and poverty reduction.

A large informal sector does indeed deprive governments of needed tax revenueswhich could be reinvested into infrastructure development and other nationaldevelopment priorities; it could also influence the development of economic policyobjectives by skewing the reliability of (trade, income, and labour market) data, andbreed a culture of corruption in public administrations (including in customs) andhinder further investments in local (formal) small and medium enterprises (SMEs),which constitute the major part of the private sector in developing countries and arekey to their economic development and growth.

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The political economy of informality in West AfricaHistorically, the West Africa region, encompassing the Sahel, the savanna, forest, andcoastal regions, exchanged primary products such as salt, dried fish, livestock, kola,and gold as well as local manufactures, such as cotton cloth, iron tools, mortars, andleather goods. With the advent of colonialism, the traditional West African tradecircuits which flourished during the era of trans-Saharan trade (Gregoire, 1997) werereplaced by the more profitable parallel activities created by contraband tradeprovided between French and British colonies (Meager, 2003) and oriented towards theAtlantic coast. Intra-African trade became dominated by export-crop smuggling. As aresult, differential currencies combined with competing colonial fiscal policies betweenthe French and British resulted in currency zones replacing ecological zones inorienting trade circuits (Meager, 2003). Thus, trade flows became increasinglydetached from the economic base of the region, and access to foreign imports became(and to some degree remain) the central regulating mechanism of intra-regional trade(Table I).

West Africa’s independence movements throughout the 1960s saw its principalactors retreat from the public sphere, as the new political leaders often adoptedattitudes of political protection which led to economic mismanagement, forms ofclientelism and corruption. As a result, the economy fed off of a lack of trust ofadministrative authority, which can still be observed today. Informal economicactivities replaced the void caused by the inflexibility of labor laws which made basicservices untenable, and existing socio-cultural trade networks, including existingcross-border trade, continue to flourish as a response to a weakened state. Informalnetworks and systems have to some extent helped to correct the structural imbalancesin regional labor markets and continue to drive urban productivity. Nevertheless,despite the strong social networks supporting informal market activity in the region,only a tiny percentage of the informal working population enjoys any form ofguaranteed social protection, and growing informality denies the state of much-needed

1. About 75 percent of urban households have informal workers2. Majority of informal activity is not criminal but unrecorded3. Informal economic activities contribute between 43 and 60 percent of regional gross domestic

product (GDP) (non-agriculture)4. On average, informal workers have a low level of education, although this trend is changing5. Consistently, high level of unemployment (high 23 percent) and underemployment (between 58

and 73 percent, urban regional average 67 percent) throughout the region6. High level of insecure work conditions (no fixed workplace)7. Since 1980, informality has been the principal motor of urban growth and youth employment8. A new class of informal-to-formal entrepreneurs has emerged dictating the business

environment; no clear distinction can be made between formal/modern and informalemployment

9. Women are the growing majority at 40-60 percent of informal workers and earning less thanhalf than men

10. About 50-60 percent informal workers are under 30 years old; approx. 13 percent are urbanyouth under 14 years old

11. Majority of informal economic activities can be categorized as street traders/vendors, seasonalor temporary workers and home-based workers in services/repair, transportation, real estate/construction, wholesale and retail commerce, artisans, import/export

Table I.Key characteristics ofWest Africa’s informaleconomy

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tax revenues to pay for infrastructure and critical public services. In addition,globalization, and specifically the emergence of global commodity chains, hasdeepened the divide between formal and informal, rural and urban West Africa.Self-employment, informal labor markets and sub-contracting over union contractsappear to be defining characteristics of recent global trends (Carr and Chen, 2001).

At the same time, West Africa’s formal, or modern, private sector has witnessedenormous transformation over the last three decades, and played a critical role insocio-economic development. It has evolved post-independence from anunder-represented, highly subsidized and often neglected sector dominated primarilyby monopolies of state-owned industries to today, where dynamic businesses whichinclude more micro- and women entrepreneurs, rural agri-businesses, joint venturesand public-private partnerships, are accompanying governments in the progressiveshift towards creating competitive, open markets in the region. Despite basicdifficulties in scaling up, as investor confidence outside of traditional export sectors isclosely linked to the existence of a well-performing local and national private sector,the formal private sector to some extent benefited from a surge in bi-lateral andregional trade agreements, notably with India, China, the USA, and EU, which haveopened the regional playing field for private sector competition, providing newopportunities, and challenges, for West African firms.

