Yunus, Entrepreneurs, and Employees

We had the good fortune to host, with NYU Wagner and NYU Stern, a talk by Muhammad Yunus today at FAI. If you couldn't join us in the room or via the livestream, you can read the tweetstream from the talk by searching Twitter for #FAIYunus, and soon we'll post video of the event. 

In the meantime, I wanted to offer some quick thoughts about one of the main topics that Professor Yunus addressed: entrepreneurship. During his talk, Yunus mentioned his advice to the children of Grameen Bank borrowers who have completed school: don't be a job seeker, be a job maker. In other words, be an entrepreneur. During the question and answer session, a member of the audience asked Yunus, "[You] assume everyone is inherently entrepreneurial. What about people who are not?" Yunus' response was that people who are not entrepreneurial have simply not been given a chance to discover and develop that side of themselves. 

The question of whether poor households are frustrated entrepreneurs or frustrated employees is central to the future of microfinance. Jonathan and I addressed this in a recent essay on Foreign Policy's website. We believe that the balance of evidence falls on the "employee" side of the ledger (see also a good discussion of this issue in Poor Economics)

As we point out in the FP piece, the question is important to get right because the financial services needed by entrepreneurs and employees are quite different. There is evidence that the basic microcredit product is actually quite limiting for entrepreneurs (for instance, here); and there are experiments on designing credit products better suited to frustrated employees (see here). Some, like the Aspen Network of Development Entrepreneurs, have suggested a "best of both worlds" approach by shifting the focus of credit away from microenterprises to comparatively larger (but still small) and growing businesses. That may be a better way to create jobs than funding microenterprises which hardly ever hire employees, but it doesn't necessarily reach the same population that microcredit does. Jonathan Morduch and Jonathan Bauchet have conducted research that shows that small and medium enterprises in Bangladesh at least, don't hire the from the poor households targeted by microcredit. Other work has shown how truly difficult it is help micro- and small enterprises grow and hire employees

The bottom line is that we are still a long way from knowing the best approaches to supporting frustrated entrepreneurs or frustrated employees. That makes it more imperative, I think, to make sure that poor households have access to a range of money management tools that best match their needs, whatever they are.