The gray area in microenterprise development

  • H. Pirela Martinez (1990). Grassroots Development, 32-40
  • Abstract: Informal finance arrangements seem to suffice as a resource for survival in the informal sector, but they do not appear to offer much when it comes to the structural transformation of enterprises. They do not address properly the needs of the "gray area', those trying times when microbusinesses are about to make the quantum jump into the modern economy, called graduation. Likewise, NGO credit programs that emulate the mechanisms of informal finance may achieve self-sufficiency because they charge high interest rates on small, rapidly rotating loans, but it does not necessarily follow that they are actually helping microentrepreneurs to succeed. The gray area is unclaimed territory for credit programs. Seizing this unclaimed territory requires grappling with issues such as long-term interest rates, risk assessment and management, loan ceilings, and collateral, among others. -from Authors
  • Theme: Finance
  • Keywords: credit policy, finance, informal sector, microenterprise development
  • Reference type: Journal Article
  • Geographic location: Global South
  • Quality:
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