Tomorrow's Entrepreneur

Coming to America
About one in every 10 people living in the United States today was born in another country, according to a report by the Center for Immigration Studies (CIS). The 28.4 million immigrants who are now reportedly living here -- about three times the number that were reported in 1970 -- are the most ever recorded, though they make up a smaller percentage of the total population than earlier immigrant groups did.

Does immigration growth increase entrepreneurship? Although CIS's figures challenge the idea that immigrants are more likely to start businesses than native U.S. residents are, people from certain countries do exhibit rates of entrepreneurship that are much higher than either the average for all immigrants or the U.S. natives' average. The following table shows those two averages (in bold) and the rates of self-employment (at both the high and low ends of the spectrum) for immigrants from selected countries.

Korea: 23.7%
Canada: 17.1%
China/Hong Kong/Taiwan: 16.9%
Poland: 16.4%
India: 15.8%
All U.S.-born (average): 11.6%
All immigrants (average): 10.7%
Haiti: 6.1%
Mexico: 5.6%
Ecuador: 5.1%
Philippines: 3.4%
El Salvador: 2.4%

Native Americans: left behind again?
Aside from running a handful of well-publicized casinos, Native Americans haven't started many businesses. A recent study by the Kauffman Center for Entrepreneurial Leadership, conducted by Babson College and the London Business School, examines the reasons for that trend. One big problem: financing, since few people living on reservations have the money to lend to a friend or family member who is trying to start a business. Cultural issues may also create obstacles, says professor Andrew Zacharakis, the study's U.S. leader.

Efforts are now under way to remove some of those roadblocks. For example, Michele Lansdowne, a professor at Salish Kootenai College, a Native American institution in Montana, is writing a series of business case studies featuring Native Americans in the hope of providing inspiration for other would-be entrepreneurs.

Small Change

How can entrepreneurs get financing if they are shut out of the usual channels because of a language barrier, a lack of education, or a poor credit history? Microlenders address that question by providing loans that are typically less than $25,000 to existing and prospective small-business owners. Among the lenders: Boston-based Accion USA (the largest, with 2,000 active clients); Working Capital, in Boston; Opportunity International Network, in Oak Brook, Ill.; and the Small Business Administration, which sponsors several programs around the country. Robin Ratcliffe, vice-president of communications for Accion USA, says that many of her company's clients are low-income immigrants or minorities who start businesses to supplement or replace minimum-wage jobs. The businesses that the microentrepreneurs run include beauty salons, restaurants, day-care centers, and contracting companies. Some 82% have never received a bank loan; most have never even applied.

Ratcliffe says that microlenders give loans even to people with damaged or nonexistent credit histories. "When you don't have any other access to capital, your motivation to repay is usually very high," she notes. The theory seems to work: Accion USA's repayment rate is 95%. Meanwhile, the company's research has shown that businesses receiving microloans raise their average monthly profits 47% after they've paid off two loans, and the owner's take-home income increases 38% during the same period.

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Published on: May 15, 2001