LATIN AMERICA: Is Micro-business an Alternative to Unemployment?

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jun 30 1999 (IPS) - The growing importance of micro- business in Latin America was demonstrated this month when the Interamerican Development Bank (IDB) invited participants to an Interamerican Forum on Micro-businesses.

The response was massive. More than 600 people, including small entrepreneurs, micro-lenders and leaders of non-governmental organisations, packed the Buenos Aires meeting hall, and many others were unable to get in.

“In the last five years, the micro-business has grown so fast that governments have been forced to include it as a substantial part of their development strategies,” said Donald Terry, head of an IDB fund for micro-businesses, at the opening session of the assembly.

The IDB, which allocates 100 million dollars annually to finance micro-business activities, is just one of the organisations that has underscored how micro-businesses can help to alleviate Latin America’s high unemployment.

According to the International Labor Organisation (ILO), the average rate of unemployment in Latin America increased from 7.2 percent to 8.4 percent between 1997 and 1998. The agency estimates joblessness will hit a new high of 9.5 percent this year.

The ILO noted that the rate of underemployment or irregular employment varied from a minimum of 35 percent up to a maximum of 74 percent in the countries of the region, contributing to the worsening of poverty in Latin America.

In many Latin American countries, the response to this lack of opportunity has been the growth of micro-businesses, or the development of independent work by tradesman, street peddlers, repairmen, cooks, seamstresses and other workers.

Terry noted that Bolivia is the country in the region that best exemplifies the use of micro-business, despite – or perhaps because of – being one of the region’s poorest nations. Already, he said, there are several private financial institutions that serve micro-businesses there and help them obtain much-needed funds.

“Bolivia is doing magnificent work, not only in the development of this sector but also through the support given by the government to the private bank (that finances micro- businesses), granting it incentives that require it to take a chance on loans to an insolvent sector,” he said.

Judith Martinez, from the Colombian organisation ‘Corfi Mujer,’ traveled to Buenos Aires with assistance from the US-based International Coalition for Women and Credit, to participate in the IDB forum and explain her work in micro-business.

Martinez told IPS that in 1990, when she was 22 years old and unable to find a job, she started to design and sew children’s clothes, embroidering them by hand. She later moved on to creating lingerie for women, and then men’s underwear, always with her own hand-painted or embroidered style.

“Now I have three directly-employed workers and two part-time employees, to whom I bring clothes to be embroidered in their homes,” she said.

With the credits she obtained, Martinez was able to buy equipment and participate in expositions, although her business still operates out of her home. “The next step is to buy a commercial space,” she said.

Along with 350 other businesspeople from Colombia, Nicaragua and the Dominican Republic, and agents from 17 micro-lending institutions, Martinez participated this month in a meeting in the Dominican Republic to present an action plan to assist other women in the micro-business sector.

The plan, which took 18 months to devise, proposes legal projects, financial and social services, and strategies of business development.

Another of the institutions present at the IDB forum was ‘Prisma,’ from Peru, a non-governmental organisation that obtains funding to assist agricultural micro-businesses.

Prisma promotes the formation of close-knit groups, composed of a small nucleus of members who set up communal banks with a president and treasurer, who are qualified to offer loans at low interest rates without the requirements of an official bank. (FIN/IPS/mv/mp/dv-if/ks-fah/99)