On the other hand, increasing urbanization and rapid population growth hasexploded the informal economy, creating a strong concentration of emergingsecondary economic hubs which, directly linked to rural areas by the increase in flowsof workers, goods and services, supply the rising urban and migrant demand. Far frombeing a marginal phenomenon, the informal economy today performs the majority ofnon-agricultural economic activity for the West African region, claiming 43 percent ofregional GDP (non-agriculture). It provides social safety nets in local economies facedby high unemployment, rapid privatization and inadequate public and financialinstitutions, while acting as a socio-economic buffer for new migrant groups in the faceof rising income inequalities and persistent gender inequality.

According to standard economic theory, economic and social competition willtemporarily lead to a rise in imbalances within communities, societies and amongregions. The unavoidable social differentiation which will ensue from the increasinglycompetitive organization of society will be a source of potential conflict, and theinstitutions necessary to resolve issues and underpin the rule of law will be needed,recalling that progress in development is inherently conflicted but need not be violent.Entrepreneurs, both urban and rural, will defend their economic interests andgradually become more prominent in the decentralized management of villages andsmall towns. In larger towns, a proper “working class” will be made up ofentrepreneurs who have come from the informal sector. The current dichotomybetween modern and formal on the one hand and traditional and informal on the other,like the divides between rural and urban, business, and social sector, is being quicklyreplaced by entrepreneurial activities linking the informal and formal sector.

And yet, West Africa’s informal economy[9] remains dynamic, poor, and poorlyunderstood. Despite growing international and local efforts to analyze informality withmicro-level statistics, informal activities remain inadequately measured or unrecordedin National Accounts. Informality today includes activities in an ever diverse marketsystem in rapid expansion (in terms of investment, population, employment, and

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innovation) which neither the formal private sector nor the state, in terms of policies,has really succeeded in tapping.

Critical assumption no. 1 – institutions, networks, groups in the informaleconomyWhat are the institutional assumptions in modern economic theory that do not easilyapply to the West African context when we discuss social entrepreneurs as innovatorsand “change agents?” One of the critical assumptions among economists is thatentrepreneurship is an individual initiative arising from within a functioningfree-market economy where there are strong public institutions and a competitiveprivate sector. What about entrepreneurs outside of these institutional frameworks,who work in the informal economy and thus operate outside the conventional notionsof the productive workforce?

For all the good work that nonprofits, NGOs and foundations do, they cannot be expected tosolve the world’s social ills. The very nature of these organizations as defined by societymakes that virtually impossible (Yunus, 2007).

Opportunity structures and allocation of opportunities have been shaped by historicalcircumstances. Groups can only work with the resources made available to them by theirenvironments and the structure of opportunities is constantly changing in modern industrialsocieties as in developing country marketplaces (Storper, 2008).

Institutions are considered informal when, after they have been established asinstitutions where rules evolve spontaneously and unintentionally over time throughhuman interaction, their conventions, routines and customs, codes of conduct andbehavioral norms remain unwritten (Skoog, 2005). Informal institutions can beassociated with organizations of state, market or civil society. They represent evolvedpractices with stable rules of behavior that are outside the formal system and wherethe unwritten rules and norms are self-perpetuated because they are self-enforced.

Informal institutions can fill a critical gap created by non-functioning ornon-existent formal institutions, and in this case are considered substitutive informalinstitutions such as women’s microfinance groups or village cooperatives. Someinformal institutions are actually competing informal institutions in terms of size,impact and influence, such as unenforced Dowry law, Shari’a law or the selection ofpolitical groups for representation.

Many inside and outside the Africa region witness the importance of informalinstitutions in West Africa as a mobilizing force for civil society development, as acreator of jobs and an incubator of SMEs. Women’s groupements, trade associations,unions, cooperatives, and especially social networks like Muslim brotherhoods providea critical social safety net that absorbs the shocks of economic expansion andcontraction. They do this by taking in excess labour, spurring local level innovation,and providing access to additional incomes for households, and especially for womenin terms of microfinance, micro-insurance and other forms of social protection.

In general, contemporary political economics holds that groups have strongly negativeeffects on economic efficiency and growth, because groups bind individuals into situationswhere they can no longer realize their preferences, exit freely, and find effectiverepresentation for their interests. In developing a theoretical framework for understandingthe institutional relationship that exists in the West African context between the market,

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and in particular the informal market, and society, we must first explore this relationshipbetween the individual, as social entrepreneur, and their groups, networks andcommunities. The question in its simplest form is how do individuals behave as socialentrepreneurs in the informal economy in West Africa if their economic activities areembedded, and therefore dependent, on their social networks, groups and communities?

