AID microenterprise stocktaking evaluation

recently completed a comprehensive stocktaking evaluation of its Microenterprise Assistance Program. This paper provides a brief synopsis of the study, highlighting the program"s impact, key findings, and lessons learned. The 1989 study included field visits to 10 countries and reviewed 32 projects. Five major findings are listed below. First, microenterprises have a heterogeneous character and include a wide range of firms operating with varying degrees of economic sophistication. As a result, A.I.D. has used three broad types of assistance which can be applicable to different enterprises -- enterprise formation (typically community development programs designed to overcome social and economic constraints to establishing microenterprises), expansion (providing credit and training/TA to exisiting enterprises), and transformation (graduating larger enterprises up and out of the microenterprise sector). Second, A.I.D. projects have clearly demonstrated that it is possible to deliver services (TA/training, credit) to disadvantaged persons (including women) in remote locations. While the poorest 20% are generally not becoming entrepreneurs, they do benefit from the employment opportunities generated by microenterprises. Third, there is often a tradeoff between the development of successful and sustainable businesses and the goal of targeting special disadvantaged groups. The most successful microenterprise programs tend to focus primarily on strengthening or establishing profitable and sustainable businesses rather than achieving social goals. Fourth, A.I.D. projects have had limited success in graduating microenterprises to nonconcessional, formal credit markets. As an alternative, it is recommended that rather than trying to graduate firms, the programs themselves should graduate to nonconcessional sources of capital. These funds could then be retailed to the enterprises by the program. Finally, the enterprise expansion approach is the least costly way of reaching the largest number of beneficiaries. When the problems faced by microenterprises extend beyond just credit, A.I.D. has much less knowledge of how to deliver cost-effective TA/training.