Business-focused anti-poverty initiatives can have unintended consequences

A new study of entrepreneurial small businesses created to address poverty in rural Africa found that the introduction of the entrepreneurial model led to unexpected social shifts that made the small business operators a source of friction and social discontent in their communities.

“This work was done in rural Kenya, in an area where society is collectivist—everyone is accustomed to sharing what they have and supporting each other to the best of their ability,” says Erin Powell, corresponding author of the study and an associate professor of entrepreneurship in North Carolina State University’s Poole College of Management.

“It’s also an impoverished area, and the entrepreneurship program was designed to help members of the community pursue businesses that would allow them to prosper financially.”

“This study was focused on understanding how people’s religious or faith backgrounds informed their approach to entrepreneurship—and we learned a lot about that,” Powell says. “But one of the key findings was that the entrepreneurship program had unintended consequences for both the entrepreneurs and other community members.”

For the study, researchers conducted in-depth interviews with 25 participants in the entrepreneurship program in rural Kenya. The interviews were conducted during six visits over the course of four and a half years, and one of the researchers also spent time in each of the villages to observe how the community interacted with the relevant small businesses.

“One of the things we found was that many community members were not happy that someone in their community was moving from the collectivist model—where everybody does what they can to help each other—to an entrepreneurial model, where goods or services have to be paid for at a specific rate and at a specific time,” Powell says. “This led to social friction. For example, entrepreneurs were threatened with being cursed—bad things would happen to them or their families.

“This friction led some of the participants in the entrepreneurship program to drop out, reverting to the collectivist lifestyle. However, others found ways to move forward with their entrepreneurship—and our findings suggest that their religious backgrounds played a significant role here.”

When the study participants initially became entrepreneurs, all of them were faced with threats of being cursed. One subset of study participants held to traditional religious beliefs in the region and were afraid of the curses. Some of these study participants stopped their entrepreneurial practices. However, others were able to reconcile their entrepreneurship with their religious beliefs by drawing a line between their businesses and their personal lives.

“In other words, some study participants decided that as long as they were still willing to share the things that belonged to them personally, the curses would not apply to them—even if they continued to treat the business itself purely as a business,” Powell says.

A second subset of study participants identified as Christian and felt that this protected them from the curses.

“Ultimately, we found that study participants who identified as Christian and study participants who held to traditional beliefs—but compartmentalized their business lives and their personal lives—adopted similar behaviors and were able to move forward with their small businesses and becoming entrepreneurs,” Powell says.

“One takeaway message here is that organizations that oversee programs focused on introducing entrepreneurship in order to alleviate poverty really need to account for local cultures and contexts when developing those programs. You can’t assume that a program that works well in one place will work well in another, and taking a uniform approach across multiple cultural contexts can easily lead to unintended consequences.”

“A program intended to help alleviate poverty only ended up helping some folks, while others were left behind and potentially worse off than before the intervention.”

The findings are published in the Journal of Business Venturing.