Microenterprise in the First and Third Worlds

Publication Date: Jun 2001
Published by: Microfinance.com
Document Type: Paper

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How to address the challenges of microenterprise development in the First world?

In this paper the author highlights the differences between the First and the Third World poor and suggests how microenterprise (ME) can develop in the First World.

As per the author:

• ME development is more difficult in the First world;
• Unlike the Third World entrepreneurs, First World entrepreneurs are more often constrained by lack of savings rather than lack of credit. Most microenterprise programs can do little to facilitate savings;
• Because many First World entrepreneurs lack skills, more programs focus on training, and due to the cost-revenue structure, these programs are non-sustainable;
• Abundant wage jobs and a safety net weaken the push toward self-employment;
• More measurements of costs and benefits create incentives to improve;
• The need to attract funds sometimes tempts advocates to hype potential and hide problems;
• A ME program should hire former entrepreneurs, professional loan officers and teachers;
• ME practitioners should search for ways to monitor efforts toward self-employment that do not require attendance at classes or indebtedness;
• ME programs should search for ways beyond self-employment to connect people to the workforce;
• A good ME program often discourages self-employment in favour of more education or job training;
• Policy should insist that banks make loans themselves in the hope that the banks might learn to serve this niche for their own self-interest.