MICRO-ENTERPRISE Training by Wayne Hamit
1. The ultimate goals in reduction of economic poverty:
a. capitalize on multifaceted survival strategies of low-income persons (the target group) (this is linked to social situation of target population)
b. increase in net worth of participating individuals (as an index of effectiveness of input usage and program impact)
c. increase in locally-owned/managed capital for local re-investment and diversification of economically viable investments (key to poverty reduction is accrual of wealth, i.e., growing capital, to reinvest in local economic development)
2. Microenterprise programs
a. increase availability of capital for local investment (access to capital is a primary input, but not the only one in successful programs: training in small business development and providing financial services for previously “left out” persons is an equally important primary input)
i. “rate of return” on investments is the driver;
ii. they attract additional capital (mobilizing local capital is an important outcome)
iii. Provide local investment opportunities to non-entrepreneurs (only 10-20% of individuals in any given target population will be entrepreneurs) i.e. people can invest in a capital fund and get dividends – and may not be small business owners themselves
b. increase local management skills for successful financial management, by providing a framework for local people to enact significant and improved/enriched roles in socio-economic development;
c. increase demand/attention for non-financial inputs to ensure business success (access to capital must be linked to “how to plan” for successful businesses
d. attract economic growth to an area nothing stimulates economic development better than an atmosphere where small and micro-businesses are developing.
LET ME ILLUSTRATE with an example from work with rural women in a low-income area about 100 km from a capital city:
Background: Collapse of agrarian economy due to government changes in supporting animal feed prices. No other options for wage labor, and no other “apparent” skills…
LESSON #1: DO YOUR SOCIAL HOMEWORK. Assume that there are REASONS than can be discovered that have brought about economic poverty.
Assume that the history of the target people must be learned and understood in order to mobilize their efforts/strengths to overcome lack of economic opportunity. Assume that local people can provide the best information about their situation and can give valuable guidance for solution pathways.
More background: Other organizations had tried to provide interest-free loans and grants. This served to increase the indebtedness of the poor, who had already been indebted to relatives to make up income shortfalls.
LESSON #2: People will provide information and insight into what has not worked to assist them, which is valuable to avoid reinventing the (often unsuccessful) wheel…
First action: We discussed with women their desires: what they wanted and then we provided them with interview tools, evaluative techniques, and analysis frameworks to assess what they were willing to undertake; and then we discussed the structure of how capital would be managed and how the proposed business ideas could succeed.
Next action: We had them do a market assessment, prefeasibility studies, and after discarding lots of business ideas, they did feasibility studies on the surviving ideas. Lots of training here.
And lots of involvement of government and non-government agencies as helpers to the process. We wanted lots of people and organizations to become stakeholders in the success of this venture.
Next action: Implemented the organization to manage the capital; and the business structure to turn the invested capital into a process to produce a product. The women (did I mention that they were mostly widows and illiterate) had discovered that farmers in their region travelled 100km or more to buy seedlings for planting. They decided to provide seedlings as their business. They had some parallel skills that they could develop because they had been small-holding farmers, etc.
The short story (of a long 3 year venture) is that the women have established a successful seeding business. They also bought and farmed additional land to sell vegetables locally, and they attracted the attention of local candidates for election who provided them with cinder blocks to build a one-room “office” for their business beside their greenhouses. The initial capital has been repaid (with interest) into a fund for business development, for new business establishment (for other women not involved in the first business) and they are asked by the local governor to attend district meetings to present development priorities, etc.
The keys were;
Equitability: they got something they (not bureaucrats or outside experts or donors) wanted
Sustainability: Their continuing efforts produced continuing benefits to them and to their community Managerial skills: they managed a resource (capital fund) in a wise way that resulted in more capital being available for more people to participate in economic and social improvements.
Of course, they also benefited personally: they have income, dividends from the company they jointly own and are employed by, and they have increased social status from which to make their opinions known.
And before this, they were illiterate women who needed their husband’s permission to visit their neighbor.
The greatest threat to successful micro-enterprise programs comes from the micro-enterprise (donor) agency itself. Most micro-enterprise agencies hold key decision-making roles for themselves, rather than incorporating local people (especially those who have made a success with their loans) in the target population into the primary decision-making entity. A good model for capital management and microenterprise stimulation is the credit-union model rather than the banking approach.