What is a Micro-Enterprise?
As financed by microcredit, micro-enterprise helps improve the quality of life for people in developing countries like India. Some of the common examples of micro-enterprise businesses include grocery stores that sell dairy products and other groceries, fruits, etc. These businesses not only help in promoting quality of life for business runners but also add value to the local economy. They produce numerous jobs at small-scale, improve income, and boost purchasing power. Learn more about what micro-enterprise is and how they are helpful for the economy of the country.
Definition of a Micro-Enterprise
Microenterprise also refers to micro business, which starts with a smaller amount of capital plus employs a small number of people. Generally, microenterprise serves as a trademark of developing the country as well as its economy. Many people found a shortage of jobs in the formal sector; however, micro-enterprise help them to find a good job in a desirable sector. Apart from creating jobs, they increase purchasing power, reduce production costs, and offer convenience.
Even the government encourages microenterprise development in low-income areas. It helps not only business but also the economy to grow. In addition to it, such enterprises aim to promote sustainable development. A micro business must get treated in the same way as any large business from a proper business plan to professionalism. The higher commitment and good initiative lead to the development of micro-enterprise businesses into bigger entities.
Purposes of a Micro-Enterprise
Microenterprise in India helps in creating large-scale employment in the economy. With the use of limited finances and investment, micro-enterprises aim to provide good jobs to job seekers.
One of the great objectives of microenterprise is to promote trade and industries in an economically backward area. As a result, it helps in the development of the economy.
Micro enterprises help in bringing the backward areas into the plan for national development. They aim to encourage regional development.
The above picture shows ladies selling food items to earn money and it’s a kind of micro business. They may work in industry or may start their own business.
Microenterprises help in filling the gap effectively in developing economies. It helps in improving the mobilisation of plenty of natural resources in India.
Irrespective of where people live and work, micro-enterprise helps in improving the living conditions of all citizens.
With the emergence of advanced technologies, it is becoming a challenge for micro-enterprise businesses to balance their reputation. The Government of India has already taken several steps due to which ease of conducting business for microenterprises has increased.
Types of Micro-Enterprises in India
Microenterprises contribute a considerable portion to the economy. Some of the business types considered as micro-enterprises are as follows.
Street vendors
Independent mechanics
Computer services
Lawn and landscaping companies
Small farmers
Carpenters
Accounting
Plumbers
Machine shop operators
Shoemakers
The above picture shows a micro-enterprise business where a group of ladies is making pots to earn for their families.
In some of the cases, people become micro-entrepreneurs by need or necessity. Many people in the country engage in self-employment to fulfil their family needs and serve the community. However, a subset of micro-entrepreneurs comprises highly talented people who prefer entrepreneurship over paid employment. The micro-enterprises have high potential to run highly profitable businesses and enhance the national economy.
What is the Role of Micro-Enterprise in Economic Development?
The successive development of micro-enterprise and small-scale industries in the nation has led to a significant rise in the per capita income. It can be seen from various micro-enterprise examples that these contribute to the country’s employment.
With the economic development of smaller towns and villages, it helps fill the gap between rural and urban areas. The significance of micro-enterprise businesses can be noted from the fact that it serves as one of the largest employment providers in India.
The establishment of micro-credit and micro-financing in India is one of the major components in microenterprise development. It allows individuals with low, moderate, or no income to start their own business and earn.
With a relatively low investment, the micro-enterprise produces immediate employment opportunities. Additionally, it promotes a more reasonable distribution of national income and makes efficient mobilisation of human skills.
Though micro-enterprises play a vital role in the economic development of any country, still there are some challenges that need to be taken into consideration. It requires a lot of government services as well as approvals. However, by making critical efforts to develop self-sufficient groups of manufacturing competence, microenterprise development can be easily measured.
FAQs on Micro-Enterprise
1. Give examples of Micro Enterprises Business?
If in a business, the annual income would be less than $250,000, then it is a micro-enterprise business. For a growing economy, micro-businesses are very profitable and growing in a good phase. These enterprises also fall under the subcategory of small businesses that have childcare, catering, accounting, planning, house cleaning, etc. Most of the micro-enterprises businesses need the same skill to proceed and work. These businesses are considered to be initiatives to the market economy.
