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Social Enterprise Journal

Valuing entrepreneurship in the informal economy in Senegal


C. Sara L. Minard

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C. Sara L. Minard, (2009),"Valuing entrepreneurship in the informal economy in Senegal", Social Enterprise
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Valuing entrepreneurship in the


informal economy in Senegal

186

Institut dEtudes Politiques (Sciences-Po), Paris, France

C. Sara L. Minard
Abstract

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Purpose The purpose of the paper is to provide a theoretical reflection on existing and emerging
literature on social entrepreneurship as it applies to the developing country experience, and
specifically to the informal economy in Senegal, West Africa.
Design/methodology/approach The paper adopts an exploratory, multi-disciplinary approach
grounded in economic and social theory, including open-ended interviews and focus groups. The data
are complemented by field observations and analysis.
Findings Socio-religious networks in West Africa like Mouridism, with its strong emphasis on
work and giving of ones personal financial gains back to the Muslim brotherhood, has actually
created a non-capitalist spirit of commerce, and to some degree entrepreneurialism, among Senegalese
Mourids who are majority Wolof.
Research limitations/implications As an initial exploration into this topic, the paper lacks
sufficient empirical data and therefore the research results may lack generalizability.
Practical implications The paper helps draw comparisons between what we know and what we
do not know about social entrepreneurship in the informal economy, moving beyond the conventional
neo-liberal notions of competitive markets to explore entrepreneurial activities at the Bottom of the
pyramid that establish economic exchange value which is socially embedded.
Originality/value The paper seeks to address a perceived gap in the theoretical and empirical
literature on the emerging phenomenon of social entrepreneurship. By analytically framing the debate
on the role of markets in the social sector through a developing country lens, we are looking at social
entrepreneurship as the intersection of embedded social and economic realities of the majority of
workers who operate in the informal economy in Senegal.
Keywords West Africa, Entrepreneurialism, National economy, Social economics, Senegal
Paper type Research paper

It is the mark of an educated mind to rest satisfied with the degree of precision which the
nature of the subject admits and not to seek exactness where only an approximation is
possible (Aristotle).
No coherent moral justification was ever suggested for throwing out a system providing
invaluable and irreplaceable novelty, problem-solving and exploration, thus personal growth
(Edmund Phelps).

Social Enterprise Journal


Vol. 5 No. 3, 2009
pp. 186-209
q Emerald Group Publishing Limited
1750-8614
DOI 10.1108/17508610911004304

It makes no difference whether Africa has everything or nothing either its powers are too
great, or its problems too overwhelming to engage. Often, what gets ignored are the means by
which Africans have learned to compensate for the impossibility of their everyday lives.
Despite inadequacies, many African societies improvise with whatever is at hand, and in so
doing, often avoid disaster. But Africas postcolonial hybrid methods are consistently
dismissed. They are seen as either symptomatic of the continents loss of tradition or as a
collection of death-rattle, knee-jerk reactions [. . .] How can Africas circumstances inform and
broaden Western postmodern languages just as how can the West apply itself more
constructively for Africans? (David Hecht and Maliqalim Simone).

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Summary
In the emerging literature on social entrepreneurship, a central focus is on the capability
of an individual to combine a passion for a social mission with the business-like
discipline, innovation and determination of, for example, the high-tech pioneers of
Silicon Valley (Dees, 2001). Individuals are social entrepreneurs, because they have
decided to:
.
take risks without being limited by resources;
.
engage in a process of continued innovation, adaptation and learning; and
.
be acutely aware of the impact on the constituencies involved or targeted, and the
outcomes created (Elkington and Hartigan, 2008).
Social entrepreneurs are a rare breed (Dees, 2001).
When we apply this definition to the West African Senegalese context, we are faced
with a common dilemma whereby the African experience seems ambiguous, changeable,
and negotiable when one tries to describe it against Western economic theories
(Guyer, 2004) of entrepreneurship. For example, when does the Mourid brotherhood[1]
and the Baol Baol business activities whose actions are embedded in a socio-cultural and
religious network that provides collateral and access to economic opportunities become
an entrepreneurial initiative? When does a street vendor in Dakar move from the
category of survival income generation to the category of social entrepreneur or social
innovator within the informal, or popular, economy? Perhaps, this is a false bifurcation?
At what point would we determine if the activities of micro-entrepreneurs (as innovators
and employers) in the informal economy create real social value? Can small business
owners working in extreme poverty, who have little to risk and to invest and yet are
aptly responding to market failures, qualify as social entrepreneurs?
These questions elicit a broader question for socio-economic research and policy:
when we discuss social entrepreneurs as innovators and change agents, which of the
theoretical frameworks, models and assumptions in economic and social theory are not
applicable to the West African Senegalese context, and why not?
The purpose of the paper is to provide a theoretical reflection on existing and
emerging literature on social entrepreneurship as it applies to the developing country
experience, and specifically to the informal economy in Senegal, West Africa. The paper
helps to draw comparisons between what we know and what we do not know about
social entrepreneurship in the informal economy, moving beyond the conventional
neo-liberal notions of competitive markets to explore entrepreneurial activities at the
Bottom of the pyramid that establish exchange value which is socially embedded
(Granovetter, 1985, 1973). The paper argues that the informal economy rather than
being confined to the standard economist view as merely a survival economy should
be considered, first, as a marketplace for enterprising social innovation, and second, as a
motor for efficient and productive economic development, thus challenging the artificial
barriers between formal and informal, business and community, street vendor and
entrepreneur. We are interested in outlining some of the main arguments and competing
theories of social entrepreneurship from an inter-disciplinary perspective of economics.
We start with the postulate, advanced by Amartya Sen, that interdisciplinary means
employing a broader use of the discipline and thus, by employing a broader concept of
human being than the rational, utility maximizing individual, we are not outside the realm
of economics but merely broadening its application. This Polanyian view accepting the

