Structuring and Sustaining the Relationships that Support U.S. Microenterprise Programs

The paper gives an overview of funding, sustainability and management issues in U.S. microfinance. It finds that:

• If there is public funding support for the microenterprise strategy, this can create opportunity for new and innovative relationships;
• The longer a relationship has been around, the more likely it is to become stable. Practitioners and funders should publicise the impact and success of the microenterprise strategy in the appropriate circles;
• U.S. programs are unlikely to be self-sufficient and most program officials and field experts now acknowledge that programs will continue to need funding from outside sources in order to sustain their operations. Private foundations seem most likely to provide these two kinds of support;
• A new piece of legislation- the PRIME - if enabled by financial appropriations, will help to fill the gap in operating support.

The paper gives a set of policy recommendations:

• Shift funding from demonstration to sustainability: public funders need to assume the responsibility of long-term funding of the U.S. microenterprise strategy;
• Educate policy makers about the merit of the microenterprise strategy: these relationships help contribute to the long-run sustainability of these programs;
• Integrate the microenterprise strategy into larger policy solutions: co-ordination of services to the unemployed must occur at the local, state and federal levels;
• Support state-level networks such as intermediaries: these organisations relieve some of the burden of fundraising from microenterprise programs by securing federal, state and local dollars; they also relieve some of the burden that funders face in having to choose which particular programs to support;
• Evaluate programs with appropriate measures: traditional metrics of performance (number of jobs created, return on investment) are not sufficient to adequately measure the impact of microenterprise development on in;dividuals and communities. Appropriate program evaluation should be encouraged
• The microenterprise field must look beyond current arrangements: merging with other programs, increasing fees and raising interest rates, marketing their services more broadly, making larger loans, and cost-sharing with other public programs.

Conclusions show that:

• U.S. microenterprise programs obtain their funding from a variety of sources including public, private for-profit and private non-profit organisations;
• This diversity of funding sources means that the structure of program/funder relationships varies from funder to funder and from program to program;
• Programs work hard to sustain these relationships and keep funders on board from one year to the next;
• Time and continued upkeep help to institutionalise these relationships.

[Author's abstract]