Cash grants ease pressure, encourage ideas

Necessity can be the mother of invention, but without financial and business development support, many impoverished entrepreneurs can't get past the start-up phase of establishing a unique business. Researcher Laura Doering showed in a recent study that low-income entrepreneurs in Panama were just as likely as wealthier people to start early-stage businesses selling new products. But they had lower rates of sustaining those businesses into long-term profitability. When Doering interviewed low-income entrepreneurs, she found that their urgency to quickly turn a profit so they could support themselves, as well as the longer time required for their often equally poor customers to adopt the new product, contributed to the low long-term success rate. Her paper suggests the entrepreneurs can be helped over the start-up hurdle through the creation of business incubation centres in which they can develop and refine their novel business ideas. Cash grants for the most promising ideas, rather than loans, could also ease the pressure to quickly turn a profit.