It’s kind of hard and pretentious to not understand why these people aren’t creative in their desire to be “The First Kid On the block”. If you had ever been an entrepreneur you would understand. Some are perceptive
enough to see what works and what doesn’t work and desire to go with what they know will work, because its eat or get eaten.

Thanks for your interesting post. And thanks to my colleague Dylan who let me know about it. Your comment about the bread made me smile because that was my very first impression too.

However, having conducted three months of field research in all ten regions of Ghana, I found that the definition of the creative micro entrepreneur still holds. Creativity is mostly defined by something that is “both new and valuable” (Brodbeck 2002).

Although Sinapi Aba Trust’s micro finance clients do not generally produce unique products such as banana bread, many of them have developed a creative set of survival strategies judging (and juggling of) new opportunities and old obligations.

I interviewed one client who owned a pharmacy where she sold drugs and bread. One client sold nail polish and zips. Another one operated a chop bar, sold clothes and grew pineapples. One woman sold – from the same bowl on her head – fabrics, cosmetics and mangos.

In fact, more than one third of the clients I interviewed for my thesis owned such a type of business. And more than half of all clients used their loan to add products to their businesses that had no synergies with their current products (conglomerate or lateral diversification)! Interestingly, those clients selling the strangest combinations seemed to be the most successful ones. Back to the definition above, such combinations are “new” and at the same time “of value” as they usually result in an over-proportional increase in income.

I have seen businesses where micro entrepreneurs sold car tyres and wedding dresses in the very same shop. Or drums and eggs. Now isn’t that creative and innovative?

I’d love to hear more about your experience. Let me know if you would like to get in touch.

Cheers, Stefanie

Good to hear things are going well with CRAN. I just had a chance to read your excellent post about innovative entrepreneurs and microfinance. The fact that these loans are really providing safety nets and / or marginal increases in sales and not financing an innovative, creative, unique business was a big aha moment for me as well.

While I was working with Sinapi up in Kumasi, I was working with a German student who is writing her thesis on the very issue you address here. And, she’s writing it in English!!!. So, if you are interested in talking with her let me know. I’m sure she would love to open up a dialogue about this issue.

Dylan

First time reading this blog and certainly I am really impressed by the quality.

For me this discrepancy is not so surprising – the terms of microcredit seems more to me comparable to a bank loan, and while bank loans are used to start businesses all over the world, more innovative businesses often utilize other types of financing – from friends & family to angels to VCs. In these cases the financing is more targeted towards the higher risk/return market.

Going back to your example – to make it possible for a small scale business to take the even greater risk of expanding into an innovative field (say banana bread), then I would think that the terms of the investment (and here it’s an investment – not a loan!) would need to reflect that. That is I would think that the investor would need to share the risk (or even take most of the risk!) of banana bread failing.

There exists VCs investing into high risk areas (most governments have one connected to their development work) however in the smaller scale (a baker trying to employ 5-10 ppl, expanding into banana bread and so on) I haven’t seen examples as much. For an entrepreneur in Belgium where I am, this would be the stage of friends&family or business angel investment.

So my question would be – is there simply a financing (type of financing) gap here?

Linus