In the sociological literature, groups and communities are said to precede theindividual in time and space. In the West African context, in particular, the relationshipbetween individual life and group life is less distinct and sometimes altogetherinextricable (Ake, 1981, 2000). This often implies that the capacity of communities[10]in overcoming problems of moral hazard and contract enforcement should be as greatas an individual’s capacity, and one could argue that same should apply to socialentrepreneurship. In this case, the actions of an entrepreneur would, therefore, bereinforced and to some extent controlled by the community or group. The questionarises, especially in context of this paper, whether or not belonging to a social networkor community or group helps or hinders the development of social entrepreneurship?

Storper lays out the tension between individual and groups when he states:

[. . .] there is wide agreement that social context and preferences are intimately related. Groupmembership can be said to clarify things for their individual members, and not merely toinculcate group values in them. What we lack however is a good theory about precisely whengroup membership obscures self-welfare goals and when it clarifies them.

As a result, any eventual contribution to economic efficiency in helping individualsdiscover their preferences must be weighed against the costs of group membership inmaking choices, beyond principle-agent problems.

The assumption in modern economic theory is that group membership, identifying firstwith a community before identifying oneself as an individual, stifles action by imposinghigh transaction costs on the realization of goals, or by stifling the pursuit of preferencesthrough the principle-agent dynamics. This is true especially at high levels of socialaggregation. However, when we consider group membership in smaller groups, forexample among groups in the informal economy, there is less probability that they describereal welfare losses and more that there are real gains. If, as Amartya Sen claims, choicemeans total independence from social constraint, then groups have no role in it; however, ifit means being able to express things that cannot be achieved individually, then groupmembership will have an intrinsic value for individuals and for the social economy.

Sociologists like Granovetter (1985) and Coleman (1990) advanced the conceptsof embeddedness and social capital to emphasize the potentially beneficial effects ofgroups and networks on economic development. The prevailing view amongsociologists, geographers and, to a much lesser extent, among economists, is that thedevelopment of social and informal institutions improves the provision of public goods(Coleman, 1990; North, 1990) and market organization (Granovetter, 1985) through theembedding of firms in efficiency-enhancing networks of relationships (Grabher, 1993).

Groups and communities are said to have such beneficial effects by generating trust(Fukuyama, 1999; Putnam, 1994; Bowles and Gintis, 1986), reducing transaction costsbetween economic agents (Storper, 1997), limiting moral hazards – or the risk ofopportunistic behavior by raising the costs or lowering the benefits for the group – andfree riding (Streeck and Matzner, 1991/1992; Putnam, 1994), mitigating asymmetries ininformation (Granovetter, 1985), and enabling the matching of individual to aggregateinterests. Thus, informal institutions, groups and networks are said to provide an

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“institutional exoskeleton” for behavior that can be conducive, not only to development(Streeck and Matzner, 1991/1992), but to entrepreneurship and social innovation(Dees, 2001).

In his seminal work The Great Transformation, Polanyi (1944/1957/2001) points outthe defects in the myth of a self-regulating economy; or as Yunus states, our “failure tocapture the essence of a human being in our theory.” Polanyi’s work on embeddednessremains potent because he discusses the fundamental realities of the political economy,in that the economy and society, like markets, institutions, and communities, have acausal relationship. Economic systems will have a direct effect on how people relate toone another, and subsequently on their degree and use of social capital. AlthoughPolanyi did not use the same vocabulary we use today, his theory on the structuralconstraints of market institutions, and by extension the impact of institutions onentrepreneurship, remains starkly poignant today. His claim is that market societiesare constituted by two opposing movements – the laissez faire movement to expandthe scope of the market, and the protective countermovement that emerges to resist thedisembedding of the economy from society.

The theoretical arguments for collective action (Polanyi, 1944/1957/2001; Olson,1996; Ostrom, 1990; Cook et al., 2005) on the role of networks, community groups, andinstitutions would place the conditions for social entrepreneurship, such as trust,cooperation, risk-taking, and innovation, within the framework of the relationshipbetween individuals, the state and market institutions, as opposed to within theories ofthe firm. However, as Ostrom (1990) points out:

[. . .] what one can observe in the world [. . .] is neither the state nor the market is uniformlysuccessful in enabling individuals to sustain long-term, productive use of natural resourcesystems.

“Further,” she continues, “communities of individuals have relied on institutionsresembling neither the state nor the market to govern some resource systems withreasonable degrees of success over long periods of time.”

