What is a Microenterprise?
A microenterprise is a business with 5 or fewer employees that is small enough or requires initial capital of $35,000 or less— accompanied by business support, training and technical assistance. Most microenterprises are sole proprietorships, which create employment for the owner and, often, other family members. Some grow into larger businesses as well, employing other members of the community.
Microenterprises can be any number of businesses including repair services, cleaning services, specialty foods, jewelry, arts and crafts, gifts, clothing and textiles, computer technology, child care, and environmental products and services. Typical microenterprise loans are $15,000 and under. Most loans are paid back on time and with interest, and the default rate on microloans is often no higher than it is on commercial loans.
What is Microenterprise Development?
Microenterprise development is an economic development strategy that provides services such as training and consulting to new, prospective and experienced small-business owners. Along with this technical assistance, small loans are necessary because traditional financing is difficult to obtain for start-up and developing businesses.
Microenterprise development programs reduce the learning curve and increase the chances of success. These services are usually provided by a community-based nonprofit or agency and are funded through partnerships with government agencies, foundations, private industry and individuals.
Does Microenterprise Development Work?
The Grameen Bank, begun in 1983 by Dr. Muhammad Yunus, serves 38,000 Bangladeshi villages, loans $1.5 million every day, has a 98% repayment rate – AND, turns a profit. These statistics represent real people. Real people full of dreams, hopes and talents. It is the incontrovertible proof that microenterprise development is a feasible strategy for poverty abatement, job creation and self-sufficiency among those that are poor, have no access to credit and no collateral.
Microenterprise development is cost effective, viable and economically sound for all participants, the funder/lending organization, the microloan program, the microentrepreneur and the taxpayer. Truly a win-win situation all around!
How Is Microenterprise Development Measured?
For the Community:
- Reduction in welfare, unemployment and other public assistance costs;
- Increase in the number of high growth jobs created;
- Improvements in the local environment, such as commercial and home occupancy and sales and property tax revenues;
- Increase in the diversity and availability of goods and services in new growth markets;
- Reduction in default and delinquency rates of new small business loans.
For Individuals and Families:
- Reduction in costs and increase in revenues, assets and personal profits;
- Improvement in economic self-sufficiency for families;
- Increase in new business skills and self-esteem;
- Improved relationships with community resources and enhanced credit opportunities.
- Family-oriented lifestyles