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What is a Microenterprise?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 07 December 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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A microenterprise is a small business venture that is often created and run by an individual. Typically, that individual has little or no resources to invest in the establishment and operation of the business. While different countries have slightly different criteria for identifying a small business as a microenterprise, there are a few generally accepted characteristics associated with this type of effort.

In most countries, a microenterprise is often unregistered and will have somewhere between one and five employees, including the owner of the business. There is usually some type of limit on the amount of assets the business can have and still fall into this category, although in most cases, that figure is a modest one. The businesses are often opened and operated by a single individual, and may begin as a means of producing a secondary income. A business model of this type may be used when an individual becomes unemployed and seeks to create his or her own business in an attempt to make a living.

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Many people use the terms microenterprise and microbusiness interchangeably. There are a number of similarities between the two, although there is one small difference that is sometimes noted. A microenterprise is a business effort that is started with the aid of some type of outside funding, usually referred to as microcredit. The microbusiness is normally started with no outside funding or investment, and grows incrementally based on the business’s ability to generate revenue that can be used for expansion.

There are a number of entities that can assist in the launching of a microenterprise. Private investors may consider a given venture to have a great deal of potential, and choose to underwrite the costs of operation for a given period of time, in return for a portion of the profits. Some federal and local governments around the world assist entrepreneurs in establishing those businesses as a means of bolstering domestic economies and reducing the unemployment rate within the jurisdiction. There are also non-profit organizations that extend what are known as microloans or microgrants, usually as a means of assisting minorities to successfully launch a new business venture.

While some people consider a microenterprise as inherently inferior to other types of businesses, the fact is that small businesses of this kind often make it possible for people to improve their financial circumstances without the need to rely on government assistance or various charitable organizations. From this perspective, the microenterprise can be seen as a vehicle for creating businesses that in turn purchase resources from other businesses in the community, and help the entire area stronger financially. As with any business, a microenterprise can fail, although many of these small businesses thrive and become excellent sources of income for their owners and employees.

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