This brings us to a second critical assumption about social entrepreneurship, thatsocial entrepreneurs have an individual capability plus something quantifiable to bargainwith, namely personal assets or the assets of the firm. Here, we revisit Dees’ definition ofsocial entrepreneurship, where “the capability of an individual to combine a passion for asocial mission with the business-like discipline, innovation and determination of, forexample, the high-tech pioneers of Silicon Valley,” as it relates to trust and reciprocity.

Critical assumption no. 2 – capability in relation to trust and reciprocityOver the last decade Nobel Prize winner Amartya Sen, the founder of the UnitedNations Human Development Index, developed his capability approach (CA). Thistheory has emerged as the leading alternative to standard economic frameworks forthinking about poverty, inequality and human development generally. For Sen,poverty is understood as capability-deprivation. His approach emphasizes functionalcapabilities called “substantive freedoms” such as the ability to grow old, engage ineconomic transactions, or participate in political activities. These are fundamental toany discussion of work in the informal economy, and are discussed in terms offreedoms people have personal reasons to value. For example, instead of utility, there ishappiness, desire-fulfillment, and choice. Instead of income, commodities, and assets,

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access to resources. Sen places the emphasis not on how human beings actuallyfunction but on their having the capability – and the practical choice – to function inimportant ways. He recognizes these freedoms and capabilities could be deprived byignorance, government oppression, lack of financial resources, or false consciousness.

This approach to human well-being emphasizes the importance of freedom ofchoice, individual heterogeneity and the multi-dimensional nature of welfare. Insignificant respects, the approach is consistent with the handling of choice withinconventional labor economics although its broad conceptual foundations acknowledgethe existence of claims, like rights, which normatively dominate utility-based claims(Sen, 1999).

One can easily observe in the West African context the reciprocity betweenentrepreneurs and their community groups and social networks. The emergence ofsocial networks, such as the Mourid brotherhood, an Islamic community and socialnetwork in Senegal, may generate a certain infrastructure and provide resources forentrepreneurs and businesses even before a sense of community develops. Socialnetworks like Islamic brotherhoods, as social constructions, are inherently fluid. Thestrength of identification with the network is through the “label” of Mouridism withlittle importance placed on the salience of the label. As Weber’s theory in TheProtestant Ethic and the Spirit of Capitalism explains, the social and religious structuredetermines the context for work and from work any initiative towardsentrepreneurship and social entrepreneurship. What we know from existingliterature on the Mourid brotherhood (Cruise O’Brien, 1998), as is evidenced by theirCity of Touba and by the strength of the Mourid Diaspora, is that development andeconomic growth among the Mourids is motivated by doctrine, by inference and bydevotion but also by trust and cooperation among members in the network.

What we do not know, however, is to what extent the Mourid brotherhood’sreligious doctrine and their economic principles of work create the conditions thatcultivate the entrepreneurial spirit among the Mourids, known in the Woloflanguage as Baol Baol. The Baol Baol methods of business carry over to manySenegalese economic exchanges including exchanges between Mourids andnon-Mourids.

Drayton suggests that one of the key elements in social entrepreneurship is ethicalfiber. This criterion requires special reflection by asking, “Is this a good person youinstinctively know you can trust? Would you want to have him/her take care of yourmoney or child?” This test is important for several reasons:

First, significant social change usually requires those affected to make several leaps of faith –which they would not do if they intuitively do not trust the champion of the proposed change.Second, there are already too many untrustworthy public leaders in the world. No one needsmore. Finally, it is important for the profession to build a community where its leadingpractitioners can come together and share openly, which is only possible in an atmosphere oftrust (Drayton, 2002).

From Adam Smith’s theory where self-interested, rational actors in The Wealth ofNations search for at least three types of satisfaction: material, social and spiritual, toKarl Polanyi’s critique of the market as a self regulating mechanism and claim that“laissez faire was planned,” the embedded social values in the choices people makeregarding production and exchange of goods will be generated by a combination ofself-interest and reciprocity.

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Critical assumption no. 3 – social entrepreneurs in the informal economyas innovators and change agents for the BOPThe third assumption is that social entrepreneurs must be able to develop scalablesocial innovations in order to have a visible social impact, while also maintaining acertain degree of profitability. Author Bornstein (2004) observed that with theexception of Max Weber’s treatment of the “charismatic leader,” theories of changeconcentrate far more on how ideas move people than how people move ideas. Theconcept of “social entrepreneurship” stresses the latter.

