Sustainability of Microbusinesses and Success of Microfinance

Abstract

Emergence of microfinance facilities has raised self-employment opportunities for the disadvantaged group. There are many small and micro entrepreneurs who have started their business with funding support from microfinance agencies. Though this increased funding resource has increased the number of businesses that are started by entrepreneurs in rural areas, another important fact is that all these new businesses are not necessarily successful. In Malwa region of Madhya Pradesh (MP), only 20 per cent of businesses funded by microfinance agencies are profitable. There are multiple reasons behind this lack of success of microenterprises. There are paucity of information in selection of right opportunity, absence of technical assistance, lack of business knowledge and marketing and finance skills, which are few of them. This is an alarming sign for funding agencies as higher failure rate of microenterprises bound to jeopardize, the sustainability of the microfinance in long term and retard the development of region. This research conducted on microenterprises of Malwa region of MP tries to identify the specific training needs of microfinance clients. Further, this research tries to evaluate empirically what are the potential and sustainable microbusiness opportunities, which can be started and run by people of disadvantage groups. Empirical findings through a survey designed on a sample of 54 microenterprises of eight villages of Malwa region show that any microbusiness having higher ratio of working capital to fixed capital investment are successful in Malwa region. Also, it is found that the most important training need of these enterprises is in the field of ‘managing finance’ for small business.