Microcredit and self-employment: comparing high-income and developing country programmes

Micro-enterprises in developing countries that receive a microcredit loan from a microcredit institution are not receiving additional non-financial services that maximize the potential for micro-enterprise sustainability and growth. Too many micro-enterprises that receive credit fail to generate significant additional employment. Microcredit institutions need policy changes to correct this problem. The uptake of growth-oriented policies needs to be widespread among microcredit institutions to ensure that clients sustain and grow their micro-enterprises. Micro-enterprises that flourish create jobs, which contribute to economic growth. To identify good practices for micro-enterprise sustainability and growth, I examine the literature and review case studies of microcredit programmes in both high-income and developing countries. These case studies are analyzed for their strengths and weaknesses. As to the latter, recommendations for improvement include offering three different training options, each bundled with a loan product: introductory training for micro-enterprise starters; comprehensive assistance for micro-enterprise expansion; and a strategic mentoring programme.