Moving beyond neo-liberal notions of competitive markets and the rational utilitymaximizing individual, the conception of human beings as entrepreneurs in informaleconomies that establish exchange value that is socially embedded brings us to thenotion of Prahalad’s (2006) BOP[11]. As I have argued in this paper, informality as weknow is not just a survival economy, it is also a power force for social change as:

. A marketplace for social innovation.

. A motor for efficient and productive economic development, challengingartificial barriers between formal and informal, business, and the social sector.

A broader look at West Africa’s informal economy reveals a majority population whothrive with limited resources at the “Bottom of the pyramid.” Prahalad sees the poor aspotential investors, innovators, entrepreneurs, and most importantly as consumers. Theirgrowth in numbers underscores the importance of tapping into this large consumer base toachieve sustainable poverty reduction. In the same way that no sub-system can expandbeyond the capacity of the total system of which it is a part, the BOP model suggest welook at developing country economies (and developed economies) as ecosystems. Informalworkers will respond to market demands with new products and new economic activitiesin order to meet the expressed needs of the population. This approach, similar to Sen’s CAand to Polanyi’s view of the embeddedness of the market in society, holds that povertyreduction is only achievable with; first, the recognition that being poor does not eliminatethe need for commerce or engagement in market processes. Thus, providing choice(in consumption) is a critical step out of poverty.

As evidenced by its rapid population growth and expanding informal economy,virtually all poor households trade cash or labour to meet much of their basic needs.The BOP approach thus focuses not on necessarily formalizing the informal, but onsupporting local entrepreneurships, valorizing local knowledge and restoring the valueof work with the right legal, regulatory, and financial frameworks for the poor to enterthe global marketplace as consumers, where they help set prices, and as producers,where they have incentives to invest in and develop social innovations.

Innovations from informal entrepreneurs can fill an important vacuum in the region’sprivate sector development as they constitute the majority of workers who betterunderstand the consumer needs of the poorest. Although not all micro-enterprises can bespring boards to successful formal businesses, which is widely recognized, creatingincentives, and social protection for informal workers can create a more dynamic andtransparent informal marketplace.

Addressing the unmet needs of what is considered, the “Bottom of the pyramid” inWest Africa, or the approximately 250 million people living on less than $1 a day, isabout raising welfare, productivity, and income – to enabling households to find theirown route out of poverty. Engaging them in the frontier between informal and formal

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economic arrangements then becomes a critical part of any wealth-generating andinclusive development strategy. Eliminating informal economy penalties and formaleconomy barriers will increase effective income for the majority of informal socialentrepreneurs. Moreover, to the extent that unmet needs, informality traps, and otherpenalties arise from inefficient or monopolistic markets or lack of attention andinvestment, addressing these barriers may also create significant market opportunitiesfor research and development in innovations for social service delivery.

Yet when applied to the Senegalese informal economy, the BOP model fitssomewhere in the middle of a spectrum between self-interest and reciprocity. Althoughmost of the BOP literature focuses on the empowering effects of the enlightenedself-interest of companies, preliminary evidence shows us the importance of reciprocity(and therefore trust) in the informal economy in the Senegalese context as much, if notmore the motor of entrepreneurial social value creation and innovation.

Empirical evidence on social enterprise and social entrepreneurship inSenegalA brief historical analysis of Senegalese culture and socio-political environment isimportant to fully appreciate how and what is entrepreneurship in Senegal today.Understanding the culture and being able to transform, the environment are two ofthe essential elements to entrepreneurialism in this context. As such, we must takea sociological and historical approach to understanding the economic landscapein the informal economy as it relates business creation in Senegal, both pre- andpost-independence.

Guyer’s (2004) critical work on Atlantic Africa’s economic history and culturalrelationship with money points to the fact that “in Africa, scholarship has beenanchored by three powerful analytical traditions that, in the end, have served to blockkey realities from view.” The first of these is the:

[. . .] monetary reductionism of practical economics that fails to capture neither the relevantvariables nor numerical practice in West African exchange as the value of conventionalizedvariables is on a numerical scale from zero to infinity.

The second is the philosophical commitment of economic thinking to what Mirkowski(1970/2000) called “conservation principles” in which “a variable is held constant sothat the variability of others can be gauged” (i.e. the material, labor, that fixed the valueof commodities, or the assumption of the constancy of utility), when “in West Africanothing has been consistently constant; everything is referential. The imperative tosurpass conservation principles derives from the experience of turbulence.” Guyer’s(2004, p. 171) third point is that “the study of economic life in Africa certainly needsmore language-based study, more critical examination of philosophical concepts inpractice.”

