Entrepreneurs: Did You Know?
This module is aimed at those interested in the field of entrepreneurship and offers helpful tools and information about building a small business. You will learn the essential characteristics and tools to becoming a successful entrepreneur. You will also learn what it takes to build a successful business plan and decide on what type of goods or services your business can offer consumers. Explore tips to start you on the right path and how entrepreneurship can help you build a successful future for you and your family.
Become inspired by other successful entrepreneurs and people and organizations that make it possible for entrepreneurs to grow their business. Read how entrepreneurs throughout the world operate and see how their personal narratives relate to you and your vision. Finally, utilize the wealth of resources that are available to you to start a business plan that can bring you the career of your dreams. This module can help set your future towards success and the fulfillment of your dreams.
Entrepreneurship is a growing career path. But what exactly does the term, entrepreneur mean? An entrepreneur is an individual involved starting a business with all the associated risks and responsibilities, but reaps the rewards of the enterprise’s success. Many people throughout the world own their own businesses, and many of them have started out small. The very successful individuals took the initiative to be creative and cultivate innovative and unique products or services to customers. Every entrepreneur has the potential for success if they make an effort to work hard and make their business the best as possible. The popularity of entrepreneurship among young people is growing. Many countries have begun to form programs to help young entrepreneurs gain the skills they need to run successful businesses. These programs teach fundamentals for starting a business, conducting research for the businesses center, marketing strategies, and utilizing online resources to grow. By cultivating the youth’s desire to run small businesses, countries can give young people a greater chance to build a successful and prosperous future.
In developing countries, the poor have a disadvantage to becoming successful entrepreneurs because they lack the resources and money to launch their business. Often if they take out loans, the interest rates are extremely high and they must have a high amount of collateral, which is defined as security pledged for the payment of a loan. This means that if a loan requires collateral and a person can not pay back their loan in the specified time amount, the lender will take the lendee’s collateral. So for instance if a person borrows $500 and puts up two goats as collateral and then can not pay the loan amount back to the lender, the lender will take the person’s two goats. These types of loans do not work in the favor of economically disadvantaged communities, so this is where microfinance institutions play an important role in the lives of the poor.
Microfinance is the general term used to describe the supplying of loans, savings, and other basic financial services to the poor. Microcredit involves the loaning of small amounts of money or capital. Microcredit is a subset or part of microfinance. Microfinance can take the form of microcredit, but also includes other financial services such as micro-insurance and micro-saving.
Since capital or financial services involve small amounts of money, the term microfinance helps to differentiate these services from those that formal banks provide. Small loans can make a significant difference for the poor and help them get the essential needs so they can become self sufficient and take care of everyday needs. Many times, the extra income they obtain from their small businesses is used for the educational fees of their children. This makes microfinance a key player in helping people escape the cycle of poverty and become empowered since they are able to do it on their own.
25 Basic Facts
- An entrepreneur sees an opportunity regardless of his or her available capital, makes a business plan, finds the lending, starts the business, manages the business, and receives the profits.
- The most commonly used definition of global poverty is the absolute poverty line set by the World Bank. Poverty is set at an income of US$2 a day or less, and extreme poverty is set at US$1a day or less.
- Empowerment is a person’s ability to affect change and make choices in their own lives.
- Microfinance has been proven to increase income, generate employment, provide a more stable existence, and improve the quality of the lives of the target beneficiaries.
- A microfinance institution (MFI) is an organization that provides microfinance services, ranging from small nonprofit organizations to large commercial banks.
- A microloan is usually under US$500.00.
- A microenterprise is a small-scale business in the informal sector. Microenterprises often employ less than five people and can be based out of the home. Microenterprise is often the sole source of family income but can also act as a supplement to other forms of income.
- A micro-entrepreneur is the owner of a microenterprise.
- Most microfinance credit is provided without collateral and loans are small, usually less than US$100.
- A credit rating is usually used to determine a bank or financial institution’s credit risk — it is an evaluation of an individual or company’s ability to repay obligations or its likelihood of not defaulting.
- Bankable people or those who are creditworthy are deemed eligible to obtain financial services that can lead to income generation, repayment of loans, savings, and the building of assets.
- Collateral is the assets (or things you own) that are pledged by a borrower to secure a loan, which can be repossessed in case the loan cannot be repaid.
- In a microfinance context, collateral can vary from fixed assets (a car, a sewing machine) to your partners guaranteeing that they have the assets if you do not.
- Credit scoring measures the risk associated with each credit applicant or microborrower — it is an automated system that assigns points for various credit factors, providing lenders with the ability to grade prospective clients, and to calculate the risk of extending credit.
- In a microfinance context, the credit scoring method is modified to take into account a micro-entrepreneur’s experience, character, and capacity to repay; the final credit score is an overall measure of the creditworthiness of the credit applicant.
- More than 50% of all microfinance recipients or borrowers live in South Asia.
- About 3% of India’s population is cast into poverty each year because they lack insurance.
- India and Bangladesh have the most MFIs (microfinance institutions).
- Microfinance clients are usually self-employed, household-based entrepreneurs. Their diverse microenterprises include small retail shops, street vending, arts and crafts manufacturing, and service providing.
- In rural areas, micro-entrepreneurs often have small income-generating activities such as food processing and trade.
- An 8-year World Bank study in Bangladesh found that 48% of the poorest households with access to microcredit loans rose above the poverty line.
- By supporting women’s economic participation, microfinance helps to empower women, thus promoting gender-equity and improving the well-being of the household, including safety within the family structure.
- According to results of Freedom from Hunger studies in Bolivia and Ghana, becoming a microfinance client has led to increased self-confidence in women and improved their status within their community.
- According to the International Fund for Agricultural Development (IFAD) a small loan of US$50 can help poor people set up their small business and give them security for food and education for their children.
- In the U.S. 40% of young people between the ages of eight and 21 have or would like to start their own business.
- According to a 2009 Kauffman Foundation Survey, 92% of Americans agreed that entrepreneurs are essential in creating jobs for the future.