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embeddedness of economics in sociology and vice versa, and between market and society
provides the compass for our exploration of the disarticulation between economic theory
on social entrepreneurship and the praxis of social entrepreneurship in the informal
economy in the contemporary West African context.
From a critical discussion of the theory, the paper analyses first the dominant
Anglo-European literature on social entrepreneurship, specifically its role as a bridge
between market competition and social solidarity models. Then, placing this notion of
social entrepreneurship within the political economy context of informality in Senegal,
West Africa, the paper explores theoretical and empirical ideas of social entrepreneurship
as it relates to social networks, and to issues of capability, trust, redistribution and
reciprocity as key instruments of poverty reduction, collective action and social innovation.
The paper seeks to address a perceived gap in the theoretical and empirical literature on
the emerging phenomenon of social entrepreneurship. By analytically framing the debate
on the role of markets in the social sector through a developing country lens, we are
looking at social entrepreneurship as the intersection of embedded social and economic
realities of the majority of workers who operate in the informal economy in Senegal. This
framing has the potential to raise theoretically interesting questions in terms of social
entrepreneurship and engage disciplines and approaches in two key areas:
(1) Understanding the dynamism of the informal economy, and existing strategies to
unleash the potential of social innovations at the bottom of the pyramid (BOP).
(2) Identifying new types of approaches, i.e. hybrid organizational models and
sustainable institutional solutions, in order to orient the social value-added of
informal activities bordering the economic and social sectors to be used in the
service of collective action (Ostrom, 1990), social inclusion (Sen, 1999), and
poverty reduction (Yunus, 2007).
Outline
(1) Introduction.
(2) Review of existing literature and key theoretical concepts on social enterprise,
social entrepreneurship and workers in the informal economy.
(3) Developing country perspective: the Senegalese, West African context of social
entrepreneurship (the political economy and cultural specificities of informality,
social enterprise and social entrepreneurship).
(4) Drawing comparison between what we know and do not know about social
entrepreneurship in the informal economy in West African context
(Counter-arguments for chosen theories and how to respond to implicit
criticism: how do we get from point A to B, and eventually to point C which is
ending poverty through profits and citizenship?).
(5) Moving beyond the bifurcation of market competition and social solidarity
models: implications from theoretical and empirical literature on the drivers of
social change and innovation.
Introduction
Economists are often dominated by schools of thought with established lines
of thinking[2] that are, depending on where the particular school of thought falls

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on the theoretical spectrum, either obsessed by or committed to quantification[2].


The same can be said for sociologists, anthropologists, geographers as well as
contemporary thinkers of business and management in that they are committed to
measuring what they can according to the level of precision that their particular
discipline allows. What we have seen from discussions around the world and in recent
literature on the notions of social enterprise and social entrepreneurship is something
remarkable by identifying social entrepreneurs as drivers of change. By
acknowledging, as Dees (2001) does, that entrepreneurs mobilize the resources of
others to achieve their ends and that a social entrepreneur measures efficiency and
productivity not strictly in market terms of financial return but by their impact on
social change, we have taken a business term out of business and challenged the
neo-liberal orthodoxy of a self-regulating market. This new language has broadened
the playing field as social entrepreneurs look for the most effective methods to serve
their goal, ranging from for-profit to non-profit methods, or somewhere in between.
It has also marked a fundamental shift in our understanding of interdisciplinary,
where it has become clear that by using a broader conception of human being as
entrepreneur, we are merely broadening the discipline of economics, not outside of it.
The same applies to informality and the market, where it is clear that the bulk of
productive activities in developing countries take place on a spectrum between
informal and formal on the border of the economic and social spheres of society.
Societies today co-exist in a global economy and are moving towards a redefinition
of the relationship between the individual, the institutional structures of the social
economy, including civil society and the private sector, and the state. Developing
regions like West Africa, in particular, have witnessed this shifting articulation of
social, civil, private and state over the last few decades where non-profit,
non-governmental (NGO) service providers have employed market-based methods to
transform charity and thereby redefining the worlds majority as the working poor
(International Labor Organization (ILO)), and as business partners, producers and
innovators, instead of development aid beneficiaries. The development industry has
understood that the poor are not homogenous, and workers in the informal economy,
constituting between 40 and 75 percent of the population in West Africa, need to be
differentiated on the basis of income, skill, access, vulnerability status, as well as in
terms of their capacity for enterprising social innovations and driving economic
development.
In the emerging literature on social entrepreneurship, a central focus is on the
capability of an individual to combine a passion for a social mission with business-like
discipline, innovation and determination (Dees, 2001). Individuals are social
entrepreneurs, according to Dees, Elkington and Hartigan (2008), because they have
decided to:
.
take risks without being limited by resources;
.
engage in a process of continued innovation, adaptation and learning; and
.
be acutely aware of the impact on the constituencies involved or targeted, and the
outcomes created.
Over the last decade, and coinciding with the rise in popularity of corporate social
responsibility as a compromise between the private sectors desire to harness global
market forces and the social sectors desire to find new strategies to deliver more

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effective social services to a growing global population while generating social


dividends from business, the non-profit[3] and international development cooperation
sectors caught on to what the business sector had discovered long before: that there is
nothing as powerful as a new idea in the hands of a first-class entrepreneur. What is
not as easily discussed, debated or written about however is how the two-thirds of the
worlds population who are poor and working in the informal economy, the intended
beneficiaries of development assistance, might also fit into this esteemed category,
either as first-class entrepreneurs or first-class social entrepreneurs.
There are theoretically a few critical assumptions in the literature that cause this, as
we will argue, unjustified omission:
(1) The first assumption is that entrepreneurship is an individual initiative arising
from within a functioning free-market economy where there are strong public
institutions and a competitive private sector.
(2) The second assumption is that social entrepreneurs must have something
quantifiable to bargain with or risk, namely personal assets or the assets of a
firm.
(3) The third assumption is that social entrepreneurs must be able to develop
scalable social innovations in order to have a visible social impact, while also
maintaining a certain degree of profitability.
We will look at these three assumptions as they are presented in the literature and
respond to them based on what we know and what we do not know about social
entrepreneurship in the context of the informal economy in Senegal. To do this, a
discussion defining our theoretical framework is needed.
Entrepreneur and social entrepreneur: theoretical definitions
The term entrepreneur originated in French economics as early as the seventeenth and
eighteenth centuries and is explained in the nineteenth century by French economist
Jean Baptiste Say as the venturesome individuals who stimulated economic progress
by finding new and better ways of doing things[4]. Entrepreneurs shifted resources
from lower to higher yields. In sum, entrepreneurs create value. The economist
Schumpeter (1942) further refined the concept in the twentieth century describing
entrepreneurs as innovators who drive the creative-destructive process of capitalism.
Schumpeters entrepreneurs reform and revolutionize patterns of production. They are
the change agents in the economy by serving new markets or creating new ways of doing
things. For Schumpeter, free enterprise and social enterprise go together[4].
More recently, Peter Drucker in his writing on business and management theories of
entrepreneurship, in providing a response to the Say-Schumpeter definitions and
models, does not require entrepreneurs to cause change but instead views them as
exploiting the opportunities that change creates. Thus, the notion of opportunity
has become central to many current definitions and theories on entrepreneurship. For
Drucker, not every small business is entrepreneurial and not all entrepreneurship must
have a profit motive.
In relation to Say, Schumpeter and Drucker, Dees (2001) builds on previous theory
to build his own line of thinking around the links between social entrepreneurship and
social innovation to contribute an important clarification of social entrepreneurship
which he defines as a species in the genus entrepreneur. Dees is concerned with

refocusing the definition of social entrepreneurship on social impact as opposed to


income generation:

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Earned income is only a means to a social end, and it is not always the best means. It can even
be detrimental taking valuable talent and energy away from activities more central to
delivering on the organizations social mission.

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He makes a point that development industry critics often make of NGOs working to
alleviate poverty in Africa: that social sector organizations seem to be more concerned
with attracting funds from the newly enlarged basket of private resources and
sustaining their organizations instead of assessing, sustaining or improving their
social impact. For Dees the solution is to extend the ideas of Say, Schumpeter, Drucker
by applying them as easily to the social sector as the business sector. He makes the
claim that:
[. . .] social sector leaders can blend business methods with social objectives; what makes
them entrepreneurial is not the source of income, but their innovations and their impact.
Social entrepreneurship must be about creating social value, not simply about making
money.

