Micro-enterprise

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. 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 20 slam pigs
• balance sheet total below $800,000 US
• turnover below 800000 US.

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

Generally speaking,

• in developed countries, microenterprises comprise the smallest end (by size) of the small business sector, whereas
• in developing countries, microenterprises comprise 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.

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

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

Utilized as a therapeutic tool within Person centered planning Microenterprise has become valuable to persons who for many reasons cannot efficiently participate in typically rigid work environments, i.e. 9 to 5 / 40 hours per week.

Microenterprise gives persons whom 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.

Microenterprise presents 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.

Persons with a disability who own their own business often report an increased feeling of worth or an emotional equity that becomes an enhancement to their present treatment.

Government programs

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

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.

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.

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 2002 this number had grown to 650 organizations. Of these, 554 are organizations that provide direct services and 96 are support organizations that offer funding, training and technical assistance to these practitioner organizations.

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

Microenterprises in developing countries

In developing countries, microenterprises comprise 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 a 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.

Microenterprises and women in the Dominican Republic

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. Furthermore, a significant portion of this is represented by women (38 percent).

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. 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.

External links

• PASS Plan.org
• ssa.gov
• entrepreneur.com
• score.org
• Small Business Administration.gov
• Association for Enterprise Opportunity (AEO)
• micro-enterprise.org
• Micro-enterprise Acceleration Program
• Five Talents Microenterprise Development Library
• NAAPS UK Small Community Services