Moving Microenterprises beyond a Subsistence Plateau

This paper argues that microcredit programs could foster even greater economic progress by ensuring that clients receive appropriate human capital development.

Without adequate training of microentrepreneurs, microloans may allow the poor to move from abject poverty to subsistence income levels, but limited skills leave the opportunity for substantial firm growth untapped. The potential of these firms to employ others also remains unfulfilled. This paper reviews relevant microcredit and microenterprise literature, and then argues for increased microentrepreneur training based on the case of a Manila microentrepreneur. The paper concludes that:

• • Investments in human capital need to be coupled with seed capital funding if these firms are to fulfill their potential toward poverty eradication;
  • • With increasing loan amounts, it is important to provide insights into cost-benefit analysis-based on accurate records-so that sound business decisions can be made;
    • • As businesses grow beyond the subsistence level, training in simple strategic as they grow microenterprises will employ additional workers, allowing more individuals to move out of abject poverty;
      • • To alleviate poverty through microcredit programs, programs must emphasize expansion and provide the training necessary to achieve it.