Comparative Overview of Nanoenterprises, Microenterprises, and Gig Economy Jobs:

Characteristics, Market Factors, Risk Resilience, and Potential Impact

Vince Rapisura

July 3, 2023

1. Introduction

Across the economic landscape of the developing world, one cannot overlook the proliferation of small scale enterprises that create a significant economic impact at the grassroots level. This intricate tapestry of economic activity, composed of nanoenterprises, microenterprises, and gig economy jobs, holds tremendous potential for poverty alleviation and socio-economic mobility. To unlock this potential, it is imperative to delve deeper into their unique characteristics, operational factors, resilience to risk, and potential for growth and impact.

Nanoenterprises, the smallest economic units, often operate on the margins of the formal economy, usually out of necessity rather than opportunity. They serve local communities, providing essential goods and services, often with limited resources and technological access. On the other end of the spectrum, microenterprises tend to be more established entities that, despite their small size, exhibit opportunity-driven entrepreneurship and contribute significantly to local and national economies.

Occupying an increasingly significant role in the 21st-century economy, gig jobs – driven by the burgeoning digital platform economy – provide flexible employment opportunities for millions. Like nanoenterprises, they primarily cater to the individuals’ survival and livelihood, but they leverage the power of technology to a much greater extent.

This paper provides a comparative overview of these three crucial components of the economic fabric. It unpacks their defining features, elaborates on their market and operational factors, gauges their risk resilience, and appraises their potential impact. By doing so, the study seeks to reveal opportunities for targeted policy interventions and entrepreneurial support programs to bolster these enterprises’ potential to contribute to sustainable development goals and socio-economic betterment.

In the global south, the sheer scale of nanoenterprises underscores their pivotal role in poverty reduction and economic development. As of 2022, an estimated 8.1 million nanoenterprises operate in the Philippines, and Nigeria boasts a staggering 32.8 million of such businesses (Olagboye, 2021). This highlights a potent yet often overlooked economic force in these developing nations.

Despite the mammoth scale of nanoenterprises, their nuanced understanding remains a challenge due to the prevalent practice of grouping them under the microenterprise umbrella. This conflation, common in many developing nations, masks the unique challenges and potential of nanoenterprises, potentially hindering effective policy and intervention design. Distinguishing nanoenterprises from their larger counterparts, microenterprises, and understanding their intersections with gig jobs offers an opportunity for a more targeted, effective approach to sustainable economic development.

In this light, focusing on the growth and resilience of nanoenterprises, coupled with a nuanced understanding of microenterprises and gig economy jobs, can unlock an inclusive economic paradigm. This approach acknowledges and leverages the power of the smallest economic actors to address poverty, arguably one of the most formidable challenges of our times.

This grand scale and potential of nanoenterprises is not unique to the Philippines or Nigeria but resonates across the developing world. Recognizing and understanding this magnitude can spur a more global momentum towards harnessing these enterprises’ potential and integrating them more effectively into sustainable economic development strategies.

This paper serves as a stepping-stone to understanding these enterprises’ multi-layered complexities in the context of the developing world. It sets the stage for an inclusive discourse that acknowledges the unique role and challenges of each sector and propels evidence-based decision-making towards a more inclusive and resilient economy.

2. Nanoenterprise definition

Chapter 2 delves into the unique landscape of nanoenterprises, dissecting their characteristics and operational dynamics across four crucial categories.

The first category, ‘Enterprise Characteristics’, encapsulates the foundational attributes that define a nanoenterprise. This includes asset size, enterprise registration, the poverty level of owners, motivation for entrepreneurship, education levels and record-keeping habits, and number of employees. These characteristics set the stage for understanding the breadth and depth of nanoenterprises, their constraints, and their operational capabilities.

The second category, ‘Market and Operational Factors’, explores the interaction of nanoenterprises with the market and the operational choices they make. These factors shape the nanoenterprise’s economic footprint and influence their growth trajectory. The access to finance, market participation, use of technology and information, ownership of equipment, capacity for value addition, and the structural dynamics of nanoenterprises fall under this category.

