A.I.D. microenterprise stocktaking : synthesis report

Three approaches are distinguished: enterprise formation, enterprise expansion, and enterprise transformation (i.e., graduation from the sector). Key findings include, inter alia, the following. (1) Measurement of program impacts -- both their magnitude and sustainability -- could be considerably improved. (2) Most programs focus on a limited number of beneficiaries, especially when compared to the number reached by financial institutions. The latter, however, cannot meet the long-term needs of microenterprises. (3) Microenterprise programs are well suited to integrating women into the development process and can reach members of the poor majority, but affect the poorest of the poor only indirectly, i.e., by creating jobs. (4) The programs can create productive new employment opportunities, particularly in manufacturing, and often have a significant influence on the development of financial markets. (5) Cost per beneficiary varies widely across programs, being relatively high in formation programs, often low in expansion programs, and high in transformation programs. (6) Cost per dollar loaned varied from $0.19 for a simple credit program to $7.68 for a women's enterprise formation program. In general, the available data, while limited, suggest very high returns to investments in microenterprises. (7) To be successful, the implementing agency needs honesty and good management, but not financial sustainability; some form of subsidy is usually required. (8) Programs that provide direct, short-term credit have a better record than do more ambitious transformation programs. However, the needs of the vast majority of microenterprises cannot be satisfied by small working capital loans. The question how to meet these needs remains unanswered. (9) Successful programs focus first and foremost on developing profitable businesses and on other objectives, e.g., directing resources to disadvantaged groups, only if consistent with this purpose. (10) The role played by credit is much better understood than that played by technical assistance and training. (11) When possible, transformation efforts should focus on graduating programs (from project to commercial funding sources) rather than enterprises.