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>>By Sabina Rogers, Microcredit Summit Campaign
“Small businesses” form the backbone of the American economy, with 98 percent of businesses employing fewer than 20 workers, including those that employ none (I refer to non-employer firms, or “self-employed individuals operating unincorporated businesses”). While the majority of businesses are non-employer firms (aka self-employed individuals), they actually account for a minuscule part of the economy.
How can we change that? How can we increase their impact on the economy?
In April Rinne’s Huffington Post article on October 25th, “3 Lessons on Financial Inclusion and the Sharing Economy,” she describe a new “sharing” economy that has emerged in the last decade wherein microentrepreneurs are leveraging new technologies to capitalize on their skills or “underutilized assets.” (She also gives a short overview up front of the evolution of microfinance over the past 40 years.)
“Freelancers,” a type of microentrepreneur, are a growing trend in the United States. Citing Freelancers Union, Intuit, and other sources, Rinne says that in the next five years (by 2020), nearly half of the American workforce (40 percent) will be freelancers.
From Airbnb (P2P lodging) to Lyft (P2P taxi cabs), individuals are supplementing their income with small amounts of money, “sometimes just squeaking by thanks to these platforms.” From my own conversations with Uber drivers (which is a competitor of Lyft), I’ve learned that some are saving for their children’s education or retirement while others need the income for that month’s rent.
Rinne explains that many of these freelancers will be looking for appropriate financial services to help start or to expand their business. Airbnb and Lift only works for those who already have the tools to employ: a car for Lyft or a home for Airbnb. And for sellers on Etsy (an “e-commerce website focused on handmade or vintage items and supplies”), Rinne says there is no money to expand their business. These platforms do not provide financial services–like a microloan. “We have yet to effectively fill this gap.”
Rinne’s three lessons (and services), therefore, come down to the lack of financial services:
- Microentrepreneurs who participate in the “sharing” economy are “ill served” by the financial services that do exist.
- Others are excluded from the “sharing” economy because there are no appropriate financial services for them.
- Financial service providers should take a look at this huge opportunity and figure out how best to serve this important arm of the economy.
One thing to note, however, is that Accion, one of the most prominent and largest microfinance networks in the world, is also operating in some 30 cities in the U.S. And, then there’s Kiva, which is now connecting you and your $25 loan with American microentrepreneurs through Kiva Zip–microentrepreneurs who, like their counterparts in India and elsewhere, are ignored, denied, or shunned by the traditional financial community.
This is a start, but, as I’m sure Rinne would counter, it’s not enough. She concludes that the “sharing” economy presents a whole new, wonderful opportunity for us.
The rise of microentrepreneurship, at scale, represents a new economic force. In order to unlock its full potential, we must develop services to address new needs. In doing so, we may also find a key to success amidst these shifts – and a world of new opportunity.
Other interesting ideas
- Unsexy Entrepreneurship (Kiva)
- Emerging Leaders in Microbusiness (squared) (Aspen)
- 10 sustainable innovations: from solar-powered suitcases to floating classrooms (The Guardian, Oct 29)
- Some ideas for native bitcoin apps (chris dixon’s blog)
- Thriving but Still Vulnerable in the U.S. (Financial Access Initiative blog, Nov 6)