Table of Contents

What is Micro-enterprise?

A micro-enterprise is generally defined as a small enterprise employing few people that can operate in mini investment. The micro-enterprise refers to a small business financed by microloan or micro-credit. Micro-enterprise is also defined as a small business, which starts with a smaller amount of investment and employs a small number of people. The global term micro-enterprise refers to a small business as a family business employing less than 10 people. The Cambridge dictionary defines the enterprise as “A micro-enterprise that employs five or fewer people and requires $35,000 or less in startup capital.” According to Midgley (2008), cited by Lateh et al., (2017), the term micro enterprise “has been realized since the 1990s. Micro enterprise known as small businesses owned and operated by poor people or groups of poor people with the support of sponsoring organizations”. Also, Lateh et al., (2017) affirm that “micro-enterprises may be owned or operated by individuals, and often their family members are also involved”. The definition of micro-enterprise is not the same which is different by the period and the country. The term microenterprise distinguishes according to each country and region’s social, economic, and political setting. A micro-enterprise is known as a small independent company or industry in some countries, it depends on the country’s legislation. In Nepal the following conditions must be met to be considered as a business when its number of employees does not exceed nine workers, the net amount of the annual number of businesses does not exceed 2 million rupees, the annual transaction doesn’t exceed ten million rupees, and with the consumption of energy capacity (electric, fuel or oil) less than 20 KV (Industrial enterprise act 2076).

The idea of micro-enterprises was developed in the late 1970s in Bangladesh introducing the concept of micro-finance. The concepts of micro-enterprise and microfinance were developed in 1976 by Nobel Prize holder Muhammad Yunus, the founder of the Gramin Bank (Bank of the Rural), in Bangladesh. The bank was established to make small loans to the poor predominantly women to help them obtain economic self-sufficiency. Micro-enterprise is a small business that has been an assistant for poverty alleviation in developing countries like Nepal. It also helps the country’s economic growth by promoting its business targeted at poor families. Especially, the micro-enterprise generates employment and self-employment which becomes a way of improving family life and living standard. The meaning of micro-enterprise is a small business that is established with a small amount of loan borrowed from financial institutions and operates the business with a smaller workforce. Micro-enterprise can be established utilizing existing skills, knowledge, and resources as well however micro credit is encompassed as an investment capital. Micro enterprises are of paramount importance for the country’s economy which provides large-scale income-generating opportunities for the dominant population, especially poor and unprivileged people.

Types of Micro Enterprise

Micro Enterprises are the foundation of the large enterprise or industries via small and medium enterprises through the steps of capital investment. It is a cornerstone for entrepreneurs to initiate mobilizing capital for large income-generating opportunities. Many types of micro-enterprise are determined by the concept and definition of a nation’s act and policy. Following the criteria for the enterprises and industries applied by the country, we can categorize several types based on their different elements and characteristics. In Nepal, there are several types of micro-enterprises which are categorized based on capital investment ( not exceeding 2 million), number of employees ( less than nine), business turnover ( not exceeding ten million annually), and energy consumption ( less than 20 KV). The enterprises that followed these rules and criteria are the micro-enterprises which can be different types of trades or businesses. The enterprise or industry is classified by the respective authorities based on the nature of goods and services. Simply, micro-enterprise can be categorized into two types by its major characteristics that recognize its principle and values.

1. On Farm (Argo-based) Micro Enterprise

An enterprise related to agriculture and forestry products is called on farm enterprise. On-farm enterprises are dominant practices in the developing country that have contributed to the economic growth of the country. It is based on agriculture and forest products in which entrepreneurs have operated their business commercially and fulfilled the required standards applied by the respective authority. Generally, on-farm enterprise helps fulfill the basic needs and commodities of local consumers. It is very important to the locality which can create large employment opportunities at the local level. It also contributes protect the environment and biodiversity. The element of protecting the environment and biodiversity somehow mostly falls in the business ecosystem. Most of the enterprises can be promoted as ‘green enterprises’.

This is an enterprise that recognizes and utilizes traditional or indigenous knowledge and skill for its production. Traditional skills and knowledge-based cottage industries can be transformed into micro-enterprises by scaling up business standards not undermining the knowledge and skills as well. However, new skills, knowledge, and technologies are supposed to have been a business more commercial for making more profit with higher turnover. Commonly, on-farm enterprises are based on labor and labor plush technology and skills by the operational circumstance. In some cases, it depends on the geographical setting and climate. The types of enterprises and products can be different as per the geological setting and the climate. Sometimes, such enterprises are interdependent in producing and selling systems.

Likewise, an entrepreneur can produce different products more than two types of products through integrated trades simultaneously. For some such an enterprise, natural resources are sourced out as forest products that’s why it is necessary to use forest products sustainably. In developing countries, micro-enterprises have been a path to economic growth that is established and operated by the dominant people of the country. Here, below are some examples of on-farm enterprises that can generate an idea to choose the trades appropriately in line with the available resources and market.

1. Beekeeping 2. Vegetable farming 3. Fruits farming and processing 4. Cow Farming 5. Buffalo Farming 6. Dairy products 7. Goat Rearing 8. Pig Rearing 9. Poultry/Dunck 10. NTFP/MAP nursery 11. Fishery / Hatchery 12. Silk farming & processing 13. Tea farming & processing 14. Coffee farming & processing 15. Herbs farming & processing 16. Floriculture 17. NTFP/MAP farming 18. Rubber farming 19. Cash crops farming 20. Mashala farming 21. Mushroom farming 22. Cotton farming 23. Bio-brigade 24. Allo farming& processing 25. Allo cloth making 26. Handmade paper 27. Compost /organic manure 28. Meat shop & processing 29. Pickle making 30. Bamboo furniture 31. Duna Tapari 32. Nettle farming & processing 33. Cold/rustic store 34. Bird farming (Kalij, Ostrich) 35. Horticulture 36. Fruit juice 37. Brewery 38. Potato chips 39. Chaku 40. Lentils farming & processing 41. Vegetable & fruits nursery, etc.