Historians like Boubacar Barry and Mamadou Diouf have demonstrated how therole of the Djolof empire, the origin of the Wolof ethnicity which is the majorityethnicity in Senegal, might partially explain the modern behavior of the Wolofethnicity as economic actors. They were historically a large and stratified kingdom andso employed more traders (sellers and buyers) than risk-takers or what could beconsidered innovators. This is true particularly in comparison to their “cousins” theFulaar and Solinke, who in the early part of the twentieth century up until today were

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forced to work the dry lands in the southern part of the country as peanut farms fortheir livelihoods, and who were in turn pushed into the cities during the drought of the1970s (and who have subsequently become the motor of the vibrant urban informaleconomy in Dakar and elsewhere).

Colonial markets that bred clientelism and path dependency also reinforced thecaste system, privileging those in control of the main commodities: gold and slaves(Kingdom of Mali) which was coming from the trans-Saharan trade route towards theAtlantic coast to meet colonial demand.

Post-independence markets were subsidized by natural resource and extractiveindustries controlled by their previous colonial masters. The new Senegalese state,riddled with clientelism and corruption as a result of French indirect rule, lacked thelegitimacy needed to build a productive local economy. Despite the attempts byLeopold Senghor and other African elites to develop a political identity, i.e. negritude,from within the formation of a new state, there was a fundamental mistrust of thepost-independence governance in Senegal. Over the two decades post-independence,the Senegalese economy collapsed along with other African economies during the1970s oil crisis and the subsequent drought and currency devaluation. It was bailed outby strong-handed structural adjustment programs which, in their pursuit fordisciplined economic policies to jump start the economy, required cuts in critical socialspending, i.e. sacrificing higher education for primary education, which was critical torebuilding the economy from the ground-up, and thus failed. As a result, the populationturned inward and saw the need to take control of their destiny using their own albeitlimited resources. The explosion of the informal economy filled the void and thecountry saw programs like microfinance multiply.

The domination of the Wolof language, or what is often referred to as the Wolofisationof Senegal, reinforces ethnic/caste roles and hierarchy. Thus, we see a propensity inmodern Senegalese urban culture of rewarding those who do not attract too muchattention but achieve moderate success, and a propensity to knock down those who haveachieved great success in business and in politics. The only ones immune to this treatmentare religious figures, like Serigne Saliou Mbacke who created the idea of “KhelKom” whichinspired people in the poor region of Kaolack to work the land as a noble mission for Allah,and grow millet in the unused fields that surrounded the city.

Similar to Serigne Touba for whom the Mourid brotherhood is named, and the BaolBaol or Modu Modu tradition, the country’s religious figures succeeded where the statefailed. They created a productive business environment for entrepreneurship byrewarding even the smallest individual efforts, putting them in the context of thecontribution to Islam, and by extension to the Mouride brotherhood, which wouldtransform their efforts into wealth. Thus, the Baol Baol tradition became a culturalbehavior through (language) as well as a religious identity (Mouridism) that gaveimmediate rewards for membership such as access to business networks and mostimportantly, trust and cooperation that built entrepreneurs, and some very successfulsocial entrepreneurs.

Leaving aside the tensions in cultural theory between structure and agency, we look toeconomic (welfare and labour economics) and social theory to explore the relationshipbetween individuals operating in informal marketplace whose identities are embeddedin community, groups and networks, and their subsequent relationship to formal (regional)markets and the state. To what extent, for example, do the informal marketplace and

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its institutions actually structure entrepreneurial behavior to deliver social dividends?Furthermore, if these market structures indeed determine action and reproduce themself,how can social change be explained? What does the insecurity inherent in informalityget absorbed and what could this tell us about how capitalism[12], or growth throughknowledge, can better serve the working, entrepreneurial poor?

In a recent survey among city dwellers in the Senegalese capital of Dakar, researchersfound that the majority of male respondents believed that entrepreneurship[13] was not a“local” attribute of Senegalese people but more related to their experience working withToubobs (non-Africans). The few women who answered the survey believed thatSenegalese entrepreneurs are like any other (Africans) when it comes to socialentrepreneurship: the fundamental approach is to build effective businesses that arefulfilling a real need for “customers” (a defined group of people), that have a good staff ofworkers, that operate transparently, and bring about social value as well as financialresults. Although the survey was part of this author’s on-going research and so the finaldata are not yet available, the preliminary observations raise a few important theoreticalquestions. Namely, how do current theories and emerging literature on social entrepreneursas change makers apply? What does it mean to our operating definitions of socialentrepreneurship (Dees and Drayton) when the Senegalese themselves say they are not“naturally entrepreneurial?” How do the apparent differences in opinion between men andwomen social entrepreneurs get incorporated in our theoretical understanding of Sen’s CA,Drucker’s consideration of opportunity, reciprocity, innovation, and especially the marketinstitutional environment when looking into activities in the informal economy?

