David Bussau and Russell Mask Chapter 3 Reviewed by Abigail East Christian Microenterprise

Income Generation 1.I15th percentile i.e. selling merchandise on sidewalks)High quality MED work at this level results in: less: vulnerability, minimal: employment opportunities. High impact=sustaining jobs, low impact: creating jobs 2.micro-enterprise(1-10 employees) MED=more: Income, employment 3.small-enterprise(11-50) MED=more: Income, employment 4.medium-scale enterprise(51 or more) 5.large-scale enterprise Continuum of Economic Activities (Figure 1)

Savings Schemes · Take place among people who know each other · Relatively small amounts of money · Multiple functions(credit+trade+commerce=insurance against risk) INFORMAL FINANCE SCHEMES(3 important elements)

Poor People Save Important note: poor people save and have been doing so in the 2/3 world for centuries, relying on informal mechanisms to save. Informal Finance- all financial transactions, loans and deposits, occurring outside the regulation of a central monetary or financial market authority.

ROSCA Size/Purpose: 15-30, up to 60. Fixed amount /week lottery Use: consumer goods, investment etc Getting Started with OneNote Page 2 Use: consumer goods, investment etc Longevity: time bound Attraction: simple and transparent

ASCA ASCA’s Methodology: not time bound or fixed amount Ex. Credit Union, Burial society Longevity: as members see fit Functions: insurance services Challenges: transparent if time bound. savings accountability is a problem with larger amounts Interest: on loans, balancing out inflation Excess cash managed by loaning to other credit unions

Promote, Provide or Partner? NGOS and missionaries considering microfinance and/or MED need to research current community schemes and extent of assistance to community 1. Promoter: help poor set up program/self managed scheme 2. Provider: sell service to the poor 3. Partner: existing provider 3 OUTSIDER OPTIONS 1. TIME HORIZON 2. SUSTAINABILITY 3. DIRECT SERIVCES 4. GOALS FOR OUTREACH 5. LINKAGES 6. MACROECON AND POLITICAL CONDITIONS

Incorrect MED  Inappropriate loans: burying people in debt ie student loans  Subsidized credit: not real market environment  Low repayment rates: reduces confidence, increases cost  Local government programs: often misappropriated or misused  Unfair preference: i.e. believers/cliques How to INCORRECTLY implement MED 1. Est. $ after all production costs are subtracted 2. Est. and quantify “senior claims” i.e. food, fuel 3. Assess likely problems during loan i.e. weather