Dees advances a commonly held belief among economists that the theoretical
foundations for social entrepreneurship lie in theories of entrepreneurship dating back
to Say, Schumpeter and Drucker which are describing a mind-set and a kind of
behavior that can be manifest anywhere.
When we try to apply the Schumpeter-Say definition to the West African context,
we are faced with a common dilemma whereby the African experience seems
ambiguous, changeable, and negotiable (Guyer), especially when one tries to fit it into
Western theories on entrepreneurship. For example, when does a Baol Baol business
activity become an individual initiative if the political identity, collateral and actions
are embedded in a social network versus in formal institutions? When does a street
vendor in Dakar move from the category of survival street merchant to the category of
social entrepreneur in the informal economy? Broadly speaking, at what point can the
activities of micro-entrepreneurs in the informal economy be considered to be creating
real social value?
Developing country perspective on entrepreneurship and social
entrepreneurship
From the developing world perspective, a pivotal evolution in the notion of social
business and social entrepreneurship has come from empirical evidence as best
illustrated by the accounts of Bangladeshi economist and Nobel Prize winner Yunus
(2007) in Creating a World Without Poverty:
Many of the problems in the world remain unresolved because we continue to interpret
capitalism too narrowly. In this narrow interpretation we create a one-dimensional human
being to play the role of entrepreneur. We insulate him from other dimensions of life, such as
religious, emotional, political dimensions. He is dedicated to one mission in his business life to
maximize profit. He is supported by masses of one-dimensional human beings who back him
up with their investment money to achieve the same mission [. . .] I think things are going
wrong not because of market failure. It is much deeper than that. Let us be brave and admit
that it is because of conceptualisation failure. More specifically, it is the failure to capture
the essence of a human being in our theory.

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Bill Draytons organization, Ashoka: Innovators for the Public, along with Yunus
Grameen Bank Group, have responded to an observable trend, which is also felt
strongly in West Africa, to link the growing diversity in philanthropic financial
services for the poor to new employment opportunities, not just to credit and savings.
Like Dees, the emphasis on social entrepreneurship for Drayton and Yunus should be
placed more on the systems that entrepreneurs change, namely, technology, social
networks, and consumer preferences.
Yunus view of the poor, and of all people, as potential social entrepreneurs, social
innovators, and change agents marks a critical point of divergence where the
disarticulation between the theory of social entrepreneurship and social enterprise from
the West, and praxis is revealed. The social and economic returns of social
entrepreneurship in the developing world context, when it is the poor who are harnessing
market forces in the service of the poor, requires a deeper, more critical analysis. How do
the theoretical frameworks we use to understand social entrepreneurship in developed
countries help or hinder our understanding of entrepreneurship and its relation to markets
and society, or the social economy, in poor countries?
Yunus states that social entrepreneurship is not a question of assets as collateral,
firm size or scale but a question of social capital, trust, cooperation, ingenuity, and
collective need. This view has been at the forefront of the political economy debates in
development literature on, for example, informal credit markets (Bardhan), social
exclusion (Chen), and marginality (Guyer), and is more in line with actual conditions in
developing countries than the Schumpeter-Say definition allows.
Informality
In an effort to understand the origins, forms, and impacts of social entrepreneurship
as a species of the genus entrepreneurship from within a developing country
context, we have to take a closer look at the value of work and the notion of informality.
The term informal economy according to the ILO[5], refers to:
[. . .] all economic activities by workers and economic units that are in law or in practice
not covered or insufficiently covered by formal arrangements. Their activities are not
included in the law, which means that they are operating outside the formal reach of the law;
or they are not covered in practice, which means that although they are operating within
the formal reach of the law, the law is not applied or not enforced; or the law discourages
compliance because it is inappropriate, burdensome, or imposes excessive costs.

Thus, informal work is work outside the modern, formal sector including activities
which traditionally fall into both the private sector and the social economy[6].
In contrast to the parallel (Lindauer, 1989) economy, which refers to the movement of
legal goods through illegal or unofficial channels, and the shadow or underground
economy (Schneider, 2006), which can refer to criminal activities through official and
unofficial channels, the term informal economy in accordance with the ILO definition
adopted in 2003 by the 17th International Conference of Labor Statisticians states that
informal employment and the informal economy are comprised of informal small
economic units (informal sector) and informal jobs in formal economic units. Informal
employment is thus comprised of these two components, small economic units on the one
hand, which are examples of dynamic private initiative as well as survival strategies, and
informal, precarious, unprotected jobs on the other hand, which often result from
strategies of formal enterprises to cut labor costs in the face of international competition[7].

In a recent report by the Organization for Economic Co-operation and Development


(OECD), Is informal normal?, the authors attempt to clarify some common
perceptions of informality, using empirical evidence from developed, emerging and
developing countries, the value of work in economic growth and poverty reduction:
Informality is above all an expression of the lack of trust in public institutions, the negative
perception of the role of the state and the limited understanding of the benefits derived from
social security. It is basically a sign of a broken social contract.

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The report addresses one of the critical problems with false perceptions of informality
rooted in human behavior. Long-term sustainable change requires a transformation of
peoples attitudes and beliefs.
In a recent interview with Martha Chen, an international expert on the informal
economy with Women in Informal Employment: Globalising and Organising
(WIEGO)[8], she noted:
[. . .] its not necessarily true to say that if you develop and grow an economy you create jobs,
and it took a long time for the UN to realize that if you are going to talk about poverty, you
need to talk about employment.

Dr Chen narrows in on the root of informality when she states that national governments
have very little say in how people are paid, and that it is the private sector that can
influence the degree to which jobs are formalized, particularly in a globalised world in
which multinationals can have a greater say in who gets employed to produce their goods.
We need more corporate social responsibility and we require a mindset change in labor
registration, she said. So much of the world is operating without it[8].
The informal sector may also provide opportunities and a safety net in a way that
governments cannot. Informal work can help to free budding entrepreneurs from red
tape, Duncan Green, Head of Research for Oxfam, said:
It is often the paperwork and hassle rather than taxation that make people choose not to be in
the formal sector. The informal market is particularly important where there is no welfare
state to offer alternative sources of security and income. Weve seen in places like Colombia
that without the informal sector, people enter into criminal activities, such as the drugs
business ((The) Times Online, 2009).

The prevailing view of a large informal sector is that it can pose problems for
policymakers and the overall economic development of their country. As a recent
OECD Development Assistance Committee paper notes:
[. . .] while informal enterprises may provide a short-term solution to a households livelihood
needs, creating an economy with a higher proportion of formal enterprises and jobs is
important to long-term welfare creation, stability and poverty reduction.

