Micro-enterprise

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A micro-enterprise (or microenterprise) is a type of small business, often registered, having five or fewer employees and requiring seed capital of not more than $35,000.[1] The term is often used in Australia to refer to a business with a single owner-operator, and having up to 20 employees. The European Union EU defines micro-enterprises as those that meet 2 of the following 3 criteria and have not failed to do so for at least 10 years:

  • fewer than 10 employees
  • balance sheet total below EUR 2 million
  • turnover below EUR 2 million .[2]

The term microenterprise connotes different entities and sectors depending on the country.

Generally speaking,

  • in developed countries, microenterprises make up the smallest end (by size) of the small business sector, whereas
  • in developing countries, microenterprises constitute the vast majority of the small business sector—a result of the relative lack of formal sector jobs available for the poor. These microentrepreneurs operate microenterprises not by choice, but out of necessity.

Microenterprises add value to a country's economy by creating jobs, enhancing income, strengthening purchasing power, lowering costs and adding business convenience.[3]

Because microenterprises typically have little to no access to the commercial banking sector, they often rely on "micro-loans" or microcredit in order to be financed. Microfinance institutions often finance these small loans, particularly in the Third World. Those who found microenterprises are usually referred to as entrepreneurs.

The terms microenterprise and microbusiness have the same meaning, though traditionally when referring to a small business financed by microcredit the term microenterprise is used. Similarly when referring to a small, usually legal business that isn't financed by microcredit, the term microbusiness is used.

Overview[edit]

Micro and Home Business Network [1], an Australian organization, defines a micro-business as one with five or less employees [2]. This definition is often used in the United States.[3] In Europe a business with less than ten employees may be officially considered a micro-business [4].

Generally speaking, governments tend to define small- and micro-businesses more broadly than colloquial uses of those terms. This article discusses micro-business in the colloquial sense.

Concept in disability recovery[edit]

Microenterprises give persons who have a disability flexibility to attend doctor’s appointments or treatments that normally occur in the 9–5 time frame of the day and would eventually conflict with the norm of most typical work environments.

Microenterprises present persons with a disability business networking avenues into the community that differ greatly from the medical or treatment mode that they may have become confined to.

Government programs[edit]

Plan for Achieving Self Support is a program offered by the United States Social Security Administration (or SSA) to encourage persons that are Supplemental Security Income (or SSI) eligible who are disabled to set aside moneys for various reasons: training, schooling and funding microenterprise as a Work Goal.

The NEIS (New Enterprise Initiative Scheme) is a government program in Australia, which assists unemployed people to start their own businesses. Although it is not specifically for micro-businesses, many if not most businesses started in this program are micro-businesses (in the senses of having limited capital, and only one person involved in the business).

Micro-loans[edit]

Micro-loans are a way for organizations and entrepreneurs to make small loans to those in poverty often in third world countries. The term "micro-loans" is more commonly referred to as Microcredit.

Microenterprises in the U.S.[edit]

In the United States, the microenterprise development field and its trade association, The Association of Enterprise Opportunity AEO, have defined a microenterprise as a business with five or fewer employees. Many of these businesses have no employees other than the self-employed owners. Additionally, such microenterprises generally need less than $35,000 in loan capital and do not have access to the conventional commercial banking sector. Most organizations in the field also focus their services on those microentrepreneurs who, as defined by federal government standards, are low-to-moderate income. By definition, most of these entrepreneurs are minorities, recent immigrants, women, disabled or for other reasons have special challenges that reduce their ability to access traditional credit and other services.

The microenterprise field has a twenty-year history in the United States. While the term “microenterprise” was in common use internationally by the late 1970s, it came into domestic use about a decade later. Traditionally, the business sector had been categorized into three groups: large, medium, and small. The U.S. Small Business Administration (SBA) defines a small business as having up to 500 employees. In 1991, the SBA recognized microenterprise as a separate or distinct category of business.

As a result of President Obama’s signing the “Small Business Jobs Act” on September 27, 2010, the SBA announced that the maximum microloan limit has been increased from $35,000 to $50,000. This announcement[5] was made public on October 21, 2010.

