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Somalis in Finland have entrepreneurship potential

A scarcity of capital, a limited customer base and gaps in entrepreneur skills hinder the growth of Somali-owned enterprises in Finland. Potential keys to future success include the exploitation of international Somali networks and the possibilities opened up if second-generation Somalis pool their resources with native Finns.

These results are based on a study in which we investigated the opinions of Somali entrepreneurs and other Finnish Somalis about entrepreneurship in Finland. (Joronen & Mohamed 2015.) In spring 2014, we interviewed a total of seven Somali entrepreneurs, six of whom lived in the Helsinki Metropolitan Area and one in the Tampere region. Two of the entrepreneurs were women and five were men.

In addition, we held a series of group interviews where we invited Somalia-born individuals who were interested in entrepreneurship but who had not yet embarked on business activities. Fourteen people participated in the group interviews: six women and eight men. They were a heterogeneous group in terms of age, educational level and the length of time they had spent in Finland.

The interviews were mainly conducted in Finnish. If necessary, a researcher with Somali background worked as an interpreter. English was also used in one group interview.

I will discuss below why previous entrepreneurship experience, and operating models favourable for entrepreneurship, have so rarely led to the establishment of enterprises in the case of Somalis in Finland. What has made it difficult to establish enterprises? I will also discuss what could be done to remove some of these obstacles.

Social capital alone does not generate business

Social capital is usually considered an important source of resources for the emergence of immigrants' ethnic business activities. The examination of the Somali communities of different countries has shown that these communities have a great deal of ethnic social capital which moreover can be characterised as transnational social capital, meaning that it transcends the boundaries of nation states. (E.g. Jones et al. 2010; Ram et al. 2008; Kloosterman et al. 1999.)

Somalis have utilised this social capital in establishing businesses particularly in the United States and the United Kingdom. (Carlson et al. 2012; Carlson 2010; Jones et al. 2010.) It has also been observed that this social capital accelerates the migration of Somalis to the resources needed at a given time. Information about the opportunities offered by the different regions of the world travels effectively in the local and international networks of Somali refugees. The tradition of hospitality which has its roots in an old nomadic culture in turn facilitates the migration and reduces its costs. Consequently, Somalis have moved actively from state to state in the United States and from country to country in Europe. (Huisman 2011; Osman 2012).

The threat of unemployment is often the triggering factor pushing people to take up entrepreneurship. However, it does not seem to work that way in the case of Somalis in Finland. Even though unemployment has been a constant and difficult problem among the group, a solution has rarely been sought in self-employment. In Finland, people with a Somali background have established businesses less often than other demographics with a refugee background and substantially below the average of all those with immigrant origin (Joronen 2014; Joronen 2012). In 2013, there were only 32 Somali-speaking entrepreneurs in Finland (Statistics Finland 2015).

Based on the strong tradition of entrepreneurship as well as the active cooperation networks so characteristic of the Somali culture, it could be assumed that entrepreneurship would also play a much stronger role in the employment of Somalis in Finland than it does currently.

One would expect the necessary skills and competence to be available as well. After all, it has been 25 years since the first wave of migration arrived in Finland, bringing with it a great number of well-educated people who have since studied in Finland (e.g. Joronen 2005).

What kinds of obstacles to starting entrepreneurship activities have the interviewees experienced?

Religion restricts loan-taking

Small-scale family entrepreneurship had been very common in Somalia before the civil war. Almost all of the Somalis interviewed for this study had family members who had been entrepreneurs in Somalia. Some interviewees had even owned a small business themselves before moving to Finland.

In addition to entrepreneurship experience, the Somalis’ communal mode of operation emerges in the interview data. Both the Somali entrepreneurs and those interviewees who had not yet established an enterprise repeatedly highlighted the different ways in which the members of the community help each other.

Thus, the Somalis in Finland characterise themselves and their culture as very communal, on the one hand, and very entrepreneurial, on the other hand. Similar comments regarding the entrepreneurial spirit and community-oriented nature of the Somali culture have also emerged in other reports on Finnish Somalis (e.g. Mubarak, Nilsson & Saxén 2015).