What is becoming less and less clear in the debates and literature is whether thepraxis, social entrepreneurship, and social enterprise in Senegal, is a reflection of theoutcropping of an already existing social economy in West Africa, or what in French isreferred to as economie sociale et solidaire, or whether it is an attempt to transposeneo-liberal entrepreneurial governance[14] explications, attributed by social andorganizational theorists (Courpasson and Reed, 2004), to explain the rise ofmarket-based approaches to development and governance. At the same time,managers are starting to integrate social sustainability values within their businesses,realizing that the scale of today’s challenges means you cannot run a businesswithout taking these concerns into account. This leads to a fundamental questionabout the theoretical frameworks and their applicability to developing countryentrepreneurialism. Is there, for example, an Anglo-Saxon/European dominance in howwe view (define, measure and understand) social entrepreneurship?

Recent online discussions have emerged questioning the dominance of Anglo-Saxonmodels of social entrepreneurship and social enterprise. To what extent haveneo-liberal principles been absorbed in our understanding of; first, entrepreneurship;and second, of the extent to which social enterprises can be drivers of development?For example, the Skoll Foundation’s Social Edge blog recently asked, “Are the OnlyInnovations in Social Entrepreneurship Anglo-Saxon?” The response was:

Though you might think so sitting at social change conferences like SoCap09, the Skoll WorldForum and others, the answer is: Absolutely not. Clearly, there are brilliant indigenoussolutions that are simply not being seen or resourced – and we simply cannot afford to fosteror tolerate systems that overlook innovators from parts of the world with limited web accessand who may, because of their life experience or out of necessity, be able to imagine moreeffective, less expensive possibilities.

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ConclusionFostering an appropriate valuation of entrepreneurship, particularly when used tosolve social problems in the poorest regions of the world, requires new thinking andapproaches by government and the private sector (as a blend or hybridization ofbusiness and social organizations). The range of ideas is extremely broad and we knowthat more strategic and creative approaches to promote informal entrepreneurial socialinnovations must be developed (Davis, 2001, p. 9).

While many governments have been tempted to over-regulate the social sector,laissez faire policies are also limited. Although using market-based approaches haveled to some important breakthroughs in various spheres, such as environmentalprotection and conservation, the market is not a panacea for social development.Governments still have an extremely important role to play in creating and ensuringfair rules of the game.

A comparative analysis of social entrepreneurship in the informal economy inWest Africa broadens our perspective and in turn, broadens the discipline of economicsby adding a developing country perspective to economic theory, such as Schumpeter’stheory[15] on capitalism and entrepreneurship. A capitalist economy is indeed quickerto seize sudden opportunities and thus have higher productivity with innovations bycapable entrepreneurs supported by credible bankers and institutions, but this view islimited. West African capitalist structures look different, but they are still deeplyembedded in the social economy and driven by informal workers who entreprendreautrement, to borrow from Say’s original definition.

The question for policy-makers interested in harnessing market forces for socialchange is; can West Africa’s informal economy working closely with the private sector,that is, her present economic situation, support large concerted efforts by socialentrepreneurs to scale up and increase capital accumulation to create wealth and economicgrowth? The answer in the past has been the established position that Africa’s cultural andhistorical antecedents prove it is neither inherently entrepreneurial, nor willing to“modernize” into a free-market model. These positions are taken without understandingwhat makes African local economies dynamic. This paper highlighted some of the limitsof existing economic theory on social entrepreneurship by taking a look at the past andpresent realities of the informal economy in West Africa, highlighting both its strengthsand weaknesses. Given the interest social entrepreneurship is recently generating, it istimely for scholars and practitioners to ask the simplest questions based on a sharedtheoretical framework and understanding. For example, Will the social values embeddedin informal work networks support capital accumulation, which is essential for economicdevelopment, or is the work of the poor relegated to a situation where the value of theirwork is determined not by the social value it creates locally but by the needs of globalconsumers? Will the insecurity and lack of social protection or institutional incentives ininformal work, especially for women, prolong the discriminatory effects of unrecognizedskills, including social exclusion, when there are innovations just waiting to be tapped?