Qualifying microenterprises are primarily for-profit entities. However, not-for-profit childcare centers are eligible to apply for a microloan. A microenterprise may owe multiple microloans at the same time but they cannot own more than $50,000 at one time. [6]

Microloans may be used for general business expenses [7] such as, working capital and tangible assets, such as inventory, furniture, and equipment. They cannot be used to pay the microbusiness owner, to purchase real-estate, pay existing debt, or for non-qualifying not-for-profit entities.

During the 1990s, the microenterprise field grew rapidly in the United States. Starting with a small number of non-profit organizations testing developing country models, the field now has service providers in every state, a national trade association (AEO), a growing number of state-level associations and financing intermediaries, and several research and policy organizations. The Aspen Institute and FIELD (Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination) has collected data on the organizations in the field since 1992. The first directory, in 1992, listed 108 organizations that identified themselves as working in the field. By 2010 this number had grown to over 800 organizations that provide direct services to entrepreneurs—either microfinancing or business development services.[4]

Community Development Financial Institutions (CDFI's), particularly Community Development Loan Funds frequently offer loan capital for microenterprises in the United States.

Anthony Hilb, author of 'Make Money with a Microbusiness' and founder of microbusinessowners.com states, "Microbusinesses have existed since people first exchanged goods and services in their communities. Today, microbusinesses can have a much larger impact; products and services can be exchanged at previously unimagined volumes, distances, and speeds. Credit here is due to advancements in technology. With the internet, apps, and other technologies available (often for free), microbusinesses will continue to explode in popularity."

Microenterprises in the United Kingdom[edit]

From information gathered from mainly UK Government sources between 2000-2013, according to the Enterprise Rockers Global Community, a UK based, Community Interest Company (CIC) created by Tony Robinson OBE and Tina Boden to support micro-businesses;

There are around 4.5 million micro enterprises (0-9 employees) which represents 95% of all UK businesses. There are only around 6000 Large (over 250 employees). The term SMEs for Small and Medium Enterprises is not used by the Enterprise Rockers CIC as 99.9% of all businesses in the UK are 'SMEs'.

Of the 4.5 million micro enterprises in the UK 3.5 million are sole traders/freelancers and just 1 million have 1 - 9 employees.

Micro enterprises account for around one third of the nation's private sector workforce at just under eight million people and contribute nearly a fifth to UK turnover. Micro-enterprises are a vitally important contributor to the UK economy.

70% of all businesses in the UK, including micro enterprises, would describe themselves as family owned

Up to 500,000 new businesses are starting each year with around 7 in 10 owners doing it because they want to be independent and be their own boss. Nearly two -thirds had previously been in full time employment. Around one in seven of the adult workforce are now self-employed or running their own business.

A third of those starting up had not consulted with anyone before starting their business and around 18% had consulted nobody but friends, family or colleagues. Of the half that got some formal advice before starting, most get it from an accountant and then the banks with only about 15% getting advice from a public advice/support agency

Nearly a quarter of the population aged 18-64 are either involved in entrepreneurial activity (11%) or are thinking about it (13%)

Men are twice as likely as women to be involved in entrepreneurial activity or to be thinking about it.

Nearly twice as many (15%) young people aged 16-34 are thinking about starting their own business than older people (8%) aged 35 - 64 but twice a many older people (16%) are currently running their own business compared with younger people (8%)

Eleven per cent of the 50-64 age group are self employed and running their own businesses

The 50-64 age group appears to be 40% more entrepreneurial in the South East or the South West of England than those in the West Midlands or Yorkshire and the Humber.

Just under 50% of all self employment in England is in the 50-69 age group.

Businesses that start off with the owner 50 or above have an equal or better chance of success as owners in other age groups.

Tony Robinson OBE’s website also provides more survey results and statistics on micro enterprises. This includes information about businesses that grow beyond the micro enterprise stage. For example, a survey by Ernst & Young and London School of Economics into 500 of the UK's most successful entrepreneurs, which reveals that:

More than a third (35%) of UK entrepreneurs raise money from their own resources, 16% of these raise capital by re mortgaging their own homes. Other popular sources of cash are venture capital firms (28%), bank loans (20%) or personal contacts (18%).