One reason why this entrepreneurial spirit has not led to the establishment of businesses on a wider scale is the lack of capital. Somali immigration to Finland has remained brisk throughout the 2000s. The proportion of the newly arrived of the working-age Somalis is large and consequently their unemployment rate has remained elevated. Moreover, the high proportion of large families and single-parent families, as well as the financial obligations towards relatives, have kept the Somali communities of Finland relatively poor.

Many Somalis regularly send money to Somalia and to their relatives who are still in refugee camps. Especially the first generation – those born in Somalia – feel that the obligation to send money is very compelling. They would rather cut back on their own consumption than fail to fulfil this obligation (e.g. Mubarak et al. 2015, 265-266; cf. Hammond 2011; Horst 2006).

As elsewhere in the world, the Somalis in Finland also avoid taking out bank loans because Islam prohibits the payment of interest. Most of the Somali entrepreneurs that we interviewed had been in paid employment before establishing a business and had raised capital solely by using their own savings – or at most by borrowing from friends.  Many of the Somalis who were planning to start a business in the future were also reluctant to rely on bank loans.

Instead of bank loans, Somalis often set up rotating credit associations based on collective savings (ayuuto, hagbad). With their help, potential small-business owners, for example, have gained access to the necessary financial resources for establishing an enterprise. The capital raised in this way moves flexibly from country to country and through Somali-owned money transfer businesses (e.g. Lindley 2009).

Nevertheless, the insufficiency of capital has been a problem. Because most of the Somali communities that have settled in various parts of the world are still relatively poor, their own savings – albeit sufficient for starting businesses – have not been large enough to develop these businesses further. This has been evidenced, for example, in the United States and the United Kingdom where Somalis have established a large number of businesses but most of them have remained in the ethnic markets. (E.g. Golden, Garad & Heger Boyle 2011; Golden, Heger Boyle & Jama 2010; Samatar 2008).

Poor knowledge of Finnish society and market

According to a number of respondents, the lack of motivation for entrepreneurship is connected with the high level of social security in Finland. This view was put forth by some of the Somali entrepreneurs who participated in the interviews and also many of the Somali men who had studied in Finland and who were in paid employment at the time of the interview.

Especially among the women who were born in Somalia, there are also individuals who have no formal education at all. Those with a low level of education can only enter very low-paid jobs. The parents of families who are dependent on social security and have many children are often afraid of losing their benefits. If the housing benefit and other possible benefits cease because of employment, the financial livelihood of the family can even decline. The families dare not take that risk, and that is why they would rather continue living on social security payments.

In light of these comments, it is surprising how much entrepreneurial zeal especially Somali women have despite their low level of education. Most of the Somali women who participated in the interviews were stay-at-home mothers. They indicated that they would rather work, saying they felt they were no longer needed at home as the children are grown up. However, it was difficult to find work because most of them lacked an adequate level of Finnish and their formal education was limited to comprehensive school completed in Somalia. That is why they dreamed of establishing their own company and being self-employed. Many had experience of entrepreneurship through family members and some had even engaged in some business activities themselves in Somalia before moving to Finland.

The aspirations of the Somali women centred on small businesses in the retail sector, including cosmetics stores, clothes shops, supermarkets and ethnic restaurants. Other Somalis were seen as the primary customer group of the stores. Consequently, the low educational level, poor language skills and lack of work experience in Finland were also reflected in the business ideas. In other words, a relatively small and impoverished ethnic market consisting only of the Somali population cannot be a source of living for many entrepreneurs.

Surprisingly, the business ideas of the Somali men who participated in the interview also moved along similar lines than those of the stay-at-home mothers, even though most of the men had acquired vocational education and work experience in Finland. Many men also aspired to establish, for example, a restaurant specialised in Somali cuisine even if their education is from a completely different field. The transportation industry was another favourite among the men. Educated women, on the other hand, were also thinking about the social and health care sector where they would be able to take advantage of the education they had acquired.

