Microequity and Microfinance

Microenterprise development is an effective means of assisting the poor in developing countries

This paper:

• Discusses the example of the Village Enterprise Fund, an NGO that makes small grants to entrepreneurs in Kenya, Uganda, and Tanzania;
• Highlights that capital, given to the poor to start microenterprises, has almost exclusively been provided in the form of loans;
• Suggests that very few programmes have used equity financing through grants;
• Argues that microequity finance, in the form of small business startup grants, may in some cases be preferable to microcredit programmes;

The article concludes that:

• Microenterprises in developing countries need both grants and loans;
• The example of the Village Enterprise Fund in Kenya, Uganda, and Tanzania demonstrates how a microequity institution has succeeded in reaching many of the rural poor.