Next, ‘Risk and Resilience Factors’ delve into how nanoenterprises respond to challenges, market shifts, and disasters. Their resilience and flexibility can be pivotal in determining the survival and potential growth of nanoenterprises, especially in volatile economic climates common in the developing world.

Lastly, the ‘Potential and Impact’ category examines the broader socio-economic contribution of nanoenterprises and their growth potential. This section illustrates the role nanoenterprises play in their communities and the larger economy and identifies opportunities for enhancing their economic impact.

Also within Chapter 2, we embark on a crucial comparative analysis. Nanoenterprises, while often subsumed under the broader umbrella of microenterprises, present distinctive characteristics, challenges, and opportunities. The delineation between these two segments of enterprises is imperative to discern for tailoring more effective support interventions and policies.

The comparison also extends to gig economy jobs, an emergent form of livelihood that has grown exponentially in the recent decade. The gig economy, while seemingly disparate from nanoenterprises, offers interesting parallels and contrasts particularly in their resilience to market shifts, flexibility, and the nature of the jobs itself.

This three-way comparison serves not just to highlight the unique attributes of nanoenterprises, but also to illustrate the nuances and fluidity of the entrepreneurship landscape in the contemporary economic milieu. The analysis paves the way for a more refined perspective, challenging traditional classifications and urging for a more dynamic understanding of these small-scale economic activities.

Throughout this chapter, we aim to shed light on the interactions and differentiations between nanoenterprises, microenterprises, and gig economy jobs. Ultimately, our goal is to present a comprehensive picture of their respective roles and potential in fostering inclusive economic growth and poverty alleviation in developing countries.

1. Enterprise Characteristics

In the Philippines, asset size of nanoenterprises generally ranges from PhP3,000 to PhP150,000. This amount is close to nanoenterprises located in developing economies in Asia, Africa and Latin America. This relatively low capital base forms the backbone of a mostly unregistered economic segment largely populated by poor owners.

Driven by survival and livelihood needs, these nanoentrepreneurs typically possess lower educational levels and maintain minimal record keeping – a reflection of their constraints and the informality of their businesses. Furthermore, nanoenterprises usually have no employees, with the owner doing all the operational tasks. Unpaid family members usually help in their livelihood.

In contrast, microenterprises operate on a larger scale, with asset sizes ranging from more than PhP150,000 to PhP3 million. A majority of these businesses are registered, signaling a greater engagement with formal financial and regulatory systems. Microenterprise owners typically fall within the non-poor category and are driven by opportunity-seeking and growth motives rather than mere survival. Reflecting a step up from nanoenterprises, microenterprises are characterized by higher educational levels and better record keeping. Moreover, they provide employment opportunities, supporting between 1 to 9 employees.

Meanwhile, gig economy jobs represent a distinct segment, operating on varied asset sizes and typically functioning as unregistered entities. The poverty level of gig workers spans both poor and non-poor categories, suggesting a wide socioeconomic spectrum within this group. Motivated by survival and livelihood needs, gig workers’ educational level and record-keeping practices vary considerably, largely influenced by the nature of their jobs which are primarily digital or app-based. As the term implies, gig economy jobs predominantly engage the individual worker – the ‘self’ in self-employment, with each gig worker essentially constituting their own ‘enterprise’.

1. Market and operational factors

Nanoenterprises in the Philippine context take on various forms such as sari-sari stores, carinderias, ambulant vendors, and smallholder farmers and fisherfolks, among others. These enterprises heavily rely on loans, predominantly sourced informally, which makes them susceptible to predatory lending. Their participation in the market is relatively limited due to barriers such as high raw material costs, lack of market information, and use of outdated technology. Access to technology and information is generally very limited, primarily due to the unaffordability of gadgets, and the limited availability and high cost of internet access. As for equipment, nanoenterprises often use rudimentary and obsolete tools, or they lease more advanced equipment when resources permit. The potential for value addition in these businesses is extremely limited, due to their resource constraints. The structure of nanoenterprises is atomistic, with low capacity for coordination due to limited resources and high cognitive load on the entrepreneurs.