Notes

1. A sect of Islam, specific to Senegal, based on the teachings of Cheikh Amadou Bamba,availabe at: www.majalis.org

2. Interview with Amartya Sen Conversations with History at UC Berkeley, available at: www.youtube.com/watch?v¼3muzELM1_uw&NR¼1

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3. William Drayton is said to have coined the term “social entrepreneur” several decades ago.He is widely credited with creating the world’s first organization to promote the profession ofsocial entrepreneurship, Ashoka: Innovators for the Public.

4. Professor Raymond Horton, Director of the Social Enterprise Program, Columbia BusinessSchool, available at: www2.gsb.columbia.edu/socialenterprise/message/MeaningSE.html

5. ILO Resolution concerning decent work and the informal economy, ILC 90, 2002.

6. An ambiguous term which elicits debate but is defined most often as “a third sectoralongside the public and private sector whose goal is to respond to the social needs of thecollective.” Complete definitions and context available in the European Charter of Principleson the Social Economy of the Permanent European Conference (Cooperatives, Mutuelles,Associations, Fondations) CEP-CMAF, available at: www.socialeconomy.eu.org/IMG/pdf/2007_08_20_FR_charte-2.pdf

7. Adapted from personal comments received from Mr Jacques Charmes, Director of Research,IRD, Paris, France in 2007.

8. Martha Chen is a Lecturer in Public Policy at Harvard University and a Co-ordinator ofWIEGO.

9. The informal economy can also be defined as “all unregistered economic activities, legal andillegal, monetary and non-monetary, which contribute to the officially calculated or observedGross National Product” (Feige, 1989; Schneider and Bajada, 2005; Lubell, 1991). Consideredan economy instead of a sector because it is not confined to one sector, it represents thecontinuum between all unrecorded economic activities and their more formal ends.

10. The operationalization of society attracts more of a consensus than does community. Society isgenerally operationalized using such indicators as the rule of law, property rights and othermarket-shaping rules, the stability of constitutional, or regime rules, the type of legal systemand its everyday operational institutions, the nature of bureaucracy and its rules, and so on.Community is more complicated than society to operationalize. On the one hand, there areindicators that measure the degree of bridging and bonding, usually concentrating on thedensity, extent, and depth of membership in civic, economic, social, and professionalassociations. The objective is to capture group life. On the other hand, there are indicators ofdivision, such as ethnic, racial, or other forms of fragmentation, which are assumed to be the“flip side” of bonds within those groups. In addition to these objective indicators, subjectivefeelings of membership, affinity, bonding, and so forth are also measured. The literature onsocial capital (Putnam, 1994; Woolcock, 2006) has attempted various combinations of thesetypes of indicators, as has an older sociological literature on community itself (Durlauf, 2001).

11. It should be noted that there is a sizeable discussion on the viability of the BOP model forpoor countries like Senegal. The model is criticized because: it does not necessarily includethose billions at the BOP in the production part of the market but considers them only asconsumers (thereby subverting poverty reduction as a goal by not focusing on the need foremployment); the BOP model appeals to western multi-national companies (MNCs) but failsto address the question of required changes in company culture for those that wish toaddress the BOP (e.g. best product vs lowest price strategies); and it focuses mostly on theupper bottom and its methods are often not applicable to the lower majority because thesepeople simply have little purchasing power and MNCs operate in the formal economy andtherefore rely on the exchange rate currency economy.

12. Borrowing from Edmund Phelps: “Capitalism is not the ‘free market’ or laissez faire – asystem of zero government ‘plus the constable’. Capitalist systems function less well withoutstate protection of investors, lenders and companies against monopoly, deception and fraud.These systems may lack the requisite political support and cause social stresses without

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subsidies to stimulate inclusion of the less advantaged in society’s formal business economy.Last, a huge social insurance system, with resulting high taxes, low take-home pay and lowwealth, may not hurt capitalism” (article excerpt from The Financial Times, 2009).

13. Definition taken from Borzaga and Defourny (2001, p. 11) “Entrepreneurs are not necessarilythe owners of a company but they are responsible for introducing changes in the followingways: introduction of a new product or a new quality of a product; the introduction of a newproduction method; the opening of a new market; the acquisition of a new source of rawmaterials, or; the reorganization of a sector of activity”.

14. Whereby the state decentralizes its public services and institutional arrangements aremanaged as would a firm, whereby an entrepreneur makes the most critical managementdecisions of the firm.

15. In fact, scholars now find that most growth in knowledge is not science-driven but driven bymarket innovations.

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Corresponding authorC. Sara L. Minard can be contacted at: sara.minard@sciences-po.org

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