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close this bookVolunteer Participation in Working with the Urban Poor (UNDP - UNV, 64 p.)
close this folderII. Insights derived from community-based programmes
close this folderUrban informal sector
View the document(introduction...)
View the documentMicro-enterprise promotion
View the documentWorking conditions in the informal sector
View the documentThe ILO experience

Micro-enterprise promotion

USAID, through its PISCES Programme (Programme for Investment in the Small Capital Enterprise Sector), has one of the longest histories of large-scale support to urban micro-enterprises, generally self-employment schemes which may rely on family labour. Micro-enterprise promotion involves the distinction between (a) the pre-entrepreneurship phase, when considerable organisational and familiarisation work has to be done with recent migrants, refugees and others who are new to commercial enterprise; and (b) entrepreneur support, which targets those who have already demonstrated initiative and commercial skills, and are fully aware of their needs for further growth.

The main instrument of micro-enterprise support has been the supply of credit, usually in small doses (USAID's average loan was $387 in 1989, for example). Four basic business needs are also provided for: markets, resources (credit), know-how (technical assistance or "TA"), and supportive policies. In general, the allocation of support tends to fall along the following lines: credit -44%; training and TA -23%; institutional development 20%; and policy and regulatory reform -4%. Credit is frequently given for working capital: raw materials, tools and equipment, working or selling-space, and labour. Programme elements include: carrying out feasibility studies; outreach and promotion work; selection of clients; credit operations, which include tailoring loans and their terms, building incentives for payback, supervising and monitoring, and graduating to local financial institutions; management and technical training.

In microenterprise promotion, the role of external catalysts, such as volunteer organisers and trainers, is often critical. The major reasons for using VDWs in microenterprise schemes include recognising the importance of cooperation and community activities and the necessity of working and living closely with the community for an extended amount of time. It has been widely noted that for pre-entrepreneurial work to succeed, community development activities, collective workspace and collective marketing activities are powerful incentives. Hence, VDWs are the key to working through group structures, promoting mutual cooperation and the informal exchange of information, assisting in developing a process of empowerment, as well as reducing costs and facilitating delivery. PISCES has been handled through international and local NGOs, and Peace Corps Volunteers have been more involved in this area since 1983.

Other benefits of using VDWs include their ability to work with existing local organisations who have proven outreach into the low-income communities. Social workers, for example, need to be with the same communities for 1-3 years to help them through the pre-entrepreneurial phase. This includes training in developing a process of participation and a sense of solidarity with a view towards self-reliance (for example, on the issue of credit schemes, group members can set their own repayment agendas and evaluation, monitoring and enforcement mechanisms). Greater use of local volunteers from the community itself also presents enormous scope for this type of work.

Generally, VSAs share many qualities seen as the major virtues of NGOs dealing with microenterprises, such as being in a pivotal position between different levels and relevant groups and organisations to allow for greater flexibility and networking ability. In addition, NGOs and VSAs share many concerns: the necessity of follow-up, the need to expand outreach, targeting services according to need, and the control of their portfolio size in order meet targeted goals, while increasing selfsufficiency and promoting the reinvestment of capital. There is enormous potential for VSAs to provide these NGOs with the necessary VDW support for their work with microenterprises.

Nevertheless, microenterprise promotion barely reaches one per cent of the enterprises in targeted cities. In light of the current focus on credit schemes, financial resource constraints are unlikely to inhibit the expansion of microenterprise schemes. Rather, the success of micro-enterprise development hinges on careful nurturing in the early stages of project definition, dialogue, and hands-on support. Specialised training may also be necessary as competition with formal sector enterprises becomes imperative to continued success. Eventually, resources for this training may have to come from nation al and local sources. The nurturing required for this entire process demands substantial human resources, and it is here that VDWs find their greatest role in microenterprise promotion.