On the other hand, microenterprises – such as small retail stores, manufacturing businesses, and service providers – have relatively better access to finance, often availing of formal financial services, albeit still facing financial constraints. Their participation in the market is significantly improved compared to nanoenterprises, though they still encounter challenges such as lack of resources and information. Access to technology and information is moderate, with financial constraints acting as a limiting factor. Microenterprises typically possess better, owned equipment, which facilitates value addition through improvements and innovations. Their organizational structure allows for internal and external coordination, reflecting a degree of organizational maturity.

Gig economy jobs represent a new facet of employment and entrepreneurship. These include delivery riders, ride share drivers, and online freelancers such as graphic artists, video editors, content creators, and writers. Unlike the other two categories, gig workers often rely on personal finance and digital platforms for fundraising. The nature of their market participation varies significantly and can span local to global markets, depending on the gig platform they engage with. Access to technology and information is generally high, as their jobs are largely reliant on technology platforms. In terms of equipment, gig workers typically own their own eqipment, but the potential for value addition is often limited by platform constraints. Gig jobs usually involve individualistic structures with varying degrees of coordination.

1. Risk and resilience factors

A critical factor in assessing the potential and vulnerability of nanoenterprises, microenterprises, and gig economy jobs is their level of disaster resilience. In this respect, nanoenterprises exhibit a very low level of disaster resiliency, making them highly vulnerable to various shocks and stressors. Microenterprises and gig economy jobs have slightly higher disaster resiliency, but they still remain at the low end of the spectrum, underscoring the precariousness of their operations in the face of disruptive events.

Another vital aspect is flexibility – the ability to adapt, pivot, or shift in response to changes and opportunities. Nanoenterprises show a high level of flexibility due to their small size and simplicity of operations. They can shut down, reopen, or pivot easily as opportunities or challenges arise. In contrast, microenterprises display medium flexibility, often requiring substantial effort and resources to effect meaningful pivots. Gig economy jobs also exhibit high flexibility, primarily due to the inherent nature of gig work which allows workers to swiftly shift roles or platforms based on demand, personal preferences, or changes in the gig marketplace.

Finally, agility to market shifts is an important indicator of the capacity of these entities to respond quickly and effectively to changes in the market environment. In this regard, nanoenterprises demonstrate very low agility to market shifts, primarily due to their resource constraints, limited market information, and technology gaps. Microenterprises exhibit low agility due to similar reasons, although to a lesser degree given their better resources and market positioning. On the other hand, gig economy jobs display moderate to high agility to market shifts, depending largely on the nature of the gig. Those involved in digital gig work, for instance, can respond relatively quickly to market changes due to their reliance on technology platforms that provide real-time market information and trends.

1. Potential and impact

In terms of economic impact, nanoenterprises play a fundamental role in local communities by providing essential goods and services. Despite their small scale, they help foster local economic development and serve as a significant lifeline for local consumers, especially in remote or underserved areas. On the other hand, microenterprises have a more substantial impact that extends beyond the community level. They not only contribute to local economies but also to the national one, providing employment and enhancing local and regional supply chains. Similarly, gig economy jobs significantly contribute to the economy, especially within the service sector. They provide goods or services, often fulfilling niche demands or offering convenience through digital platforms.

The potential for growth varies across these categories. Nanoenterprises have relatively low growth potential due to their resource constraints and other barriers. However, with proper support and interventions, they could evolve into more sustainable businesses. Microenterprises, on the other hand, have moderate to high potential for growth, attributable to their better resources and market access. Likewise, gig economy jobs offer moderate to high growth potential, highly contingent on the individual’s skills, the demand for their services, and their business strategies.

Examining these categories from a gender and development perspective reveals that nanoenterprises are predominantly owned and run by women, often catering to the household’s needs. This characteristic emphasizes the role of these enterprises in empowering women economically and providing them with a source of income. On the contrary, both microenterprises and gig economy jobs present a more mixed picture with both men and women participating, reflecting the broader societal gender roles in the world of work and entrepreneurship.

3. Review of related literature

The rise of nano-enterprises as a driving force in the informal economy cannot be overlooked. These entities, defined as non-salaried individuals running their own businesses outside an employment contract framework, often emerge as alternatives for family income generation or due to the absence of formal employment opportunities (Lagunas, 2021). Frequently, nano-entrepreneurs do not opt for the informal economy out of choice; instead, they are pushed by a lack of opportunities in the formal sector and the absence of alternative means of subsistence.

