Basically, there are 2 points that I believe are important to always keep in mind:
Micro entrepreneurship is the means, not the end.
Micro entrepreneurship, if understood specifically to mean ownership of micro scale enterprises, is one way to address problems of poverty and economic welfare. However, it is NOT only way to address these problems. Nothing is ever the only way to address these problems. Further, rarely does one solution suffice to address these complex problems in their entirety.
- If access to higher levels of socioeconomic welfare is the end goal (a common goal but again, not necessarily the only one) then business ownership at the small or micro scale may not always be appropriate.
- Context always matters. In some countries, economic (and social) institutions may be such that economic problems might be more efficiently tackled by getting more people wage based jobs in the existing market.
- In some other countries, one might be able to get more people out of poverty faster by setting them up as small business owners rather than by overhauling existing market institutions and getting them wage based jobs.
Access to credit is a primary obstacle to micro entrepreneurship, but it is not the
Having made this point in this last post, I won't repeat it again. What bears reiterating is that context matters. Access to credit may indeed be the critical thing in some places, but a number of other social and economic factors may become important in others. Even after providing funds, entrepreneurship may not emerge at the expected scale because these other factors create barriers to such emergence.
- The easiest factors to understand are those of gender related social norms. Many conservative and patriarchal social systems have a strict set of rules against participation of women in the non-domestic sphere.
- If one is interested in creating women micro entrepreneurs in such a system, then one would not have to consider these rules but also consider the ramifications of encouraging women to break these rules.
- Would women entrepreneurs from such sections of society be encouraged by the incentive of economic empowerment? Or would they be discouraged by the disincentive of social censure?
- There are a multitude of such factors to consider. Access to finance may interact with these existing factors to create positive outcomes, or achieve nothing at all.
Here are 2 reports/papers that address some of these issues.
For a brief overview of this paper along with some additional comments see the following blog post from Microdinero.com :
Strategies to counter microfinance delivery challenges
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Microenterprise development programs in the United States and in the developing world
Schreiner, M. and Woller, G.
World Development, 31(9): 1567 - 1580
This is an interesting paper because it first looks at why microfinance is proving to be such a useful economic strategy in developing countries. It then asks if the strategy would be as useful in the United States if implemented on a large scale, given that the socioeconomic context in the US is quite different from that in those developing countries where microfinance has taken off in a big way.