Starting up a small business as a way of rising out of poverty

  •  According to the World Bank, 3.08 billion people live on less than $4 a day.
  •  The BBVA Microfinance Foundation supports vulnerable entrepreneurs in Latin America, who see their sales grow by an average of 17% year-on-year, and their assets by 25%.

3.08 billion people survive on less than $4 a day according to the World Bank, a figure worth pondering on the occasion of the International Day for the Eradication of Poverty, commemorated by the United Nations every 17 October.

For these people, making ends meet each day is a challenge. Their initiative, ingenuity and hard work are vital. Being lucky enough to find employment is beyond the reach of most people in their communities, so the only option open to them is to become an entrepreneur. Their small businesses are their livelihood. If they can make these enterprises prosper and grow, they can succeed in rising out of the situation of poverty and vulnerability in which they live. Three out of every four people that succeed do so this way.

But can only do this by overcoming numerous obstacles. Giovanni di Plácido, head of Analysis and Strategy at the BBVA Microfinance Foundation, explains: “As they lack financial services, poor people, if they want to get ahead, must use their own resources or informal funding sources and lenders. They value very highly the opportunity to access formal loans that provide them with a differential value compared to informal loans. Financial inclusion is essential for reducing vulnerability”.

People who run their own businesses from a situation of poverty or vulnerability need to be given access to financial services and products that are tailored to their situation, along with training in financial literacy and advice, as most lack even basic education.

These principles are the cornerstone of Productive Finance, the methodology used by the BBVA Microfinance Foundation to enable the vulnerable entrepreneurs it serves to develop their small businesses and ensure a sustainable source of income that improves their well-being and that of their families. This non-profit institution currently serves 1.8 million underprivileged people in Latin America, bringing financial services (credit, insurance, savings, etc.) and training for the growth of their businesses to their homes/workplaces.

77% of the entrepreneurs who are granted loans are vulnerable (with per capita surpluses of less than three times the national poverty threshold), 60% are women, 46% have only a basic education level (primary education at most) and 33% live in rural environments. The entrepreneurs see their sales grow by an average of 17% year-on-year and their assets by 25%. When asked their main motivation, the most frequent response is so their children can study and have a better life than they themselves have had.