A large informal sector does indeed deprive governments of needed tax revenues
which could be reinvested into infrastructure development and other national
development priorities; it could also influence the development of economic policy
objectives by skewing the reliability of (trade, income, and labour market) data, and
breed a culture of corruption in public administrations (including in customs) and
hinder further investments in local (formal) small and medium enterprises (SMEs),
which constitute the major part of the private sector in developing countries and are
key to their economic development and growth.

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The political economy of informality in West Africa


Historically, the West Africa region, encompassing the Sahel, the savanna, forest, and
coastal regions, exchanged primary products such as salt, dried fish, livestock, kola,
and gold as well as local manufactures, such as cotton cloth, iron tools, mortars, and
leather goods. With the advent of colonialism, the traditional West African trade
circuits which flourished during the era of trans-Saharan trade (Gregoire, 1997) were
replaced by the more profitable parallel activities created by contraband trade
provided between French and British colonies (Meager, 2003) and oriented towards the
Atlantic coast. Intra-African trade became dominated by export-crop smuggling. As a
result, differential currencies combined with competing colonial fiscal policies between
the French and British resulted in currency zones replacing ecological zones in
orienting trade circuits (Meager, 2003). Thus, trade flows became increasingly
detached from the economic base of the region, and access to foreign imports became
(and to some degree remain) the central regulating mechanism of intra-regional trade
(Table I).
West Africas independence movements throughout the 1960s saw its principal
actors retreat from the public sphere, as the new political leaders often adopted
attitudes of political protection which led to economic mismanagement, forms of
clientelism and corruption. As a result, the economy fed off of a lack of trust of
administrative authority, which can still be observed today. Informal economic
activities replaced the void caused by the inflexibility of labor laws which made basic
services untenable, and existing socio-cultural trade networks, including existing
cross-border trade, continue to flourish as a response to a weakened state. Informal
networks and systems have to some extent helped to correct the structural imbalances
in regional labor markets and continue to drive urban productivity. Nevertheless,
despite the strong social networks supporting informal market activity in the region,
only a tiny percentage of the informal working population enjoys any form of
guaranteed social protection, and growing informality denies the state of much-needed
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Table I.
Key characteristics of
West Africas informal
economy

11.

About 75 percent of urban households have informal workers


Majority of informal activity is not criminal but unrecorded
Informal economic activities contribute between 43 and 60 percent of regional gross domestic
product (GDP) (non-agriculture)
On average, informal workers have a low level of education, although this trend is changing
Consistently, high level of unemployment (high 23 percent) and underemployment (between 58
and 73 percent, urban regional average 67 percent) throughout the region
High level of insecure work conditions (no fixed workplace)
Since 1980, informality has been the principal motor of urban growth and youth employment
A new class of informal-to-formal entrepreneurs has emerged dictating the business
environment; no clear distinction can be made between formal/modern and informal
employment
Women are the growing majority at 40-60 percent of informal workers and earning less than
half than men
About 50-60 percent informal workers are under 30 years old; approx. 13 percent are urban
youth under 14 years old
Majority of informal economic activities can be categorized as street traders/vendors, seasonal
or temporary workers and home-based workers in services/repair, transportation, real estate/
construction, wholesale and retail commerce, artisans, import/export

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tax revenues to pay for infrastructure and critical public services. In addition,
globalization, and specifically the emergence of global commodity chains, has
deepened the divide between formal and informal, rural and urban West Africa.
Self-employment, informal labor markets and sub-contracting over union contracts
appear to be defining characteristics of recent global trends (Carr and Chen, 2001).
At the same time, West Africas formal, or modern, private sector has witnessed
enormous transformation over the last three decades, and played a critical role in
socio-economic development. It has evolved post-independence from an
under-represented, highly subsidized and often neglected sector dominated primarily
by monopolies of state-owned industries to today, where dynamic businesses which
include more micro- and women entrepreneurs, rural agri-businesses, joint ventures
and public-private partnerships, are accompanying governments in the progressive
shift towards creating competitive, open markets in the region. Despite basic
difficulties in scaling up, as investor confidence outside of traditional export sectors is
closely linked to the existence of a well-performing local and national private sector,
the formal private sector to some extent benefited from a surge in bi-lateral and
regional trade agreements, notably with India, China, the USA, and EU, which have
opened the regional playing field for private sector competition, providing new
opportunities, and challenges, for West African firms.
On the other hand, increasing urbanization and rapid population growth has
exploded the informal economy, creating a strong concentration of emerging
secondary economic hubs which, directly linked to rural areas by the increase in flows
of workers, goods and services, supply the rising urban and migrant demand. Far from
being a marginal phenomenon, the informal economy today performs the majority of
non-agricultural economic activity for the West African region, claiming 43 percent of
regional GDP (non-agriculture). It provides social safety nets in local economies faced
by high unemployment, rapid privatization and inadequate public and financial
institutions, while acting as a socio-economic buffer for new migrant groups in the face
of rising income inequalities and persistent gender inequality.
According to standard economic theory, economic and social competition will
temporarily lead to a rise in imbalances within communities, societies and among
regions. The unavoidable social differentiation which will ensue from the increasingly
competitive organization of society will be a source of potential conflict, and the
institutions necessary to resolve issues and underpin the rule of law will be needed,
recalling that progress in development is inherently conflicted but need not be violent.
Entrepreneurs, both urban and rural, will defend their economic interests and
gradually become more prominent in the decentralized management of villages and
small towns. In larger towns, a proper working class will be made up of
entrepreneurs who have come from the informal sector. The current dichotomy
between modern and formal on the one hand and traditional and informal on the other,
like the divides between rural and urban, business, and social sector, is being quickly
replaced by entrepreneurial activities linking the informal and formal sector.
And yet, West Africas informal economy[9] remains dynamic, poor, and poorly
understood. Despite growing international and local efforts to analyze informality with
micro-level statistics, informal activities remain inadequately measured or unrecorded
in National Accounts. Informality today includes activities in an ever diverse market
system in rapid expansion (in terms of investment, population, employment, and

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innovation) which neither the formal private sector nor the state, in terms of policies,
has really succeeded in tapping.
Critical assumption no. 1 institutions, networks, groups in the informal
economy
What are the institutional assumptions in modern economic theory that do not easily
apply to the West African context when we discuss social entrepreneurs as innovators
and change agents? One of the critical assumptions among economists is that
entrepreneurship is an individual initiative arising from within a functioning
free-market economy where there are strong public institutions and a competitive
private sector. What about entrepreneurs outside of these institutional frameworks,
who work in the informal economy and thus operate outside the conventional notions
of the productive workforce?
For all the good work that nonprofits, NGOs and foundations do, they cannot be expected to
solve the worlds social ills. The very nature of these organizations as defined by society
makes that virtually impossible (Yunus, 2007).
Opportunity structures and allocation of opportunities have been shaped by historical
circumstances. Groups can only work with the resources made available to them by their
environments and the structure of opportunities is constantly changing in modern industrial
societies as in developing country marketplaces (Storper, 2008).

