UNDP Approaches
Poverty and its knock-on effects remain a global problem. While huge advances have been made in alleviating poverty, further reducing it remains key to long-term development. The vast majority affected by the phenomenon of poverty are born into poor families. The challenge being not to escape poverty, but to break the vicious circle and overcome the initial unfavorable conditions by making a new start which will allow for sustainable development and provide a basis for income on the long term. Only by taking their own initiative and taking advantage of a 'hand-up' , rather than depending on constant 'hand-out' support of others, can the poor break the vicious circle on the run and become independent. However, starting anew requires initial capital most poor people do not have and hence the vision of becoming independent appears unrealistic.
Microfinance/microenterprise facilitates such an approach by creating opportunities for the poor to help themselves. Microenterprises can apply for such support once they fulfill the criteria defining a micro enterprise, which has been set as being: a business with five or less employees, which requires $35,000 or less in start up capital, and which does not have access to the traditional commercial banking sector. (Defined by AEO and the Microenterprise Development industry).
Microenterprise development or MED is seen as a holistic approach, embracing poverty alleviation, human development and economic development strategies. For this reason, a wide range of institutions are involved in microenterprise development. After a decade of operation, microenterprises programs in the U.S., are creating jobs, generating income, building assets and enhancing skills. Similar stories of success are the examples of Asia and 'the Grameen Bank' where Microfinance has triggered development and empowerment. MED has also been a useful tool to facilitate the empowerment of women allowing them to run a business while still retaining traditional tasks or duties.
These results are particularly impressive considering the fact that a significant proportion of assisted microentrepreneurs are individuals facing barriers presented by race, gender, ethnicity, income, job market fluctuations, or location. Whether the business is the sole source of family income or a crucial supplement to family earnings, microenterprise development has put many low-income families on the road to self-sufficiency.
Today small businesses are the backbone of the U.S. economy accounting for some 53% of all jobs (Office of Advocacy, Small Business Administration.) The smallest of these firms, self-employed individuals and microenterprises employing fewer than ten workers, are playing an increasingly important role within economies.
By generating new economic activity, microenterprises also increases public tax revenues and private incomes, thereby reducing dependence on public assistance, which helps to shrink public budgets. These significant social and economic benefits far outweigh the cost of public and private investment in microenterprise development.
Thus it is important, not only for the people ' but also for the local economy- that such enterprises are built and given the chance to develop. Microenterprise development programmes have been designed to address the issue of poverty at its roots by helping small enterprises, or people who wish to open such an enterprise. Most micro-enterprise development programs, in general, target their services to low-income people. Programs are tailored to meet the needs of specific target groups such as welfare recipients, minorities, women, the working poor, and individuals or business sectors that, for these and other reasons, lack access to credit. Some programs also target young people, refugees, homeless individuals and rural areas. MED provides opportunities which allows individuals to follow their interest, secure their livelihood and become independent. Existing enterprises are strengthened and gives opportunity for new ones to get stared.