2. Define Micro and Small Enterprises?
As defined by definition, small enterprises are those with less than or equal to 50 workers working under it. However, in a micro-enterprise, it has around ten people working under it. Micro Businesses do not work on a large scale but are the initiatives to the future businesses and a country’s economic growth. Also, in the micro-businesses, the machinery cost is not more than 25 lakhs, but in small enterprises, it is more than 25 lakhs but less than 50 crores.
3. What is a micro-enterprise and why is it important for the economy?
A micro-enterprise or a micro business starts by employing a small number of people and a relatively less amount of capital, for example, a small grocery store. It helps in promoting a good quality of life for other businesses. It is not only imperative for the development of a local economy, but also for the overall economy of the country as it adds more and more value to it. The main reason for that is because such businesses tend to produce quite a good number of jobs at a small-scale and eventually help to improve the purchasing power, especially in economically backward regions and low-income areas. Governments tend to encourage micro-enterprises not only because they help with the overall growth of the economy, but also because they generally work by the idea of sustainable development. Such businesses also aim at mobilising various natural resources of the country.
4. What are some of the most popular and profitable micro-enterprises in India?
1. Some of the most popularly known micro-enterprises in India are as follows:
Sea Hydrosystems India in Kancheepuram
Oilmax Systems in Pune
Assam Carbon Products in Guwahati
Aerol Formulations in New Delhi
Shiva Granito Export in Udaipur
Marudhar Packaging in Bengaluru
2. Some of the businesses that are highly profitable micro-enterprises are as follows:
Manufacturing of sports items
Manufacturing of detergent and soap
Manufacturing of paper
Producing jute bags
Candle making
Training and educational services, management, etc.
Computer services
Landscaping companies
5. Are there any problems faced by micro-enterprises? If so, then what are they?
As valuable and profitable micro-enterprises tend to be, there are still a number of drawbacks associated with these businesses. These are as follows:
The problem of lack of capital on a national basis also ends up putting micro-enterprises in a predicament and leaves them with not enough finance. Besides that, the weak economic base of such businesses is also another issue. Due to their weak credit, it becomes difficult for them to get financial aid from commercial banks and other such financial institutions.
The issue of marketing is one of the most commonly faced ones by micro-enterprises and other small-scale industries. The lack of good marketing organisations and structures lead to competitive disadvantages because large-scale industries end up sweeping public opinions in their favour with regard to their products.
Poor quality along with an irregular supply of raw material also poses a great problem for micro-enterprises.
Other problems faced by these businesses include under-utilisation of capacity, lack of adequate infrastructure facilities, obsolete technology, not profitable enough marketing strategies, etc.
6. How can the government help micro-enterprises through the various issues that they face?
Some of the main problems faced by micro-enterprises are those of lack of financial assistance and marketing challenges. The government can help them in these situations through the following ways:
Developing specific schemes and policies that are focused on granting loans to such businesses.
Make procurement policies accessible to micro-enterprises.
Providing them with collateral which can then make it easier for them to seek financial aid from commercial banks.
Helping them through some favourable taxing policies.
The government can also provide a platform for micro-enterprises through which the latter can create and build networks as well as attract more customers.
Offer them grants to a certain extent for research purposes and expanding their technological horizon.
Introduce developmental strategies that encourage the consumers to support local businesses.
Lastly, the government could also ensure certain mental benefits to such businesses considering how psychological health is often neglected in these areas.
7. What is the difference between a micro-enterprise and a small business?
The difference between a micro business and a small business is as follows:
Micro Business | Small Business |
A micro-enterprise is usually run by a single owner with no other employees. | A small business can be entrepreneurial, individual-based, or run by an organisation. |
It employs less than or about 10 people. | It tends to employ more than or about 50 people. |
Their business activity is much lower than small businesses. | Their business activity is comparatively larger as they attract more consumers. |
A micro-enterprise often doesn’t require any kind of registration | A small business tends to register as an LLC or as a corporation. |
Works under sole proprietorship. |