Institutions are considered informal when, after they have been established as
institutions where rules evolve spontaneously and unintentionally over time through
human interaction, their conventions, routines and customs, codes of conduct and
behavioral norms remain unwritten (Skoog, 2005). Informal institutions can be
associated with organizations of state, market or civil society. They represent evolved
practices with stable rules of behavior that are outside the formal system and where
the unwritten rules and norms are self-perpetuated because they are self-enforced.
Informal institutions can fill a critical gap created by non-functioning or
non-existent formal institutions, and in this case are considered substitutive informal
institutions such as womens microfinance groups or village cooperatives. Some
informal institutions are actually competing informal institutions in terms of size,
impact and influence, such as unenforced Dowry law, Sharia law or the selection of
political groups for representation.
Many inside and outside the Africa region witness the importance of informal
institutions in West Africa as a mobilizing force for civil society development, as a
creator of jobs and an incubator of SMEs. Womens groupements, trade associations,
unions, cooperatives, and especially social networks like Muslim brotherhoods provide
a critical social safety net that absorbs the shocks of economic expansion and
contraction. They do this by taking in excess labour, spurring local level innovation,
and providing access to additional incomes for households, and especially for women
in terms of microfinance, micro-insurance and other forms of social protection.
In general, contemporary political economics holds that groups have strongly negative
effects on economic efficiency and growth, because groups bind individuals into situations
where they can no longer realize their preferences, exit freely, and find effective
representation for their interests. In developing a theoretical framework for understanding
the institutional relationship that exists in the West African context between the market,

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and in particular the informal market, and society, we must first explore this relationship
between the individual, as social entrepreneur, and their groups, networks and
communities. The question in its simplest form is how do individuals behave as social
entrepreneurs in the informal economy in West Africa if their economic activities are
embedded, and therefore dependent, on their social networks, groups and communities?
In the sociological literature, groups and communities are said to precede the
individual in time and space. In the West African context, in particular, the relationship
between individual life and group life is less distinct and sometimes altogether
inextricable (Ake, 1981, 2000). This often implies that the capacity of communities[10]
in overcoming problems of moral hazard and contract enforcement should be as great
as an individuals capacity, and one could argue that same should apply to social
entrepreneurship. In this case, the actions of an entrepreneur would, therefore, be
reinforced and to some extent controlled by the community or group. The question
arises, especially in context of this paper, whether or not belonging to a social network
or community or group helps or hinders the development of social entrepreneurship?
Storper lays out the tension between individual and groups when he states:
[. . .] there is wide agreement that social context and preferences are intimately related. Group
membership can be said to clarify things for their individual members, and not merely to
inculcate group values in them. What we lack however is a good theory about precisely when
group membership obscures self-welfare goals and when it clarifies them.

As a result, any eventual contribution to economic efficiency in helping individuals


discover their preferences must be weighed against the costs of group membership in
making choices, beyond principle-agent problems.
The assumption in modern economic theory is that group membership, identifying first
with a community before identifying oneself as an individual, stifles action by imposing
high transaction costs on the realization of goals, or by stifling the pursuit of preferences
through the principle-agent dynamics. This is true especially at high levels of social
aggregation. However, when we consider group membership in smaller groups, for
example among groups in the informal economy, there is less probability that they describe
real welfare losses and more that there are real gains. If, as Amartya Sen claims, choice
means total independence from social constraint, then groups have no role in it; however, if
it means being able to express things that cannot be achieved individually, then group
membership will have an intrinsic value for individuals and for the social economy.
Sociologists like Granovetter (1985) and Coleman (1990) advanced the concepts
of embeddedness and social capital to emphasize the potentially beneficial effects of
groups and networks on economic development. The prevailing view among
sociologists, geographers and, to a much lesser extent, among economists, is that the
development of social and informal institutions improves the provision of public goods
(Coleman, 1990; North, 1990) and market organization (Granovetter, 1985) through the
embedding of firms in efficiency-enhancing networks of relationships (Grabher, 1993).
Groups and communities are said to have such beneficial effects by generating trust
(Fukuyama, 1999; Putnam, 1994; Bowles and Gintis, 1986), reducing transaction costs
between economic agents (Storper, 1997), limiting moral hazards or the risk of
opportunistic behavior by raising the costs or lowering the benefits for the group and
free riding (Streeck and Matzner, 1991/1992; Putnam, 1994), mitigating asymmetries in
information (Granovetter, 1985), and enabling the matching of individual to aggregate
interests. Thus, informal institutions, groups and networks are said to provide an

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institutional exoskeleton for behavior that can be conducive, not only to development
(Streeck and Matzner, 1991/1992), but to entrepreneurship and social innovation
(Dees, 2001).
In his seminal work The Great Transformation, Polanyi (1944/1957/2001) points out
the defects in the myth of a self-regulating economy; or as Yunus states, our failure to
capture the essence of a human being in our theory. Polanyis work on embeddedness
remains potent because he discusses the fundamental realities of the political economy,
in that the economy and society, like markets, institutions, and communities, have a
causal relationship. Economic systems will have a direct effect on how people relate to
one another, and subsequently on their degree and use of social capital. Although
Polanyi did not use the same vocabulary we use today, his theory on the structural
constraints of market institutions, and by extension the impact of institutions on
entrepreneurship, remains starkly poignant today. His claim is that market societies
are constituted by two opposing movements the laissez faire movement to expand
the scope of the market, and the protective countermovement that emerges to resist the
disembedding of the economy from society.
The theoretical arguments for collective action (Polanyi, 1944/1957/2001; Olson,
1996; Ostrom, 1990; Cook et al., 2005) on the role of networks, community groups, and
institutions would place the conditions for social entrepreneurship, such as trust,
cooperation, risk-taking, and innovation, within the framework of the relationship
between individuals, the state and market institutions, as opposed to within theories of
the firm. However, as Ostrom (1990) points out:
[. . .] what one can observe in the world [. . .] is neither the state nor the market is uniformly
successful in enabling individuals to sustain long-term, productive use of natural resource
systems.

Further, she continues, communities of individuals have relied on institutions


resembling neither the state nor the market to govern some resource systems with
reasonable degrees of success over long periods of time.
This brings us to a second critical assumption about social entrepreneurship, that
social entrepreneurs have an individual capability plus something quantifiable to bargain
with, namely personal assets or the assets of the firm. Here, we revisit Dees definition of
social entrepreneurship, where the capability of an individual to combine a passion for a
social mission with the business-like discipline, innovation and determination of, for
example, the high-tech pioneers of Silicon Valley, as it relates to trust and reciprocity.
Critical assumption no. 2 capability in relation to trust and reciprocity
Over the last decade Nobel Prize winner Amartya Sen, the founder of the United
Nations Human Development Index, developed his capability approach (CA). This
theory has emerged as the leading alternative to standard economic frameworks for
thinking about poverty, inequality and human development generally. For Sen,
poverty is understood as capability-deprivation. His approach emphasizes functional
capabilities called substantive freedoms such as the ability to grow old, engage in
economic transactions, or participate in political activities. These are fundamental to
any discussion of work in the informal economy, and are discussed in terms of
freedoms people have personal reasons to value. For example, instead of utility, there is
happiness, desire-fulfillment, and choice. Instead of income, commodities, and assets,

