Challenging the crisis in Peru : job and income generation through microenterprise development (guidelines for a USAID strategy)

Lacking opportunities for formal sector employment, poor Peruvians have had to create jobs in the informal sector, which now employs about 900,000 persons (nearly half of them women) and over 40% of Lima"s labor force. However, between 1987 and 1989, average incomes in this sector dropped by 60%. This report provides an overview of the role of informal microenterprises in the Peruvian economy, covering the major theoretical viewpoints through which the informal sector has been analyzed, the sector"s structure, and the relation between investment in the sector and technological diversity. The report then describes the impact of government policies on the sector during the 1985-89 period of economic reactivation, as well as related legislation, support institutions (i.e., government agencies, business associations, research groups, and others), and recent experiences with microenterprise promotion. The remainder of the report presents guidelines for a microenterprise development strategy. A comprehensive approach is recommended which would include components to improve access to credit, markets, production techniques, and management skills, along with regulatory and administrative reform. It is estimated that an investment of $10 million in such a program could create 28,500 jobs over a 10-year period.