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A micro-enterprise (or microenterprise) is generally defined as a
small business Small businesses are types of corporations, partnerships, or sole proprietorships which have fewer employees and/or less annual revenue than a regular-sized business or corporation. Businesses are defined as "small" in terms of being able to ap ...
employing nine people or fewer, and having a balance sheet or turnover less than a certain amount (e.g.

€
2 million or
PhP PHP is a general-purpose scripting language geared toward web development. It was originally created by Danish-Canadian programmer Rasmus Lerdorf in 1993 and released in 1995. The PHP reference implementation is now produced by The PHP Gr ...
3 million). The terms microenterprise and microbusiness have the same meaning, though traditionally when referring to a small business financed by
microcredit :''This article is specific to small loans, often provided in a pooled manner. For direct payments to individuals for specific projects, see Micropatronage. For financial services to the poor, see Microfinance. For small payments, see Micropayme ...
the term microenterprise is often used. Similarly, when referring to a small, usually legal business that is not financed by microcredit, the term microbusiness (or micro-business) is often used. Internationally, most microenterprises are family businesses employing one or two persons. Most microenterprise owners are primarily interested in earning a living to support themselves and their families. They only grow the business when something in their lives changes and they need to generate a larger income. According to information found on the Census.gov website, microenterprises make up 95% of the 28 million US companies tracked by the census.


History of the concept

The concepts of micro-enterprise and
microfinance Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings ...

microfinance
were pioneered in 1976 by
Nobel Prize The Nobel Prizes ( ; sv, Nobelpriset ; no, Nobelprisen ) are five separate prizes that, according to Alfred Nobel#Nobel Prize, Alfred Nobel's will of 1895, are awarded to "those who, during the preceding year, have conferred the greatest ben ...
recipient
Muhammad Yunus Muhammad Yunus (born 28 June 1940) is a Bangladeshi social entrepreneur, banker, economist and civil society leader who was awarded the Nobel Peace Prize for founding the Grameen Bank and pioneering the concepts of microcredit and microfinance ...

Muhammad Yunus
, founder of the
Grameen Bank Grameen Bank ( bn, গ্রামীণ ব্যাংক) is a microfinance Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Micro ...
(Bank of the Rural), in
Bangladesh Bangladesh (}, ), officially the People's Republic of Bangladesh, is a country in South Asia. It is the List of countries and dependencies by population, eighth-most populous country in the world, with a population exceeding 165 million pe ...

Bangladesh
. The bank was established for the purpose of making small loans to the poor − predominantly women – to help them obtain economic self-sufficiency. The fundamental principle behind the Grameen Bank is that credit is a human right. This strategy was highly effective as the bank grew exponentially; from fewer than 15,000 borrowers in 1980, Grameen Bank had 2.34 million members by 1998, 7.67 million at the end of 2008, 97% of whom are women, and 9.4 million today.


Global definitions

The term ''micro-enterprise'' or ''microbusiness'' refers to different entities and sectors depending on the country.


India

In
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countries and dependencies by population, second-most populous ...

India
, all the manufacturing and service enterprises having investment "Not more than Rs 1 crore" and Annual Turnover "not more than Rs 5 crore" come under this category.


Australia

In
Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. With an area of , Australia is the largest country by ...

Australia
, the term refers to a business bigger than a single owner-operator, but having up to 5 employees.


European Union

The
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...

European Union
(EU) defines "micro-enterprises" as those that meet two of the following three criteria and do not fail to do so for at least 10 years: * fewer than 10 employees * balance sheet total below EUR 2 million * turnover below EUR 2 million .


Philippines


United Kingdom

The
Office for National Statistics The Office for National Statistics (ONS; cy, Swyddfa Ystadegau Gwladol) is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to the UK Parliament. Overview The ONS is responsible for ...
and the
Department for Business, Energy and Industrial Strategy The Department for Business, Energy and Industrial Strategy (BEIS) is a Departments of the Government of the United Kingdom, department of Government of the United Kingdom, His Majesty's Government. The department was formed during a machiner ...
both maintain statistical records which officially classify businesses of 1–9 employees as being micro-businesses. The House of Commons Library maintains a briefing note pulling together these statistical sources. In May 2013 David Young, Baron Young of Graham published a report for the government on supporting micro-business growth in the UK,
Growing your business: a report on growing micro businesses
.


