This 1994 report, “Strategies for State-supported Microenterprise Development Systems,” examines how state governments can support the growth of microenterprises, focusing on the experiences of Montana, North Carolina, and Vermont, and detailing Nebraska’s emerging program. Key takeaways include:
- Microenterprise Growth: The U.S. microenterprise lending programs grew from a handful in 1989 to over 200 by 1994, facing challenges like rapid expansion, developing best practices, and securing stable funding.
- State Government Role: States are increasingly interested in supporting microenterprise development as a strategy for economic development and self-sufficiency. This involves addressing issues like appropriate public policy, fitting microenterprise into existing development strategies, and securing funding.
- Comprehensive Statewide Strategy: The most effective approach involves:
- Broad program objectives: statewide coverage, service to the full microenterprise sector, and integration of lending with business training.
- State-level, multi-partied planning processes, which can be legislative, administrative, or coalition-driven.
- A two-tiered delivery structure: a statewide entity supporting a network of local delivery organizations.
- Intermediary Support Structures: Statewide support organizations consolidate critical functions (e.g., fundraising, staff development, program design, marketing) to improve efficiency and provide advantages to local delivery organizations.
- Funding: Funding needs include system loan capital, state organization operations, and local delivery organization operations. Raising operating funds is often more challenging than raising loan capital. The Community Development Block Grant (CDBG) program is identified as a flexible and regular funding source.
- Nebraska’s Experience: Nebraska’s Microenterprise Partnership (a joint project of NIFA, DED, and the Nebraska Community Foundation) is designed with four components: a clearinghouse for information, strategic support for local services, direct programs to fill gaps, and development/evaluation. Its structure incorporates lessons from other states, emphasizing flexible matching, operating support, and unique funding partners to ensure long-term sustainability.
- Practitioner’s Perspective: Practitioners seek consistent, long-term state support, which provides legitimacy with other funders. They are concerned about tailoring programs to funding requirements, increased monitoring, and the potential for new providers.
