Microenterprise

Rakesh Kumar

15 Sep, 2023

Microenterprises, also known as microbusinesses, are small-scale businesses operated by micro-entrepreneurs with fewer than 10 employees and a small capital, often obtained through advance loans. These businesses primarily serve their local communities, offering specialized goods or services, and play a crucial role in supporting the local economy and improving living conditions. They are a vital part of grassroots economic development, helping to create job opportunities and foster community growth.

What is Microenterprise?

Microenterprises, microbusinesses or micro-entrepreneurs are known as small businesses where a very small number of employees engage and operate through such a small amount of capital. Within a Microenterprise, less than 10 people operate any business, and the investment behind the business can be taken as an advance loan from any bank or any other establishment. Micro businesses usually cover small local areas where they specialize in providing their manufactured goods or services as per their business, like street vendors, carpenters, local machine operators, etc. A person who usually operates such business are known as Micro entrepreneurs. They play a very vital role in their local area economy.

Key Points

• Businesses are usually small in nature, and their operating funds are based on advanced startup loans.
• Their investments depend on microcredit, which is given to those without collateral value, credit history or any previous employment history.
• It improves the people’s life living in local areas and provide them with such goods and services mostly required in their local areas.
• They can be considered as the hearts of their own local region economy.
• Muhammad Yunus, founder of Grameen Bangladesh Bank, came up with this concept and won a Nobel Prize in the year of 1976. 

Understanding the Essence of  Microenterprise

• Microenterprises, microbusinesses or micro-entrepreneurs, known as small businesses, where a very small number of employees are engaged and operate through such a small amount of capital.
• Microenterprises have less than 10 people operating any business, and the investment behind the business is much less, which can be taken as an advance loan from any bank or any other establishment.
• Such business plays an important role in improving the life status of people living within developed countries and usually offers goods and services to them in their locality.
• Not only do such businesses support and improve the lifestyle of establishment owners, but they also attribute good efforts to their economy. Microenterprises can boost a person’s purchasing capabilities, improve their income value, and create new opportunities for new jobs.
• Generally, small financers support and help Microenterprise by providing them small loans with no collateral value so that families with no income or any individual could start their own business and help build their local economy.
• Various NGOs & existing banks used to provide loans for small businesses just like a regular loan process related to repayments and interest.
•  Muhammad Yunus created Bangladesh Grameen Bank with an approach to provide easy loans to those persons or families who wish to start their own businesses for survival and to improve their community economy. This concept was developed in the late 1970s to improve the conditions of people- mostly the women who received this loan facility under Grameen Bank.

Various organizations around the world have started to accept this model and help many people, even in developed countries.

Types of Microenterprises

Usually few in size with scope, microenterprises together constitute and cover such a large portion of the economy in terms of new job opportunities. Businesses come under the category of microenterprise like-wise

• Small street vendors
• Carpenters
• Plumbers
• Self-employed motor mechanics
• Local machine operators
• Cobbler
• Small Farmers
• Dry cleaners
• Tailors, etc.

Why are Microenterprises Important?

Microenterprises play an important role in building any country’s economy and dominant models of businesses among various nations. In the Indian Context, microenterprises have the highest number of employers as it is one of the easier approaches with less paperwork to start any business with minimum capital. In fact, they boost our economy.

• It resolves the unemployment issue within the nation with respect to those locations having less income generations. It allows unemployed people to start their own startups with minimum financial support.
•  Funds for Microenterprises minimize the cost of production goods by producing goods locally at a low cost. They help in increasing the purchasing power of the poor people living in backward locations.
• It supports the sustainable development process of a nation as a small business established in the local region and easily delivers goods and services as per needs. It limits the excessive need for transportation and supports to use the of locally available resources like human use to deliver goods.
• It serves as a bridge between cities and villages to improve the economic conditions of villages and restrict the migration of labour from rural areas.

Microenterprises Contributions to Our Indian Economy

• Microenterprise is very important for our country’s prosperity because our nation’s per capita income has increased and helped in resolving the poverty issue.
•   Microenterprises are the main source of employment as they generate a large number of new job opportunities within the nation. There has been an increase in the money/cash flow within the rural parts of India and, somehow, lifted the standard of living in backward areas.
•  Poor entrepreneurs who started their own businesses could easily improve the economic and education levels of the next generations. And be a role model for the younger in their locality.

Indian government itself has different steps and services for beginners to improve Microenterprise’s businesses. So, it would be more beneficial for startup microenterprises to take loans, especially from government banks, including governmental micro-lending authorities, instead of money lenders.