United States

In the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
, a different model is used, but the stated goals and core values are similar. According to the Small Business Administration, a microenterprise or microbusiness is defined as a business with 1-9 employees. They are the most common type of business. As a subcategory of small businesses, with sales and assets valued at less than $250,000 per year, they generally have less than five employees, including the owner. Additionally, such micro-enterprises generally need less than $35,000 in loan capital as a startup, and do not have access to the conventional commercial banking sector. The basis of microenterprise in the U.S. is entrepreneurship, recognizing that people have the right to apply their individual talents, creativity, and hard work to better their lives.


Armenia

The 2020 edition of the Armenian Tax Code the concept of micro-enterprise defines in which case the company or sole owner doing business in this form, is exempt from paying sales tax. In Armenia the micro-enterprise business set up can take individual entrepreneurs, people who do some activities but cannot have employees. Starting 1 January 2020 people will be exempted from all main taxes and hire limitless employees for their economic activities. The tax called PIT(personal income tax) consists of 5000ADM for each month. Micro-enterprise programs, therefore, are built around the philosophy that the unique ideas and skills of entrepreneurs and would-be entrepreneurs should be provided business assistance and small amounts of credit to support the development or start-up of a small business, primarily through the U.S. Small Business Administration. Most organizations in the field also focus their services on those microentrepreneurs who, as defined by federal government standards, are low-to-moderate income. By definition, most of these entrepreneurs are minorities, recent immigrants, women, disabled or for other reasons have special challenges that reduce their ability to access traditional
credit Credit (from Latin verb ''credit'', meaning "one believes") is the Trust (social sciences), trust which allows one Party (law), party to provide money or resources to another party wherein the second party does not reimburse the first party im ...
and other services.


Contributions to the larger economy

Microenterprises are said to add value to a country's economy by creating jobs, enhancing income, strengthening purchasing power, lowering costs and adding business convenience.


Financing

Because microenterprises typically have little to no access to the
commercial banking A commercial bank is a financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking ...
sector, they often rely on "micro-loans" or
microcredit :''This article is specific to small loans, often provided in a pooled manner. For direct payments to individuals for specific projects, see Micropatronage. For financial services to the poor, see Microfinance. For small payments, see Micropayme ...
in order to be financed.
Microfinance Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings ...
institutions often finance these small loans, particularly in the
Third World The term "Third World" arose during the Cold War to define countries that remained non-aligned with either NATO or the Warsaw Pact. The United States, Canada, Japan, South Korea, Western European nations and their allies represented the "First W ...
. Those who startup microenterprises are usually referred to as
entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...
s. Micro-loans are a way for organizations and entrepreneurs to make small loans to those in poverty often in third world countries. The term "micro-loans" is more commonly referred to as
Microcredit :''This article is specific to small loans, often provided in a pooled manner. For direct payments to individuals for specific projects, see Micropatronage. For financial services to the poor, see Microfinance. For small payments, see Micropayme ...
.


Government programs

Government support for microenterprises varies from country to country. Plan for Achieving Self Support is a program offered by the United States
Social Security Administration The United States Social Security Administration (SSA) is an Independent agencies of the United States government, independent agency of the Federal government of the United States, U.S. federal government that administers Social Security (United ...
(or SSA) to encourage persons that are
Supplemental Security Income Supplemental Security Income (SSI) is a means-tested program that provides cash payments to disabled children, disabled adults, and individuals aged 65 or older who are citizens or nationals of the United States. SSI was created by the Social Se ...
(or SSI) eligible who are
disabled Disability is the experience of any condition that makes it more difficult for a person to do certain activities or have equitable access within a given society. Disabilities may be Cognitive disability, cognitive, Developmental disability, dev ...
to set aside moneys for various reasons: training, schooling and funding microenterprise as a Work Goal. The NEIS (New Enterprise Initiative Scheme) is a government program in Australia, which assists unemployed people to start their own businesses. Although it is not specifically for micro-businesses, many if not most businesses started in this program are micro-businesses (in the senses of having limited capital, and only one person involved in the business).


