Academic journal article Journal of Small Business Management

Fueling Asian Immigrants' Entrepreneurship: A Source of Capital

Academic journal article Journal of Small Business Management

Fueling Asian Immigrants' Entrepreneurship: A Source of Capital

Article excerpt

Agreat many samll entrepreneurial enterprises have been established in the United States by post-Vietnamese War Asian immigrants (Lewis 1989). For instance, Koreans dominate the retail liquor and wig trade in Los Angeles and own many small groceries nationwide. In one Boston neighborhood, a multiplicity of Vietnamese-owned shops line the streets; and one area of Arlington, Virginia has so many Vietnamese shops it is known as "Little Saigon." In New York's garment industry, the Chinese have become a major force, and Chinese restaurants operate throughout the nation. Cuisines of Vietnam and Thailand also have gained popularity, providing new entrepreneurial opportunities for those Southeast Asian nationalities.

The successful establishment of U.S. business enterprises by immigrants is the result of informal ethnic support networks. These networks provide entrepreneurs with three types of assistance: (1) business contacts, (2) advice and training, and (3) capital loaned through informal financial markets. These informal financial markets, labeled Rotating Saving and Credit Societies (RSCS) by Asian sociologists, are discuseed in this article. Detailed analysis of techniques, motivation, and procedures used to establish and maintain the societies are provided.

The article contains six sections. The following section identifies types of societies and participation procedures, while the third section discusses the financial structures of the societies' lending activities. Section four focuses on how interest rates and payment systems ar determined. Potential rates of return, the duration of the lending cycles, estimates of default rates and the amount of money involved are examined in the fifth section. And the sixth section summarizes this information and addresses the overall implications of this unique source of capital.

ROTATING SAVING

AND CREDIT SOCIETIES

The societies have been used in Asian countries as a mutual aid device that meets participants' saving and credit needs (Samson 1971; Nanamikul 1979; Presidential Committee on Agricultural Credit 1980; Bouman 1981; Chotigeat 1985). Thereore, it is only natural that the process also is used by Asian immigrants interested in establishing new businesses in the United States.

In each RSCS, selected participatns regularly contribute funds, which then are loaned to the members. In addition to saving and lending benefits, members have access to funds earlier than they would have if they had saved individually. The person who forms an RSCS will be referred to as the "organizer." This person is a well-respected member of the Asian community, with demonstrated business acumen. The main reason organizers establish the societies is to help others who need financial backing. However, the organizer's altruistic efforts also ensure that, in successful societies, they themselves will obtain interest-free loans upon demand. Organizers ultimately are responsible for collecting funds and monitoring the efforts and integrity of participants and must select trustworthy members. Participants, on the other hand, need to choose societies that are most likely to serve their own unique needs and interests.

Form the borrower's point of view, an RSCS may be the only viable way to engage in a desired business pursuit in a comparatively short period of time. The following list, although not exhaustive, presents some of the major reasons for attractiveness of the RSCS:

1. Many immigrants enter the host country with little or no English proficiency. This not only creates difficulties for employers seeking to determine whether they have the requisite employment skills, but also may limit their ability to fill out employment applications.

2. Many of these immigrants were shopkeepers or artisans in their own countries, and they would like to return to familiar business pursuits. However, while their work ethics and entrepreneurial skills are portable, their wealth is not. …

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