This trend towards nanoenterprise entrepreneurship has attracted academic attention due to its significant influence on the informal sector. Various scholars (Acs, 2006; De la Garma, 2010) have devoted studies to this phenomenon. Entrepreneurship is globally perceived as a tool to combat poverty and unemployment (Sigalia and Carney, 2012; Rodríguez and Palavicini, 2013; Pazmiño, Merchán, and Jiménez, 2018). However, there’s an argument that ventures in the informal economy function more as a survival option than poverty alleviation (Walton and López, 2005; Delgado, Cruz, and Lince, 2019).

Nanoenterprises are typically characterized by individual ownership and operation. Valdés (2004) identifies a nanoentrepreneur as a self-employed worker who independently carries out commercial activities. Lejarriaga (2003), García and Fernández (2005), and Raydán (2010) all concur with this definition, adding that nano-enterprises are typically operated as sole proprietorships. This understanding is reinforced by the European Observatory for SMEs (2018) and the Ministry of Economy and Business of Spain (2002), which classify nano-entrepreneurs as individuals running their own businesses with complete autonomy.

Nonetheless, the classification and criteria for micro, small, and medium-sized enterprises have been criticized for their lack of uniformity globally (McKeown, 2017; Poole, 2018). As Olagboye (2021) proposes, it’s crucial to recognize nano-enterprises as an independent category, separate from micro-enterprises. This is particularly true in Sub-Saharan Africa, where many individual entrepreneurs exist in the informal economy.

The informal economy has long been a point of academic interest, attracting a plethora of terms such as the irregular economy, the subterranean economy, the underground economy, the black economy, the invisible economy, and the shadow economy (Ferman and Ferman, 1973; Gutmann, 1977; Dilnot and Morris, 1981; Simon and Witte, 1982; McCrohan and Smith, 1986; Frey and Schneider, 2000; Charmes, 2012). The consideration of the informal economy as independent of the formal one has led to debates over whether to regulate or eradicate it, especially considering its role as a safety net for the poorest populations (2014b; Williams and Martinez, 2014; Benjamin et al., 2014; Dibben, Wood and Williams, 2015).

Olagboye (2021) defines nano-enterprises as non-employing registered and unregistered businesses operated by a single individual or with the assistance of family members. The author argues that formalizing such enterprises can enhance their legitimacy, promoting them as legitimate contributors to economic growth rather than characterizing them as elements of an illegal economy. In essence, the institutionalization of nanoenterprises, or informal economy enterprises (IEEs), presents an opportunity to shift the paradigm of enterprise development, moving away from a ‘one size fits all’ approach to one that acknowledges the socio-economic peculiarities of different contexts (Olagboye, 2021).

4. Nanoenterprise development and sustainable development goals

Nanoenterprises (NEs), owing to their unique characteristics and inherent agility, can play a pivotal role in the attainment of several United Nations Sustainable Development Goals (SDGs). Through their economic activities, NEs significantly influence poverty reduction, gender equality, decent work and economic growth, industry innovation, reduced inequalities, responsible consumption and production, and the establishment of global partnerships.

SDG 1: No Poverty

As entities often formed out of necessity, NEs directly contribute to poverty reduction (SDG 1). By creating income opportunities, particularly for those with limited access to formal employment, they provide a means of subsistence and financial independence. Although NEs generally function more as a survival option than as a poverty eradication mechanism, with appropriate support and interventions, they can evolve into sustainable businesses, potentially lifting their proprietors out of poverty.

SDG 5: Gender Equality

NEs also play a crucial role in advancing gender equality (SDG 5). Women constitute a significant proportion of nanoentrepreneurs, utilizing their enterprises to provide for their households and attain financial autonomy. By fostering an environment where women can take the reins of their own businesses, NEs promote gender equality and empower women, two critical aspects of SDG 5.