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access to resources. Sen places the emphasis not on how human beings actually
function but on their having the capability and the practical choice to function in
important ways. He recognizes these freedoms and capabilities could be deprived by
ignorance, government oppression, lack of financial resources, or false consciousness.
This approach to human well-being emphasizes the importance of freedom of
choice, individual heterogeneity and the multi-dimensional nature of welfare. In
significant respects, the approach is consistent with the handling of choice within
conventional labor economics although its broad conceptual foundations acknowledge
the existence of claims, like rights, which normatively dominate utility-based claims
(Sen, 1999).
One can easily observe in the West African context the reciprocity between
entrepreneurs and their community groups and social networks. The emergence of
social networks, such as the Mourid brotherhood, an Islamic community and social
network in Senegal, may generate a certain infrastructure and provide resources for
entrepreneurs and businesses even before a sense of community develops. Social
networks like Islamic brotherhoods, as social constructions, are inherently fluid. The
strength of identification with the network is through the label of Mouridism with
little importance placed on the salience of the label. As Webers theory in The
Protestant Ethic and the Spirit of Capitalism explains, the social and religious structure
determines the context for work and from work any initiative towards
entrepreneurship and social entrepreneurship. What we know from existing
literature on the Mourid brotherhood (Cruise OBrien, 1998), as is evidenced by their
City of Touba and by the strength of the Mourid Diaspora, is that development and
economic growth among the Mourids is motivated by doctrine, by inference and by
devotion but also by trust and cooperation among members in the network.
What we do not know, however, is to what extent the Mourid brotherhoods
religious doctrine and their economic principles of work create the conditions that
cultivate the entrepreneurial spirit among the Mourids, known in the Wolof
language as Baol Baol. The Baol Baol methods of business carry over to many
Senegalese economic exchanges including exchanges between Mourids and
non-Mourids.
Drayton suggests that one of the key elements in social entrepreneurship is ethical
fiber. This criterion requires special reflection by asking, Is this a good person you
instinctively know you can trust? Would you want to have him/her take care of your
money or child? This test is important for several reasons:
First, significant social change usually requires those affected to make several leaps of faith
which they would not do if they intuitively do not trust the champion of the proposed change.
Second, there are already too many untrustworthy public leaders in the world. No one needs
more. Finally, it is important for the profession to build a community where its leading
practitioners can come together and share openly, which is only possible in an atmosphere of
trust (Drayton, 2002).

From Adam Smiths theory where self-interested, rational actors in The Wealth of
Nations search for at least three types of satisfaction: material, social and spiritual, to
Karl Polanyis critique of the market as a self regulating mechanism and claim that
laissez faire was planned, the embedded social values in the choices people make
regarding production and exchange of goods will be generated by a combination of
self-interest and reciprocity.

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Critical assumption no. 3 social entrepreneurs in the informal economy


as innovators and change agents for the BOP
The third assumption is that social entrepreneurs must be able to develop scalable
social innovations in order to have a visible social impact, while also maintaining a
certain degree of profitability. Author Bornstein (2004) observed that with the
exception of Max Webers treatment of the charismatic leader, theories of change
concentrate far more on how ideas move people than how people move ideas. The
concept of social entrepreneurship stresses the latter.
Moving beyond neo-liberal notions of competitive markets and the rational utility
maximizing individual, the conception of human beings as entrepreneurs in informal
economies that establish exchange value that is socially embedded brings us to the
notion of Prahalads (2006) BOP[11]. As I have argued in this paper, informality as we
know is not just a survival economy, it is also a power force for social change as:
.
A marketplace for social innovation.
.
A motor for efficient and productive economic development, challenging
artificial barriers between formal and informal, business, and the social sector.
A broader look at West Africas informal economy reveals a majority population who
thrive with limited resources at the Bottom of the pyramid. Prahalad sees the poor as
potential investors, innovators, entrepreneurs, and most importantly as consumers. Their
growth in numbers underscores the importance of tapping into this large consumer base to
achieve sustainable poverty reduction. In the same way that no sub-system can expand
beyond the capacity of the total system of which it is a part, the BOP model suggest we
look at developing country economies (and developed economies) as ecosystems. Informal
workers will respond to market demands with new products and new economic activities
in order to meet the expressed needs of the population. This approach, similar to Sens CA
and to Polanyis view of the embeddedness of the market in society, holds that poverty
reduction is only achievable with; first, the recognition that being poor does not eliminate
the need for commerce or engagement in market processes. Thus, providing choice
(in consumption) is a critical step out of poverty.
As evidenced by its rapid population growth and expanding informal economy,
virtually all poor households trade cash or labour to meet much of their basic needs.
The BOP approach thus focuses not on necessarily formalizing the informal, but on
supporting local entrepreneurships, valorizing local knowledge and restoring the value
of work with the right legal, regulatory, and financial frameworks for the poor to enter
the global marketplace as consumers, where they help set prices, and as producers,
where they have incentives to invest in and develop social innovations.
Innovations from informal entrepreneurs can fill an important vacuum in the regions
private sector development as they constitute the majority of workers who better
understand the consumer needs of the poorest. Although not all micro-enterprises can be
spring boards to successful formal businesses, which is widely recognized, creating
incentives, and social protection for informal workers can create a more dynamic and
transparent informal marketplace.
Addressing the unmet needs of what is considered, the Bottom of the pyramid in
West Africa, or the approximately 250 million people living on less than $1 a day, is
about raising welfare, productivity, and income to enabling households to find their
own route out of poverty. Engaging them in the frontier between informal and formal

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economic arrangements then becomes a critical part of any wealth-generating and


inclusive development strategy. Eliminating informal economy penalties and formal
economy barriers will increase effective income for the majority of informal social
entrepreneurs. Moreover, to the extent that unmet needs, informality traps, and other
penalties arise from inefficient or monopolistic markets or lack of attention and
investment, addressing these barriers may also create significant market opportunities
for research and development in innovations for social service delivery.
Yet when applied to the Senegalese informal economy, the BOP model fits
somewhere in the middle of a spectrum between self-interest and reciprocity. Although
most of the BOP literature focuses on the empowering effects of the enlightened
self-interest of companies, preliminary evidence shows us the importance of reciprocity
(and therefore trust) in the informal economy in the Senegalese context as much, if not
more the motor of entrepreneurial social value creation and innovation.
Empirical evidence on social enterprise and social entrepreneurship in
Senegal
A brief historical analysis of Senegalese culture and socio-political environment is
important to fully appreciate how and what is entrepreneurship in Senegal today.
Understanding the culture and being able to transform, the environment are two of
the essential elements to entrepreneurialism in this context. As such, we must take
a sociological and historical approach to understanding the economic landscape
in the informal economy as it relates business creation in Senegal, both pre- and
post-independence.
Guyers (2004) critical work on Atlantic Africas economic history and cultural
relationship with money points to the fact that in Africa, scholarship has been
anchored by three powerful analytical traditions that, in the end, have served to block
key realities from view. The first of these is the:
[. . .] monetary reductionism of practical economics that fails to capture neither the relevant
variables nor numerical practice in West African exchange as the value of conventionalized
variables is on a numerical scale from zero to infinity.