The overwhelming majority (88%) of entrepreneurs started their enterprise before the age of 44, and 20% before reaching the age of 24. Nearly a third of UK entrepreneurs (30%) are involved in their second, or more, enterprise.

A little more than half (55%) of entrepreneurs have a university degree, but say that attending university made no significant financial difference to the success of their firm.

Microsoft founder Bill Gates is the most likely person to be named as an inspiration or role model by UK entrepreneurs.

(Survey by Ernst & Young and London School of Economics into 500 of the UK's most successful entrepreneurs.)

Microenterprises in developing countries[edit]

In developing countries, microenterprises constitute the vast majority of the small business sector—a result of the relative lack of formal sector jobs available for the poor. Microenterprises in developing countries, then, tend to be the most frequent form/size of business. As explained by Aneel Karnani in the Stanford Social Innovation Review (summer 2007), "Microfinance Misses Its Mark":

Most microcredit clients are not microentrepreneurs by choice. They would gladly take a factory job at reasonable wages if it were available. We should not romanticize the idea of the “poor as entrepreneurs.” The International Labour Organization (ILO) uses a more appropriate term for these people: “own-account workers.”

Paper to Pearls is an example of a micro-enterprise, one that is based in the US and works with women northern Uganda.

The International Fund for Agricultural Development (IFAD) Vietnam country programme supports operations in 11 poor provinces. Between 2002 and 2010 around 1,000 saving and credit groups (SCGs) were formed, with over 17,000 members; these SCGs increased their access to microcredit for taking up small-scale farm activities.[5]

In Poland in 2012 were 1 710 598 micro-enterprises (1 784 603 all companies). They employed 3,5 mln person.[6]

Microenterprises and women in the Dominican Republic[edit]

In the Dominican Republic, a nationwide survey conducted in 1992 revealed that 330,000 micro and small enterprises created employment for 26 percent of the economically active population.[7] Furthermore, a significant portion of this is represented by women (38 percent).[8]

It is argued that the households of women are benefitted more by microenterprises because women tend to devote this income, proportionately, more to their households than do men.[9] Therefore, it is recommended that microenterprise training programs be less gender-neutral and should be diversified to address the central challenges of women's businesses.[10]

References[edit]

  1. ^ http://www.microenterpriseworks.org
  2. ^ Official Journal of the EU, Recommendation by the European Commission 2003/361/EC dating from 060503, Annex Article 2. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:124:0036:0041:EN:PDF
  3. ^ Munoz,J.M.2010.Contemporary Microenterprise:Concepts and Cases. Cheltenham: Edward Elgar Publishing. http://www.e-elgar.com/Bookentry_Main.lasso?id=13820
  4. ^ "Welcome to MicroTracker". microTracker. Retrieved 10 January 2013. 
  5. ^ RIDP, PCR and Validation, 2010.
  6. ^ D. Walczak, G. Voss, New Possibilities of Supporting Polish SMEs within the Jeremie Initiative Managed by BGK, Mediterranean Journal of Social Sciences, Vol 4, No 9, p. 760-761.
  7. ^ Cabal,Miguel. 1992. Microempresasy pequenas empresase n la Repdblica Dominicana: Resultadados de una encuesta nacional. Santo Domingo: Fondomicro.
  8. ^ Cabal,Miguel. 1992. Microempresasy pequenas empresase n la Repdblica Dominicana: Resultadados de una encuesta nacional. Santo Domingo: Fondomicro.
  9. ^ Grasmuck, Sherri, and Rosario Espinal. 2000. Market Success or Female Autonomy? Income, Ideology, and Empowerment among Microentrepreneurs in the Dominican Republic. Gender and Society 14 (2):231-255.
  10. ^ Grasmuck, Sherri, and Rosario Espinal. 2000. Market Success or Female Autonomy? Income, Ideology, and Empowerment among Microentrepreneurs in the Dominican Republic. Gender and Society, 14(2):231-255.

External links[edit]