SDG 8: Decent Work and Economic Growth

SDG 8 calls for the promotion of sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. Although NEs often operate in the informal economy and may not offer the same security as formal employment, they provide a source of income and employment, even for those who might otherwise remain unemployed. With the right institutional and policy support, NEs could potentially transition into the formal economy, promoting decent work and contributing to economic growth.

SDG 9: Industry, Innovation, and Infrastructure

Despite operating with limited resources, NEs often demonstrate a high degree of innovation, a key component of SDG 9. This innovation can manifest in various ways, from novel methods of product delivery to creative ways of accessing markets or minimizing costs. While NEs may not contribute significantly to infrastructure development directly, their resilience and growth can spur the need for improved infrastructure, thereby indirectly influencing this aspect of SDG 9.

SDG 10: Reduced Inequalities

NEs inherently foster inclusivity, offering business opportunities to individuals regardless of their social or economic status. In doing so, they play a part in reducing inequalities (SDG 10) by providing avenues for income generation for individuals across the socioeconomic spectrum.

SDG 12: Responsible Consumption and Production

Given their size and scale, NEs can contribute to SDG 12 by promoting responsible consumption and production. They often source materials locally, reducing transport emissions, and due to their small-scale operations, they may generate less waste than larger companies. NEs also have the potential to foster responsible consumption habits within local communities, given their proximity to their customer base.

SDG 17: Partnerships for the Goals

Finally, NEs have the potential to contribute to SDG 17 by establishing partnerships with various stakeholders, including other businesses, non-profit organizations, and local governments. These partnerships can foster knowledge sharing, collaboration, and the pooling of resources, enhancing the capacity of NEs to achieve sustainable growth and contribute to other SDGs.

In conclusion, the development and support of NEs could serve as a multi-faceted strategy for achieving several of the SDGs. Although challenges exist, with the right policy and institutional support, NEs have the potential to contribute significantly to sustainable development.

5. Further research

1. The Imperative of State-led Social Safety Nets for Nanoenterprises: Directions for Further Research

As we delve further into the role and potential of Nanoenterprises (NEs) in socioeconomic development, a pertinent area that warrants in-depth exploration is the provision of social safety nets by governments. More specifically, the need for state-backed health and disaster risk mitigation measures for these enterprises. While private sector participation is crucial, the foundation of these safety nets must be laid and sustained by the state for several reasons.

Ensuring Equal Access and Coverage

State-led safety nets ensure universal access and coverage, particularly for NEs operating in remote or marginalized areas, or those run by individuals who may otherwise be excluded from private sector services due to factors such as low income or lack of collateral. Governments, unlike private organizations, are obligated to provide services to all constituents, ensuring that the most vulnerable NEs are not left unprotected.

Promoting Business Continuity and Resilience

Social safety nets, particularly in health and disaster risk mitigation, promote business continuity and resilience in the face of adversities. NEs, given their small scale and limited resources, are often the most affected by health crises or natural disasters. By providing support in these areas, governments can ensure that NEs can recover from setbacks more effectively and continue to contribute to the economy.

Reducing Financial Vulnerability

NEs are often financially vulnerable, and unexpected costs such as healthcare expenses or disaster-related losses can push them further into poverty. State-provided safety nets can reduce this financial vulnerability, allowing nanoentrepreneurs to invest in their businesses rather than spending their resources on coping with such shocks.

Encouraging Formalization

The provision of social safety nets by the state can serve as an incentive for NEs to formalize. This could, in turn, open doors for them to access other forms of support such as training, funding, and business development services, ultimately contributing to their growth and sustainability.

Future research should focus on the design and implementation of these social safety nets. How can they be made most effective for NEs? How should they be delivered to ensure maximum reach? What role can technology play in their deployment? How can they be financed sustainably? Answering these and other questions will help in devising policies and strategies that will ensure NEs, despite their size, can contribute significantly to the economy while also guaranteeing the welfare of those who run them.

Moreover, there should be a keen interest in studying the partnership dynamics between the state and the private sector in providing these safety nets. Such research would shed light on the potential synergies and areas of conflict, enabling a smoother and more effective collaboration between these two important stakeholders in supporting NEs.

Further research in this area is necessary to not only provide a deeper understanding of the needs and challenges of NEs but also to inform policy decisions and guide the development of programs aimed at supporting these vital economic entities.