2. Non-farm Micro Enterprises

A non-farm enterprise is the same business but is established and operated by entrepreneurs using multiple functions of capital except agro-forestry products. Although agroforestry products are involved in these enterprises as credential goods or producing materials that are already final products sent to the market. An off-farm enterprise has multiple functional capacities including skills, knowledge, technology, and entrepreneurship. These types of enterprises produce goods and services for not only the locality but for wider customers. However, first consumers are those who utilize and consume the goods and services whether they are local or not. In some cases, locals can’t be a consumer of the goods and services of the enterprise. For instant, Thanka, handmade carpets (Galaincha) are targeted at international customers and exported to the international market.

The off-farm enterprise is based on skills, knowledge, technology, and entrepreneurship that produce goods and services for its customers. However, the enterprise, producing goods can not produce service at the same time. Although an entrepreneur can operate both types of business simultaneously. It can be established using existing capital comprised of traditional skills and knowledge, own obtained skills and knowledge, available resources (producing materials, technology, financial capital, spatial assets, etc.) paying attention to the costumers’ interests and availability of the market. However, it is necessary to upgrade the required skills, knowledge of entrepreneurship, and technology along with investment capital for fulfilling the interests of now dynamic customers.

These types of enterprises are mostly regulated by the authorities. Because the products and services of the enterprises are related to the public’s needs and interests. Off-farm enterprises have a direct linkage to on-farm enterprises, but it seems to have not been channelized in the business ecosystem. The linkage to the on-farm business can be called backward linkage where off-farm business supply their products to the off-farm enterprises as being the first producer called forward linkage. Goods and services exchange between both types of business although they are not their market themselves.

Generally, we can understand that non-farm enterprises are operated using specific skills, knowledge, and technologies. These elements are inter-dependable in the production cycle of the enterprises. Here, it has discussed skill-based enterprises that are directly connected to off-farm enterprises. An enterprise, which depends on skill is called a skill-based enterprise which is under the off-farm enterprises. In this enterprise, the dominant factor of skill is associated as an inalienable component throughout its business cycle. A skill is indispensable to such an enterprise, whether cottage or micro-enterprises of small or large industries. A skill is associated with not only the production cycle even with the management and operation functions. Knowledge contributes to delivering skills in the enterprising field. Therefore, knowledge and skill are an inalienable element to the enterprising.

Here, we will discuss skill-based micro-enterprise where the enterprise doesn’t become an enterprise in the absence of skill. In such types of this enterprise, skill is the central point that guides the business success. This enterprise requires skill in the production and service delivery cycle. An enterprise doesn’t run without specific skills. It requires an entrepreneur or their employees. Skill determines the enterprising of the business functions. A business where skill keeps concerns as a dominant element can be called a skill-based enterprise which is ultimately under the off-farm business. The products and services produced in the enterprise are also based on local needs and interests however the market is beyond. A skill is a human ability that can be obtained from training and exposure. For instance, Barber becomes an entrepreneur when he/she obtains the skill of Barbery. Here, the skill of Barbery is a major thing to the enterprise. Without Barbery skills, nobody becomes an entrepreneur or proprietor of the Barbery business. Off-farm enterprise contributes to economic growth in developing and least-developed countries. In such types of business, maximum human capital is involved in producing goods and services not undermining the other capital and technologies. Some non-farm micro enterprises are presented below as an example.

1. Hotel/Motel 2. Homestay 3. Tea shop 4. Cafee 5. Furniture 6. Carpentry 7. Embroidery 8. Beauty parlor 9. Bengal making 10. Handicrafts 11. Barbery 12. Sculpture 13. Hojiyari 14. Knitting and weaving 15. Fashion design/tailoring 16. Carpert (Galaincha/ Radi) 17. Thanka painting 18. Grocery shop 19. Automobile repair 20. Mobile repair 21. Electrical repair and maintenance 22. Gift house 23. Shoes making/repair 24. Aran Bhanti 25. Pottery 26. Books and stationery 27. Communication 28. Photography 29. Agrovet 30. Bread factory 31. Washing service/Dry clinic 32. Street food 33. Dry food 34. Dhaka weaving 35. Museum 36. Interior decoration 37. Health service/Clinic 38. Slate stone 39. Food & commodities di. po. 40. Tour operating 41. Bakery 42. Ice cream/Kulfee 43. Blessing materials 44. Sanitary materials 45. Mill, etc.

Merits and Demerits of Micro-enterprise

Though micro-enterprises play an essential role in the local economy, they have their own merits and demerits that need to be analyzed in the business functions.

Merits

Demerits

Easy to start
Need less capital
Utilize local resources
Easy to operate
Flexible to change
Low overheads
Close customer relationships
Provide Independence
Low risk
Financial rewards

Financial risk
Limited resources
Multi-tasking
Low turnover
Low investment, low profit
Limited market access

Conclusion

Micro enterprises are important as they play a significant role in the economic growth of local people. Micro enterprises generate income and provide employment opportunities at the local level. It gives tangible efforts to the local economy. It helps improve the quality of life for low-income groups. The success of a micro-enterprise is important for the development and progress of rural communities. The micro-enterprises add value to a local economy by creating employment opportunities, generating income, and adding convenience.

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