Men were more conscious than women of the fact that profitable businesses could not rely solely on their own ethnic community and that business ideas oriented towards a broader market should be developed. Even while realising this, they felt they did not know the Finnish society or Finnish consumer habits well enough to be able to sell goods and services to the majority population. That is why they were not very willing to take the risk of becoming entrepreneurs.

How to further develop business ideas and necessary resources

The Somali men interviewed for the study believed that the knowledge gap related to understanding the Finnish market would correct itself over time as the second generation who have grown up in Finland enters the job market more extensively. The men believed that young people would benefit from their social networks that they have developed going through the Finnish education system. All in all, the youth are assumed to have better knowledge of the Finnish society than their parents.

Young people were also believed to be more open-minded towards the Finnish society than their parents who still look back on the negative reception they experienced in the 1990s. The immigration of Somalis was regarded as a very negative thing in Finland at the time and it was almost impossible for them to find employment. The Somali men who participated in the interview felt that, as a result of that negative attitude, the Somali communities in Finland had become very withdrawn.

Consequently, the fact that young people had grown accustomed to functioning with Finns from an early age and that their social networks were more diverse than those of their parents were seen as their advantages. It was also believed that the problems related to the business funding would lessen with the new generation. The men believed in the emergence of joint enterprises between the Finns and the Somalis. It was assumed that such joint enterprises would enjoy not only the benefits of extensive networks but also the kind of know-how that would generate completely novel businesses. The problems regarding loan-taking would be solved when the Finnish partners could take out a bank loan and the Somalis could collect their share of the required capital with the help of their own rotating credit associations.

However, not all Somalis in Finland believe in the sustainability of the mutual networks of the majority population and Somalis. For example, the young Somalis interviewed for the book Suomen somalit [“Somalis in Finland”] (Mubarak et al. 2015.) expressed also opposite views. For example, the importance of religion as a factor that separates young people with different cultural backgrounds was discussed in the book. Many Somalis had had the teenage experience of becoming alienated from their childhood friends when the young Finns had begun dating and using alcohol or drugs. The young Somalis who wanted to adhere to the values of their community could not participate in this.

On the other hand, these comments from young people also reflect how superficially many Somalis who have grown up in Finland know the Finnish society. The way of life of the young people hanging out on the street or at shopping centres is just one subculture among many, and it is not sufficient grounds for making generalisations about Finnish youth as a whole. A different way of life is led by those young people who are active in their hobbies and studies or enjoy staying at home. Even the deeply religious young Somalis might find more in common with these youth.

If our society wants to increase the entrepreneurship of Finns of Somali origin, it seems that education is the key. In addition to strengthening the Finnish language and vocational education, there appears to be a need to develop integration training further as well. Refugees come mostly from countries where there are no formal systems of social security or they are very limited, and the administration may be corrupt. In such cases tax systems and other structures of the welfare state are foreign to people. Integration training should give more emphasis to acquainting the newcomers with the structures of the Finnish society and the values that underpin these structures.

Integration training should not be limited to the immigration phase. The curricula in comprehensive and vocational education should also aim to decode the philosophy behind the structures of the Finnish society and the typical practices of the majority population. One lesson worth emphasising is the importance of hobbies and leisure activities for finding a field of study, employment and a social network.

Entrepreneurial guidance and courses on entrepreneurship have been organised for immigrants in Helsinki since the mid-1990s. Joint courses for immigrants and the native population have provided a natural forum for exchanging experiences and networking. However, Somalis have used these services relatively little up till the present. In our interviews, the Somali men expressed the belief that the use of entrepreneurial services might increase if the guidance were given by an adviser with a Somali background. Besides general entrepreneurship education, the Somali community would also welcome short informative events aimed particularly at aspiring women entrepreneurs. These events could be organised on the premises of Somali associations and should include an opportunity for discussion.

Tuula Joronen, PhD, is a specialist in migration studies. She has recently retired as Researcher at City of Helsinki Urban Facts.


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