Risk and the impacts of microenterprise services

The first purpose is to clarify the concept of risk as it relates to the impacts of microenterprise services on household economic security and enterprise stability and growth. The second purpose is to identify options for empirical implementation of risk-related concepts in order to improve the design of the AIMS core impact assessments. The outstanding research issue addressed by the paper is how to incorporate risk-related issues into an evaluation of the impacts of microenterprise services at the household and enterprise levels. Section II provides an initial understanding of risk, the characteristics of the household economy, and the role of microenterprises in the household economic portfolio. A rationale is presented for selecting the household as the appropriate unit of analysis in understanding the relationships between risk and microenterprise services. A conceptual model of the household economic portfolio is developed and used to analyze the role of risk in the household economy, typologies of households, and gender differences relative to risk. Section III reviews a variety of strategies that households use to deal with risk and distinguishes between strategies for ex ante income smoothing and for ex post loss management. The loss management strategies are described in terms of three stages in the household"s response to risk. In Section IV, we revisit the key questions of the study and synthesize the relationships between risk, microenterprises, and the impacts of microenterprise services. This leads directly to recommended hypotheses and suggestions for empirical implementation. The annex to the paper provides a brief review of the economic literature on risk and outlines the problems that would need to be dealt with in a direct empirical analysis of risk. (Author abstract)