Are Small Businesses Being Overlooked in the Fight Against Poverty?

Friday, May 8, 2015

When the dust settles on the sustainable development goals, and the world knows exactly what targets will determine climate and development policy for the next 15 years, the hard work of actually implementing them will be left to individual governments.

As a result, there has been a lot of talk about how local governments can use the SDGs, but when contexts vary significantly from one country to the other, and even within countries, the idea of “localising” the SDGs can seem daunting.

This is where the power of small and growing businesses (SGBs) (distinct fromsmall and medium-size enterprises) comes in. The entrepreneurs who start these firms are already part of their local communities and are invested in the prosperity of those communities. Often these businesses are distributing products and services — clean cook stoves, solar lanterns, private education — that directly serve poor people and they have a clear stake in making sure their communities thrive and become less dependent on aid.

We know that in low-income countries 78% of the formal workforce is employed through small firms. As these businesses grow, they provide better-quality jobs. While the majority will stay small, the ones that do grow can have an exponential impact on job-creation, which means steadier incomes and better access to critical goods and services for their communities. These enterprises have a ripple effect on local economies as payments go out to suppliers, distributors see more income, and local governments can gain more tax revenue. It is estimated that every $1 invested in SGBs generates $13 in the local economy.

One example is Cajour Espoir in Togo, the country’s first cashew processor. West Africa produces the majority of raw cashews in the world, but exports 95% of them to be processed outside of the region. So in 2004 two Togolese entrepreneurs saw an opportunity to develop local processing capacity, and to create jobs in an area with high unemployment, and where the majority of people were living on less than $1 a day. Since 2004, Cajou Espoir has gone from fewer than 30 employees to more than 500.

Source: The Guardian (link opens in a new window)

poverty alleviation