Can entrepreneurship alone solve the poverty conundrum?

Since its inception, Silicon Valley was hailed by different practitioners and policymakers as the world’s technological hub. The Silicon Valley model used a unique collaborative approach between private companies, private and public capital, and key universities to support patient-led entrepreneurship. This model has proved the effectiveness of key networks and the importance of knowledge exchange between different institutions in order to build a dynamic entrepreneurial ecosystem.

Many different policymakers and international organisations have tried hard to replicate this model in different parts of the world without realising the uniqueness of this ecosystem – namely, that it is driven, in part, by technological social enterprises.

Scholars have also argued that social enterprises can be a driving force for social change through using business approaches to address the biggest societal challenges such as climate change, inequality and poverty. During the course of my PhD, which was partially funded by the Open Society Foundation and supervised by the Centre of Enterprise and Entrepreneurship and The Bauman Institute at the School of Sociology and Social Policy, I researched the emergence of social enterprises and noted the important role that they play in creating educational and entrepreneurship programmes for the Egyptian youth.

During my fieldwork, I had the opportunity to conduct in-depth interviews with different practitioners and intermediary support organisations, including investors, business incubator managers and venture capitalists, in order to uncover the challenges and the opportunities that social enterprises encounter within the Egyptian context.

In the last decade, Egypt has faced unprecedented political and socioeconomic upheaval culminating in the Egyptian Uprising in 2011 and the current economic reforms, which have led to considerable economic growth over the past year. However, poverty and youth unemployment are still among the most important challenges facing Egyptian society. Hence, there has been a sudden policy shift towards entrepreneurship from major international organisations such as the IMF and the World Bank.

Such policies were merged into official United Nation reports, which made the case that entrepreneurship can be seen as a vehicle for fighting poverty, creating job opportunities and ultimately generating economic growth throughout the Middle East. However, what these reports did not specify was that entrepreneurship is not created in a void, nor by emphasising the role of the individual in creating an ecosystem.

The empirical evidence reported by scholars such as Mariana Mazzucato and William Janeway argued that the US and Chinese entrepreneurial ecosystems – which are currently dominating the business scene in the realm of digital technology, or earlier innovative projects such as GPS, Siri or the internet – were initially funded by state-led investment anchored by bold policies. This is the original foundation for the finance that is required for innovation.

When looking at the Egyptian context, the entrepreneurial scene is still growing, and the seeds for creating the necessary sustainable and secure job opportunities will take time to germinate. However, scholars have warned against hurriedly establishing businesses as a means of employment as they can ultimately follow in the footsteps of micro-finance initiatives, which ended up saddling individuals with significant amounts of debt and increased poverty levels in countries such as Bangladesh and India.

We still lack coherent evidence on how entrepreneurship alone can solve the grand societal challenges such as poverty or youth unemployment. History shows that such societal challenges need a dynamic policy agenda to establish the principles of a modern welfare state in order to effectively tackle the problems in society.