Recent development in the United States

The microenterprise field has a twenty-year history in the United States. While the term "microenterprise" was in common use internationally by the late 1970s, it came into domestic use within the United States about a decade later. Traditionally, the business sector had been categorized into three groups: large, medium, and small. The U.S. Small Business Administration (SBA) defines a small business as having up to 500 employees. In 1991, the SBA recognized microenterprise as a separate or distinct category of business. Microloans may be used for general business expenses such as, working capital and tangible assets, such as inventory, furniture, and equipment. They cannot be used to pay the microbusiness owner, to purchase real-estate, pay existing debt, or for non-qualifying not-for-profit entities. During the 1990s, the microenterprise field grew rapidly in the United States. Starting with a small number of non-profit organizations testing developing country models, the field now has service providers in every state, a national trade association (AEO), a growing number of state-level associations and financing intermediaries, and several research and policy organizations. The Aspen Institute and FIELD (Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination) has collected data on the organizations in the field since 1992. The first directory, in 1992, listed 108 organizations that identified themselves as working in the field. By 2010 this number had grown to over 800 organizations that provide direct services to entrepreneurs—either microfinancing or business development services. Community Development Financial Institutions (CDFI's), particularly Community Development Loan Funds frequently offer loan capital for microenterprises in the United States. Anthony Hilb, author of ''Make Money with a Microbusiness'', and founder of microbusinessowners.com stated, "Microbusinesses have existed since people first exchanged goods and services in their communities. Today, microbusinesses can have a much larger impact; products and services can be exchanged at previously unimagined volumes, distances, and speeds. Credit here is due to advancements in technology. With the internet, apps, and other technologies available (often for free), microbusinesses will continue to explode in popularity."


In developing countries

In developing countries, microenterprises constitute the vast majority of the small business sector—a result of the relative lack of formal sector jobs available for the poor. Microenterprises in developing countries, then, tend to be the most frequent form/size of business. As explained by Aneel Karnani:
Most microcredit clients are not microentrepreneurs by choice. They would gladly take a factory job at reasonable wages if it were available. We should not romanticize the idea of the "poor as entrepreneurs." The International Labour Organization (ILO) uses a more appropriate term for these people: "own-account workers."
Paper to Pearls is another example of a micro-enterprise program, which is based in the United States, but works with women in northern Uganda. The International Fund for Agricultural Development (IFAD) Vietnam country programme supports operations in 11 poor provinces. Between 2002 and 2010 around 1,000 saving and credit groups (SCGs) were formed, with over 17,000 members; these SCGs increased their access to
microcredit :''This article is specific to small loans, often provided in a pooled manner. For direct payments to individuals for specific projects, see Micropatronage. For financial services to the poor, see Microfinance. For small payments, see Micropayme ...
for taking up small-scale farm activities. In Poland, in 2012, there were 1.7 million micro-enterprises, employing 3.5 million persons.


Women in the Dominican Republic

In the
Dominican Republic The Dominican Republic ( ; es, República Dominicana, ) is a country located on the island of Hispaniola in the Greater Antilles The Greater Antilles ( es, Grandes Antillas or Antillas Mayores; french: Grandes Antilles; ht, Gwo Zant ...
, a nationwide survey conducted in 1992 revealed that 330,000 micro and small enterprises created employment for 26 percent of the economically active population.Cabal,Miguel. 1992. Microempresasy pequenas empresase n la Repdblica Dominicana: Resultadados de una encuesta nacional. Santo Domingo: Fondomicro. Furthermore, a significant portion of this is represented by women (38 percent). It is argued that the households of women are targeted more directly by microenterprise support services because women tend to devote more of their income to their households, than do men. Therefore, it is recommended that microenterprise training programs be less gender-neutral and should be diversified to address the central challenges of women's businesses.Grasmuck, Sherri, and Rosario Espinal. 2000. Market Success or Female Autonomy? Income, Ideology, and Empowerment among Microentrepreneurs in the Dominican Republic. ''Gender and Society'', ''14''(2):231–255.


References


Further reading

* * * Munoz, J. Mark (2010). ''Contemporary Microenterprise : Concepts and Cases''. Edward Elgar Publishing : UK. * {{cite book , last1=Oricchio , first1=Gianluca , last2=Lugaresi , first2=Sergio , last3=Crovetto , first3=Andrea , last4=Fontana , first4=Stefano , title=SME Funding: The Role of Shadow Banking and Alternative Funding Options , chapter=SMEs in Europe: An Overview , publisher=Palgrave Macmillan UK , location=London , date=17 December 2016 , isbn=978-1-137-58607-0 , doi=10.1057/978-1-137-58608-7_2 , page=7-41 Business models