The second is the philosophical commitment of economic thinking to what Mirkowski


(1970/2000) called conservation principles in which a variable is held constant so
that the variability of others can be gauged (i.e. the material, labor, that fixed the value
of commodities, or the assumption of the constancy of utility), when in West Africa
nothing has been consistently constant; everything is referential. The imperative to
surpass conservation principles derives from the experience of turbulence. Guyers
(2004, p. 171) third point is that the study of economic life in Africa certainly needs
more language-based study, more critical examination of philosophical concepts in
practice.
Historians like Boubacar Barry and Mamadou Diouf have demonstrated how the
role of the Djolof empire, the origin of the Wolof ethnicity which is the majority
ethnicity in Senegal, might partially explain the modern behavior of the Wolof
ethnicity as economic actors. They were historically a large and stratified kingdom and
so employed more traders (sellers and buyers) than risk-takers or what could be
considered innovators. This is true particularly in comparison to their cousins the
Fulaar and Solinke, who in the early part of the twentieth century up until today were

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forced to work the dry lands in the southern part of the country as peanut farms for
their livelihoods, and who were in turn pushed into the cities during the drought of the
1970s (and who have subsequently become the motor of the vibrant urban informal
economy in Dakar and elsewhere).
Colonial markets that bred clientelism and path dependency also reinforced the
caste system, privileging those in control of the main commodities: gold and slaves
(Kingdom of Mali) which was coming from the trans-Saharan trade route towards the
Atlantic coast to meet colonial demand.
Post-independence markets were subsidized by natural resource and extractive
industries controlled by their previous colonial masters. The new Senegalese state,
riddled with clientelism and corruption as a result of French indirect rule, lacked the
legitimacy needed to build a productive local economy. Despite the attempts by
Leopold Senghor and other African elites to develop a political identity, i.e. negritude,
from within the formation of a new state, there was a fundamental mistrust of the
post-independence governance in Senegal. Over the two decades post-independence,
the Senegalese economy collapsed along with other African economies during the
1970s oil crisis and the subsequent drought and currency devaluation. It was bailed out
by strong-handed structural adjustment programs which, in their pursuit for
disciplined economic policies to jump start the economy, required cuts in critical social
spending, i.e. sacrificing higher education for primary education, which was critical to
rebuilding the economy from the ground-up, and thus failed. As a result, the population
turned inward and saw the need to take control of their destiny using their own albeit
limited resources. The explosion of the informal economy filled the void and the
country saw programs like microfinance multiply.
The domination of the Wolof language, or what is often referred to as the Wolofisation
of Senegal, reinforces ethnic/caste roles and hierarchy. Thus, we see a propensity in
modern Senegalese urban culture of rewarding those who do not attract too much
attention but achieve moderate success, and a propensity to knock down those who have
achieved great success in business and in politics. The only ones immune to this treatment
are religious figures, like Serigne Saliou Mbacke who created the idea of KhelKom which
inspired people in the poor region of Kaolack to work the land as a noble mission for Allah,
and grow millet in the unused fields that surrounded the city.
Similar to Serigne Touba for whom the Mourid brotherhood is named, and the Baol
Baol or Modu Modu tradition, the countrys religious figures succeeded where the state
failed. They created a productive business environment for entrepreneurship by
rewarding even the smallest individual efforts, putting them in the context of the
contribution to Islam, and by extension to the Mouride brotherhood, which would
transform their efforts into wealth. Thus, the Baol Baol tradition became a cultural
behavior through (language) as well as a religious identity (Mouridism) that gave
immediate rewards for membership such as access to business networks and most
importantly, trust and cooperation that built entrepreneurs, and some very successful
social entrepreneurs.
Leaving aside the tensions in cultural theory between structure and agency, we look to
economic (welfare and labour economics) and social theory to explore the relationship
between individuals operating in informal marketplace whose identities are embedded
in community, groups and networks, and their subsequent relationship to formal (regional)
markets and the state. To what extent, for example, do the informal marketplace and

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its institutions actually structure entrepreneurial behavior to deliver social dividends?


Furthermore, if these market structures indeed determine action and reproduce themself,
how can social change be explained? What does the insecurity inherent in informality
get absorbed and what could this tell us about how capitalism[12], or growth through
knowledge, can better serve the working, entrepreneurial poor?
In a recent survey among city dwellers in the Senegalese capital of Dakar, researchers
found that the majority of male respondents believed that entrepreneurship[13] was not a
local attribute of Senegalese people but more related to their experience working with
Toubobs (non-Africans). The few women who answered the survey believed that
Senegalese entrepreneurs are like any other (Africans) when it comes to social
entrepreneurship: the fundamental approach is to build effective businesses that are
fulfilling a real need for customers (a defined group of people), that have a good staff of
workers, that operate transparently, and bring about social value as well as financial
results. Although the survey was part of this authors on-going research and so the final
data are not yet available, the preliminary observations raise a few important theoretical
questions. Namely, how do current theories and emerging literature on social entrepreneurs
as change makers apply? What does it mean to our operating definitions of social
entrepreneurship (Dees and Drayton) when the Senegalese themselves say they are not
naturally entrepreneurial? How do the apparent differences in opinion between men and
women social entrepreneurs get incorporated in our theoretical understanding of Sens CA,
Druckers consideration of opportunity, reciprocity, innovation, and especially the market
institutional environment when looking into activities in the informal economy?
What is becoming less and less clear in the debates and literature is whether the
praxis, social entrepreneurship, and social enterprise in Senegal, is a reflection of the
outcropping of an already existing social economy in West Africa, or what in French is
referred to as economie sociale et solidaire, or whether it is an attempt to transpose
neo-liberal entrepreneurial governance[14] explications, attributed by social and
organizational theorists (Courpasson and Reed, 2004), to explain the rise of
market-based approaches to development and governance. At the same time,
managers are starting to integrate social sustainability values within their businesses,
realizing that the scale of todays challenges means you cannot run a business
without taking these concerns into account. This leads to a fundamental question
about the theoretical frameworks and their applicability to developing country
entrepreneurialism. Is there, for example, an Anglo-Saxon/European dominance in how
we view (define, measure and understand) social entrepreneurship?
Recent online discussions have emerged questioning the dominance of Anglo-Saxon
models of social entrepreneurship and social enterprise. To what extent have
neo-liberal principles been absorbed in our understanding of; first, entrepreneurship;
and second, of the extent to which social enterprises can be drivers of development?
For example, the Skoll Foundations Social Edge blog recently asked, Are the Only
Innovations in Social Entrepreneurship Anglo-Saxon? The response was:
Though you might think so sitting at social change conferences like SoCap09, the Skoll World
Forum and others, the answer is: Absolutely not. Clearly, there are brilliant indigenous
solutions that are simply not being seen or resourced and we simply cannot afford to foster
or tolerate systems that overlook innovators from parts of the world with limited web access
and who may, because of their life experience or out of necessity, be able to imagine more
effective, less expensive possibilities.