1. Private Sector Intervention for Coordination and Consolidation

Another compelling area of inquiry concerns the role the private sector can play in fostering coordination and consolidation to enhance market access for both suppliers and buyers. Particularly, there’s an opportunity for large corporations to form partnerships with Nanoenterprises (NEs), focusing on local sourcing of raw materials rather than importation. These partnerships could reduce the carbon footprint of businesses, stimulate local economies, and foster sustainable development.

Despite the potential capital-intensive nature of these partnerships in the short-term, the long-term benefits to the local economy and the environment are undeniable. State intervention in the form of subsidies and incentives could be essential in promoting such partnerships.

Technology Transfer and Capacity Building

Large corporations often possess advanced technologies and technical know-how that can significantly enhance the productivity and efficiency of NEs. Partnerships between large corporations and NEs can provide an avenue for technology transfer and capacity building, leading to improved output and competitiveness of NEs.

Supply Chain Integration

NEs can be integrated into the supply chains of larger corporations, providing a steady and reliable market for their products or services. This can improve their financial stability, encourage growth, and create employment opportunities.

Financial Support and Investment

Larger corporations could provide much-needed financial support and investment to NEs. This could be in the form of direct funding, or indirectly through facilitating access to credit and other financial services. Such financial support can be crucial for NEs to scale up their operations and enter new markets.

Infrastructure Development

Partnerships with large corporations could also lead to infrastructure development in areas where NEs operate. This can include physical infrastructure like roads and utilities, as well as digital infrastructure like internet connectivity, which can open up new opportunities for NEs.

Further research is needed to understand the most effective ways of fostering these partnerships, the potential barriers and how they can be overcome, and the impact of such partnerships on the economic sustainability of NEs. It would also be beneficial to explore the role of government in facilitating these partnerships, and the types of policies and incentives that could encourage more large corporations to partner with NEs.

Moreover, future studies could also focus on the role of social enterprises and NGOs in bridging the gap between NEs and large corporations, and how these organizations can collaborate with governments to promote inclusive and sustainable economic growth.

1. Case Study of SEDPI’s Ethical Financing and Social Safety Nets: Opportunities for Research

A third potential area for research is an in-depth case study of the Social Enterprise Development Partnerships, Inc. (SEDPI) model of microfinance services to Nanoenterprises (NEs). SEDPI’s pioneering work in the field of ethical financing and social safety nets for NEs has led to reduced default rates, and the successful expansion of its branch network and outreach.

SEDPI operates under six foundational principles: financial education, capital infusion rather than loans, profit and risk sharing, loss follows capital, non-profit insurance product, and partnership and cooperation. These principles provide a solid basis for a transformative approach to microfinance that is equitable, empowering, and sustainable.

Impact of Financial Education

An investigation could assess the impact of intensive savings mobilization, universal insurance coverage, provision of investment opportunities, and liberation from oppressive loan products on the economic resilience and sustainability of NEs.

Capital Infusion versus Traditional Loans

Research could compare and contrast the effectiveness of capital infusion versus traditional loans in promoting the growth and sustainability of NEs. It could also examine the benefits and challenges of SEDPI’s co-ownership business partnership model.

Profit and Risk Sharing

An evaluation could be made of the impact of SEDPI’s profit and risk sharing mechanism on the viability of NEs, and how this approach differs from conventional loan systems where debtors shoulder all the risks.

Non-Profit Insurance Product:

A study could analyze the success of SEDPI’s non-profit insurance product, and how this approach to insurance contrasts with profit-oriented models.

Partnership and Cooperation

An exploration could be undertaken of SEDPI’s partnerships with government agencies, civil society, and other like-minded organizations. This research could analyze how these partnerships have contributed to the organization’s success, and what lessons can be learned for other organizations aiming to serve NEs.

In sum, this case study would provide valuable insights into how social safety nets can strengthen the capacity of NEs to cope with emergencies and disasters. By examining how SEDPI’s model has led to lower default rates and enabled the organization to expand its services, this research could inform the development of strategies and policies aimed at promoting sustainable and inclusive economic growth.