5 Sets of Challenges Native American Entrepreneurs Face

This is the second blog post in a series on Native American entrepreneurship: the background, the challenges, and the potential solutions. Review the first post, which examines the current state of entrepreneurship among Native Americans.

Entrepreneurship has the potential to contribute to economic growth within the Native American community. However, there are many hurdles facing potential Native American entrepreneurs. Some of these challenges are common to all entrepreneurs, while others are particular to the Native American community.

Plenty of Poverty, Lack of Education, and Job Experience

As mentioned in the first post in this series, Native Americans are nearly twice as likely to live in poverty and more likely to be unemployed compared to all Americans. This affects their ability to use their savings and assets to self-finance, to qualify for bank loans, and to undertake the risk of entrepreneurial ventures.

Due to the low rates of education and high rates of unemployment among Native Americans, many do not have the academic or work experience from which to build an entrepreneurial venture.

Isolated Geography

Reservations tend to be geographically isolated. Consequently, entrepreneurs are at a disadvantage since they have a greater potential distance from their markets, which makes it “more difficult and costly…to serve those markets, reducing the chance of successful development.” Lack of broad telephone and internet access[1] also proves isolating.

In 2011, “there was a 68% telephone penetration rate on Tribal lands nationwide; for broadband the penetration rate is less than 10%.” The lack of proximity, both geographically and electronically, makes it harder for Native American entrepreneurs to network, find mentors, and explore their consumer base.

Limited Networks and Mentors

Kauffman research shows that people who know entrepreneurs are more likely to become entrepreneurs. A survey of organizations providing services to Native American entrepreneurs found that “a general lack of education and experience about business is a significant challenge to prospective entrepreneurs.”

With the low entrepreneurship rate on reservations and among Native American people, there is less exposure to entrepreneurship and its best practices. Additionally, there are fewer entrepreneurial peers to learn from and fewer available mentors, key factors to entrepreneurial success.

Governmental Structure, Regulation, and Risk

Research shows that “small business owners are less likely to start or expand their business if they think the rules of the game might change at any moment.” Tribal governments can often prove inconsistent, not having a uniform regulatory process for a beginning entrepreneur.

Without an established history of entrepreneurial enterprise, and given tribal government varies greatly among reservations and tribes, potential entrepreneurs and investors can be discouraged from participation. Potential entrepreneurs do not have clarity about what is expected of them. Investors, who cannot predict the regulatory environment in which they are investing, can find reservations to be a risky investment.

The consequences of a failed business are more significant on reservations than elsewhere. With the limited assets on a reservation, a failed business can have a large, negative impact.

As researchers have highlighted, big cities can better handle the effects of politicized contracts and burned investors. Native American tribes cannot bear the burden as easily.” While “Chicago can afford a few politicized contracts and burned investors…[Native American] tribes cannot.”  

A failed business on a reservation has a much more substantial impact on employment levels, and an investor’s willingness to reinvest in businesses on the reservation, than a non-reservation business failure.

Discrimination and Oppression

To effect change, it is necessary to recognize that a change is needed, as well as a belief that things can be different. This is true of entrepreneurs, as they must have an idea of how they could impact change, as well as the belief that they can do it in order to attempt to start a business. 

For Native Americans, to be proactive in the development of an economic development plan, the community must believe that a change can occur. After years of oppression, Native Americans often feel discouraged. Unfortunately, centuries of discrimination and oppression has placed doubts in the minds of potential Native American entrepreneurs that they might benefit from a new venture.  

Native Americans also have doubts that they will be treated fairly in the process. As will be explored in a future post on financing challenges among Native American entrepreneurs, there is proven discrimination against minority entrepreneurs in lending practices.

Finally, financing continues to be cited as a major barrier facing potential entrepreneurs. In upcoming posts, I will examine the specific financing challenges facing Native American entrepreneurs, as well as outline potential policy solutions to assist Native American entrepreneurs.