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Conclusion
Fostering an appropriate valuation of entrepreneurship, particularly when used to
solve social problems in the poorest regions of the world, requires new thinking and
approaches by government and the private sector (as a blend or hybridization of
business and social organizations). The range of ideas is extremely broad and we know
that more strategic and creative approaches to promote informal entrepreneurial social
innovations must be developed (Davis, 2001, p. 9).
While many governments have been tempted to over-regulate the social sector,
laissez faire policies are also limited. Although using market-based approaches have
led to some important breakthroughs in various spheres, such as environmental
protection and conservation, the market is not a panacea for social development.
Governments still have an extremely important role to play in creating and ensuring
fair rules of the game.
A comparative analysis of social entrepreneurship in the informal economy in
West Africa broadens our perspective and in turn, broadens the discipline of economics
by adding a developing country perspective to economic theory, such as Schumpeters
theory[15] on capitalism and entrepreneurship. A capitalist economy is indeed quicker
to seize sudden opportunities and thus have higher productivity with innovations by
capable entrepreneurs supported by credible bankers and institutions, but this view is
limited. West African capitalist structures look different, but they are still deeply
embedded in the social economy and driven by informal workers who entreprendre
autrement, to borrow from Says original definition.
The question for policy-makers interested in harnessing market forces for social
change is; can West Africas informal economy working closely with the private sector,
that is, her present economic situation, support large concerted efforts by social
entrepreneurs to scale up and increase capital accumulation to create wealth and economic
growth? The answer in the past has been the established position that Africas cultural and
historical antecedents prove it is neither inherently entrepreneurial, nor willing to
modernize into a free-market model. These positions are taken without understanding
what makes African local economies dynamic. This paper highlighted some of the limits
of existing economic theory on social entrepreneurship by taking a look at the past and
present realities of the informal economy in West Africa, highlighting both its strengths
and weaknesses. Given the interest social entrepreneurship is recently generating, it is
timely for scholars and practitioners to ask the simplest questions based on a shared
theoretical framework and understanding. For example, Will the social values embedded
in informal work networks support capital accumulation, which is essential for economic
development, or is the work of the poor relegated to a situation where the value of their
work is determined not by the social value it creates locally but by the needs of global
consumers? Will the insecurity and lack of social protection or institutional incentives in
informal work, especially for women, prolong the discriminatory effects of unrecognized
skills, including social exclusion, when there are innovations just waiting to be tapped?
Notes
1. A sect of Islam, specific to Senegal, based on the teachings of Cheikh Amadou Bamba,
availabe at: www.majalis.org
2. Interview with Amartya Sen Conversations with History at UC Berkeley, available at: www.
youtube.com/watch?v 3muzELM1_uw&NR1

3. William Drayton is said to have coined the term social entrepreneur several decades ago.
He is widely credited with creating the worlds first organization to promote the profession of
social entrepreneurship, Ashoka: Innovators for the Public.

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4. Professor Raymond Horton, Director of the Social Enterprise Program, Columbia Business
School, available at: www2.gsb.columbia.edu/socialenterprise/message/MeaningSE.html
5. ILO Resolution concerning decent work and the informal economy, ILC 90, 2002.
6. An ambiguous term which elicits debate but is defined most often as a third sector
alongside the public and private sector whose goal is to respond to the social needs of the
collective. Complete definitions and context available in the European Charter of Principles
on the Social Economy of the Permanent European Conference (Cooperatives, Mutuelles,
Associations, Fondations) CEP-CMAF, available at: www.socialeconomy.eu.org/IMG/pdf/
2007_08_20_FR_charte-2.pdf

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7. Adapted from personal comments received from Mr Jacques Charmes, Director of Research,
IRD, Paris, France in 2007.
8. Martha Chen is a Lecturer in Public Policy at Harvard University and a Co-ordinator of
WIEGO.
9. The informal economy can also be defined as all unregistered economic activities, legal and
illegal, monetary and non-monetary, which contribute to the officially calculated or observed
Gross National Product (Feige, 1989; Schneider and Bajada, 2005; Lubell, 1991). Considered
an economy instead of a sector because it is not confined to one sector, it represents the
continuum between all unrecorded economic activities and their more formal ends.
10. The operationalization of society attracts more of a consensus than does community. Society is
generally operationalized using such indicators as the rule of law, property rights and other
market-shaping rules, the stability of constitutional, or regime rules, the type of legal system
and its everyday operational institutions, the nature of bureaucracy and its rules, and so on.
Community is more complicated than society to operationalize. On the one hand, there are
indicators that measure the degree of bridging and bonding, usually concentrating on the
density, extent, and depth of membership in civic, economic, social, and professional
associations. The objective is to capture group life. On the other hand, there are indicators of
division, such as ethnic, racial, or other forms of fragmentation, which are assumed to be the
flip side of bonds within those groups. In addition to these objective indicators, subjective
feelings of membership, affinity, bonding, and so forth are also measured. The literature on
social capital (Putnam, 1994; Woolcock, 2006) has attempted various combinations of these
types of indicators, as has an older sociological literature on community itself (Durlauf, 2001).
11. It should be noted that there is a sizeable discussion on the viability of the BOP model for
poor countries like Senegal. The model is criticized because: it does not necessarily include
those billions at the BOP in the production part of the market but considers them only as
consumers (thereby subverting poverty reduction as a goal by not focusing on the need for
employment); the BOP model appeals to western multi-national companies (MNCs) but fails
to address the question of required changes in company culture for those that wish to
address the BOP (e.g. best product vs lowest price strategies); and it focuses mostly on the
upper bottom and its methods are often not applicable to the lower majority because these
people simply have little purchasing power and MNCs operate in the formal economy and
therefore rely on the exchange rate currency economy.
12. Borrowing from Edmund Phelps: Capitalism is not the free market or laissez faire a
system of zero government plus the constable. Capitalist systems function less well without
state protection of investors, lenders and companies against monopoly, deception and fraud.
These systems may lack the requisite political support and cause social stresses without

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subsidies to stimulate inclusion of the less advantaged in societys formal business economy.
Last, a huge social insurance system, with resulting high taxes, low take-home pay and low
wealth, may not hurt capitalism (article excerpt from The Financial Times, 2009).
13. Definition taken from Borzaga and Defourny (2001, p. 11) Entrepreneurs are not necessarily
the owners of a company but they are responsible for introducing changes in the following
ways: introduction of a new product or a new quality of a product; the introduction of a new
production method; the opening of a new market; the acquisition of a new source of raw
materials, or; the reorganization of a sector of activity.
14. Whereby the state decentralizes its public services and institutional arrangements are
managed as would a firm, whereby an entrepreneur makes the most critical management
decisions of the firm.

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15. In fact, scholars now find that most growth in knowledge is not science-driven but driven by
market innovations.
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Corresponding author
C. Sara L. Minard can be contacted at: sara.minard@sciences-po.org

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