| Market Forces Shape Microenterprise Development
Schreiner's paper lays out the material conditions in which microenterprise programs operate in developing nations. In the process, he raises serious doubts about their applicability to solving poverty in this country.
What conditions are conducive for making microenterprise programs work in the Third World? First, according to Schreiner, wage jobs are scarce. Second, there is no public safety net. Third, self-employment is not a complex undertakingmeaning that there are few regulations and taxes facing the entrepreneur, customers are generally neighbors, and employees are usually relatives. Fourth, access to credit is severely limited.
Lack of access to conventional lending services has been the motivation for the most distinctive product of Third World microenterprise programsjoint-liability groups whose members cross-guarantee each others' loans as a way of getting around the problem of inadequate individual collateral. As a result of being bound together financially, the members have strong incentives to help one another succeed.
However, these conditions are relevant only for a very small percentage of Americans, according to Schreiner. We have a strong wage-based economy in which most people who want a job can get one, and, if they cannot, a strong social safety net ensures that most will not go hungry or homeless. Starting one's own business, on the other hand, is not a simple matter. There are complex laws and regulations to follow and substantial risk involved. However, if one does choose to start a business in this country, obtaining a loan is rarely a barriereven for the low-income individualbecause of easy access to credit cards.
Interestingly, Schreiner reports that the first microenterprise programs in this country closely followed the group lending programs in the developing world. Over time, however, they have adapted to our particular economic conditions, and most now promote financial and human capital development through collateralized loans and entrepreneurial training.