Introduction to Microenterprise

Telework Forum Follow-up

July 14, 2009

What is Microenterprise Development (MDO)?

A strategy to create jobs, alleviate poverty, support community development, and empower low income individuals (AEO).

Very small business Entrepreneurs with no access to traditional credit Business education and capital

Very small loans Goals of poverty reduction community

development and job creation

Microenterprise’s Beginning

Dr. Muhammad Yunus Grameen Bank begun in 1970

40 loans, $27 dollars Awarded 2006 Nobel Peace Prize Grameen-related organizations now in 40

countries

Microenterprise in the US

Beginnings in 1980s Start or expand very small business

<$35,000 in starting capital fewer than 5 employees

Varied organizational structure Credit versus Training-Led Independent agencies, or subsidiaries (often to

CDFIs, CDCs, etc) Range of services

Credit products Education

Typical Microenterprises

Retailers craft shops, florists, used clothing

stores Service suppliers

hairdressers, caterers, graphic design Manufacturers

carpenters, craft artisans, bakers

More Than Loans

Goals of creating economic security, development and job creation. Improving access to credit (raising

scores) Ex. Credit builder loans

Personal finance and business training

Typical Microentrepreneurs

Working poor People caring for families People with disabilities Public assistance recipients Immigrants and refugees Recently unemployed

Source: Elizabeth Wilson, AEO

Client Demographics

78 % women

42% African American

81% with no college degree

47% with business sales under $1,000 per month

Median income of $26,227 for poor and non-poor clients

Source: Elizabeth Wilson, AEO

Who Provides MED Services? Microenterprise development agencies Traditional business development

agencies Community economic development

organizations Employment & training organizations Human services and faith based agencies Target group focused organizations

Source: Elizabeth Wilson, AEO

Microenterprise Players

Association for Enterprise Opportunity (AEO)

State Microenterprise Associations Program start-up Monitoring, and evaluation Training Peer lending opportunities

Microenterprise Funding

Sources of Funding for Microenterprise Development Organizations

Federal Government 36%

State Government 16%

Local Government 6%

Private Sources 27%

Program Income 12%

Other Sources 3%

Source: Elizabeth Wilson, AEO

Where is the funding?

Federal sources include: SBA

MicroLoan PRIME Women’s Business Ownership

Community Services JOLI

CFDI Fund at Treasury CDBG Funds USDA

Intermediary Relending Rural Business Enterprise Rural Community Development Init.

HHS ORR

Microenterprise Successes 49 percent Five year survival rate - comparable to

the average for similar businesses 53 percent of poor entrepreneurs move out of

poverty. Most doubled income over 5 years Estimated for every $1 invested in MED returns

$2.5 (income for owners & employees, asset growth, reduction in public assistance, unemployment insurance costs, increased tax revenues

Source: Elizabeth Wilson, AEO