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Microenterprise in the First and Third Worlds

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  • Mark Schreiner

    (Washington University in St. Louis)

Abstract

Sparked by examples from the third world, hundreds of microenterprise programmes have been started in the first world. Will they be successful? This paper reviews the evidence and concludes that microenterprise development is more difficult in the first world. For example, the microenterprise sector in the first world is smaller because most people can get wage jobs and because of the public safety net. Unlike third-world entrepreneurs, first-world entrepreneurs are more often constrained by lack of savings rather than a lack of credit. Most microenterprise programmes, however, can do little to facilitate savings. Because many first-world entrepreneurs also lack skills, most first-world programmes focus on training. The cost-revenue structure of this training, however, is not sustainable. The paper offers several suggestions for how to address the challenges of microenterprise development in the first world.

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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0108001.

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Date of creation: 02 Sep 2001
Date of revision: 27 Dec 2001
Handle: RePEc:wpa:wuwpdc:0108001

Note: Type of Document - Adobe Acrobat 3.0; prepared on Windows 98; to print on Adobe Acrobat 3.0; pages: ; figures: Included in pdf file
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Web page: http://128.118.178.162

Related research

Keywords: Microenterprise; microfinance; savings; loans; community development; not-for-profit;

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References

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  1. Devarajan, Shantayanan & Squire, Lyn & Suthiwart-Narueput, Sethaput, 1997. "Beyond Rate of Return: Reorienting Project Appraisal," World Bank Research Observer, World Bank Group, World Bank Group, vol. 12(1), pages 35-46, February.
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  3. Bhatt, Nitin & Tang, Shui-Yan, 1998. "The problem of transaction costs in group-based microlending: An institutional perspective," World Development, Elsevier, Elsevier, vol. 26(4), pages 623-637, April.
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  5. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(6-8), pages 613-673, August.
  6. Mark Schreiner & Jonathan Morduch, 2001. "Replicating Microfinance in the United States: Opportunities and Challenges," Development and Comp Systems, EconWPA 0109002, EconWPA.
  7. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 03-95, Wharton School Rodney L. White Center for Financial Research.
  8. Philip Bond & Robert Townsend, 1996. "Formal and informal financing in a Chicago neighborhood," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Jul, pages 3-27.
  9. Marc Bendick & Jr & Mary L. Egan, 1987. "Transfer payment diversion for small business development: British and French experience," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 40(4), pages 528-542, July.
  10. Mark Schreiner, 2001. "Resources Used to Produce Individual Development Accounts in the First Two Years of the Experimental Program of the American Dream Demonstration at the Community Action Project of Tulsa County," Finance, EconWPA 0108003, EconWPA, revised 27 Dec 2001.
  11. Powers, Elizabeth T., 1998. "Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States," Journal of Public Economics, Elsevier, Elsevier, vol. 68(1), pages 33-53, April.
  12. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(4), pages 1569-1614, December.
  13. Zeller, Manfred & Sharma, Manohar, 2000. "Many borrow, more save, and all insure: implications for food and micro-finance policy," Food Policy, Elsevier, Elsevier, vol. 25(2), pages 143-167, April.
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