Microenterprise and Microlending


What is Microenterprise?

Microenterprise is defined as a business with no more than five employees and start up costs of $35,000 or less.

A microenterprise is a sole proprietorship, partnership or family business that has fewer than five employees. It is small enough to benefit from loans under $35,000 and generally too small to access commercial banking services. Microenterprises are a subset of small businesses (which can have up to 500 employees and still be considered “small”). But, in the majority of microenterprises, the owner is the sole operator and worker, leading many to refer to this phenomenon as self employment.

Although these two terms are often used interchangeably, self employment refers to the status of the business owner while microenterprise refers to a very small business. The size and type of production of these businesses varies considerably; however, they generally have a few common characteristics:

Job Creation: Most microenterprises create employment for the owner and often other family members.

Local Market: Microenterprises serve the needs of their neighbors and their communities.

Tiny Businesses: Microenterprises are often businesses that are unseen; perhaps the work is done from home or within another business.[i]

Microenterprises span a wide range of business types, of which most are within the service or retail sector.[ii] The University of Montana research and Training Center on Rural Issues for People with Disabilities has documented that entrepreneurs with disabilities have successfully operated a wide variety of microbusinesses: Accounting Service, Air Condition Repair Service, Auto Body Repair Shop, Bakery, Chiropractic Practice, Counseling Service, Real Estate Office, Restaurant, and Welding Shop.[iii]

Financial Planning for Your Microenterprise, a publication developed jointly by the National Endowment for Financial Education and the Association for Enterprise Opportunity, is aimed at entrepreneurs who want to develop and strengthen their personal and business financial management skills. Topics include: personal budgeting, the use and misuse of debt, building financial assets, and cash flow and break-even analysis.

Download a free copy of Financial Planning for Your Microenterprise.

Visit the Association for Enterprise Opportunity website and learn more about Microenterprise

What is Microenterprise Development?

Microenterprise development is a social service industry in the United States and around the world comprised of microenterprise development organizations. The organizations are typically non-profit entities that assist individuals to start very small businesses. The benefit of working with a microenterprise development organizations is their experience serving low income, minority and disadvantaged populations. There are approximately 700 organizations in the US that provide high quality services critical to business success.

What is a Microenterprise Development Organization?

Microenterprise Development Organizations provide assistance and training to individuals interested in starting or expanding a microenterprise. Organizations vary, but the majority offer business planning assistance, group trainings, and customized assistance to prepare clients for business ownership. Many of these organizations focus services on low income individuals, minorities and disadvantaged populations.

There are over 500 organizations in the United States that provide services to prospective entrepreneurs and business owners. The Abilities Fund works closely with the Microenterprise Industry and may be able to help you find a nearby organization.

Characteristics of Microenterpreneurs

According to a 2000 study commissioned by Accion USA, a non-profit organization and the largest microlending network in the US, there are 13.1 million microentrepreneurs across the country.[iv] By definition, a microenterpreneur is an individual who owns/operates a microenterprise. Microentrepreneurs start their business for two primary reasons: one, because they need income or they need a job, or two, because they love to do the kind of work their business requires, and have a special skill in that area. Often, microenterpreneurs provide a very special product or service that is particularly appropriate to his or her community.[v]



What is Microlending?

Microlending is the act of extending loans to clients of Microenterprise Development Organizations. Microlending was born because traditional banks are not always willing to accommodate very small business loan requests or compensate for individuals whose credit may not be perfect.

Many Microenterprise Development Organizations manage their own loan programs designed specifically to fund business ventures. There are a variety of programs that make loans as small as $500 and up to $35,000 (funding parameters vary by program).

As microenterprise development organizations grew, they realized that traditional banks are not always willing to work with very small business loan requests or compensate for individuals whose credit may not be perfect. So, many of these organizations developed their own lending programs. There are a variety of programs that make loans as low as $500. Microloan programs are typically more flexible than traditional banks and can be a great resource for entrepreneurs who need business capital.

Visit the Association for Enterprise Opportunity website – the national membership organization for microenterprise development.

[i] Else, Servon, Messenger, 2001
[ii] Clark and Hudson, 1993
[iii] Ed. Kit 2000
[iv] Terry, S. (2003). Loans for the Little Guys. The Christian Science Monitor. Available Online: www.csmonitor.com.
[v] Hudson, T. & Clark, P.(). Assisting the Smallest Business: Assessing Microenterprise Development as a Strategy for boosting the Poor Community. The Aspen Institute.

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