Non-Financial Assistance to Microentrepreneurs

This article is available on pages 12 and 13 of this compilation document.

Non-financial assistance is a focus of USAID's Microenterprise Initiative.

Notes that:

• Direct firm-level non-financial services can only be cost-effective if they are delivered on a large scale, and can use their delivery system to minimise transaction costs;
• A number of more indirect services, including technological innovation, larger-smaller firm linkages, and policy reform, may offer an alternative path to cost-effective microenterprise support--but how cost-effective these services are depends on how they are delivered;
• Concentrating on particular subsectors, chosen because they show strong market growth opportunities, can make it easier for a microenterprise support institution to identify successful strategies for negotiating both the above paths to cost-effective non-financial assistance.

Discusses institutions scaling up non-financial services on the back of a large, pre-existing client network. They lower transaction costs through building training and technical assistance services for a captive audience. Such large networks are not common but where they exist, they have evolved through considerable investment, sometimes for microenterprise finance, sometimes for other social development programs. Therefore this pathway for developing non-financial services is an interesting, but limited one.

Forthcoming GEMINI briefs will consider alternative non- financial assistance strategies for situations where piggybacking is not possible.