Micro-Enterprise Support: An Upcoming Issue And Solution For States

As state governments wrestle with enacting welfare reform and the challenge of building stability in economically at-risk communities, micro-enterprise support is both a need and a solution.

Micro-enterprise development, considered to be the key to sustainable growth in emerging economies of the world, is also the foundation for building stability in economically at-risk communities here in the U.S. The tendency in economic development policy has been to focus on established business organizations rather than micro-business start-up. The average Community Development Block Grant loan is about $270,000. However, new job growth frequently occurs on a smaller scale, and involves home-grown firms.

Typically, small or start-up businesses need smaller loans than state governments or private banks are willing to provide. In the early 1990s, North Carolina led the way by allocating funds from its industrial recruitment budget to fund a community-based development strategy which includes a micro-enterprise loan fund. This initiative and others like it demonstrate how existing money can be re-channeled to create effective local opportunities and leverage private resources at a lower cost.

Steps Toward Micro-Enterprise Sufficiency At the State Level

CPA’s surveys of practitioners revealed policy steps that can create more effective micro-enterprise support:

• Using intermediaries – particularly to access large federal programs administered at the state level, such as HUD Community Development Block Grant programs, initiatives at the Small Business Administration and U.S. Department of Labor and others – as conduits of public capital.
• Leveraging private capital through reinvestment or risk management programs such as Economically Targeted Investment (ETI) programs or incentive banking programs.
• Creating community capital networks – these provide valuable information on local market trends, access to block grants and private financing, and strategies for intermediaries.

By developing a solid policy foundation to support micro-enterprise and working with non-profits and private organizations, states can help create an environment conducive to the growth of small businesses.