Obstacles for Entrepreneurs in Developing Countries

What are some of their obstacles that entrepreneurs in developing countries may face that we in “developed” countries do not?

I once talked to a guy in Palestine who had a text message business who wasn’t making a lot of money. He wasn’t exploiting people – just using creative ideas to help people get jobs. To solve problems. But for that reason, he was considered a threat and the government tried to shut him down. That’s a huge problem all over the world: anytime you have a controlling or authoritarian government, anyone else that solves problems is seen as a threat. 

Social stigma is another big piece where, in many places, if you fail, you never get a second chance. This could be a legal issue, or it could also be a social issue. For instance, I’ve talked to a lot of entrepreneurs whose families suffer because someone is an entrepreneur. One guy told me that his brother’s marriage got called off because the other family didn’t like that he was an entrepreneur; they didn’t want to marry into a family that had an entrepreneur. 

There are all kinds of other social challenges, too. The factors that really prohibit people are a fear of failure, and of legal and social consequences. Laws can sometimes also be changed deliberately to hurt you. Right now, China – which is very different from many other developing countries – completely changed the way they treat their tech companies in the last two or three weeks. It’s destroyed billions of dollars of value. Now, going forward, future entrepreneurs in China are going to be more nervous. They’re not going to start companies there because then the government might come and change the rules later to hurt you. That fear of political instability is a piece of it. 

Otherwise, entrepreneurs everywhere in the world complain that there’s not enough money. This is true to different degrees. I talked to an entrepreneur from an African country who had a printing business. He said that the tax rate in his country was 40 percent for businesses, but that it’s only enforced at 10 percent.  This is a problem because, if an entrepreneur is for some reason no longer on the government’s good side, all of a sudden, they can decide to enforce the statutory tax rate. This guy that I spoke to, he had a printing business and the government was a customer of his – a big customer. But if he spoke out or tried to do anything that the government didn’t like, then all they would do is jack up his taxes, which would put him out of business. The laws weren’t changed, in that scenario, they were just enforced in a different way.

However, the aspects of entrepreneurship that are better now than ever before are: access to technology, access to customers. Essentially the fact that a cell phone gives you access to the world – you have so much computing power in your hands, but also access to markets and knowledge that is hugely valuable. People are creating businesses and they’re selling around the world in ways that they could have never done before, even just 10 years ago. 

Are there any obstacles that women might face in developing countries like Palestine, that they might not face in the United States and elsewhere?

That’s a fascinating topic. And I hear different sides. One of the projects that I’ve been working on this summer is for Georgetown to get a contract to work with women in entrepreneurship from Saudi Arabia. I’m definitely not an expert in that, but I have read some things and Georgetown has hosted some women entrepreneurs from Saudi Arabia, and also from Iran and other countries where women don’t have many rights. 

I’ve also heard the opposite, though – that women have plenty of rights. For instance, I met a guy who won a global award. I got to be a judge when he promoted entrepreneurship for women in Pakistan. He mentioned that, in the history of Islam, one of the best stories is that Muhammad’s wife was an entrepreneur. She was a business woman who made money to support him while he became this global religious figure. At least that’s part of the story that you hear when you talk to women entrepreneurs from Muslim countries. Some say that their communities support them and their work, while others say, “I can’t leave the house without a male escort,” or “people won’t do business with me,” or ”the bank wants my husband to sign everything.” Some of that [redacted] still happens in the US, too, right? It’s not a simple challenge to solve.

You mentioned the story of the family who didn’t want their daughter to marry into another family because the husband-to-be was related to an entrepreneur. Did that stigma come from financial instability, or was it more than that?

The guy that told that story was from Palestine. Another guy from Qatar had a similar experience. Through talking with them, I got the sense that, in some places the culture says, “to be successful, you need to follow certain career paths.” And an entrepreneur is not always one of them. The reason is likely a mix of the fear of taking risks and the potential for failure. 

There’s also always the question, “Why are you different from everybody else?” There are a lot of cultures where just being different is considered a negative deviance.  Some will ask, “Why don’t you just do what your father did, or what the government wants you to do? Why is your way better?” 

In Doha, of course, there’s a whole different set of challenges in that every citizen is born wealthy so why take a risk? There was an article last week about an Egyptian technology guy who was working for Google. Google fired him after he wrote this story about why Israel and Palestine should not be fighting each other. Most people know that, in the Indian expatriate community in the US, there’s a running joke that if you’re not a doctor or a lawyer, then you’ve failed. This joke is spurred by reality, that there’s a tremendous amount of pressure on those people. That kind of thing exists all over the world in different ways. An entrepreneur is rarely celebrated. 

I think that is another thing that is changing. It is changing dramatically. And in the last 20 years, there is a huge difference. This is one of the things the US has traditionally embraced a lot better, has celebrated entrepreneurs more, but in a lot of countries, that’s not the case.

I’ve spent time in Mexico and Peru and talking to people and 20 years ago, we did a brief study in Mexico. There, the perception of entrepreneurs is that they are people who use their government connections to exploit other people. And that’s what we heard in Peru just a few years ago. But that has changed. Now Mexico has an amazing entrepreneurial community. There’s been a huge entrepreneurial revolution all over the world in the last 10 to 15 years. But things don’t always change that fast.