MICROCAPITAL BRIEF: Micro- Equity Better than Microfinance to Create Opportunities for Poor People?

In Pakistani newspaper The Express Tribune, economist Humayon Dar of Britain’s Cambridge University recently argued in favor of micro-private equity, also known as venture philanthropy, as an alternative to microcredit. Micro-private equity involves investment in for-profit social enterprises that create business and assets for poor communities in addition to offering employment and shareholding opportunities. Dr Dar holds the opinion that this is more efficient than lending money to many people in one community who will create similar, competing businesses; rather, micro-private equity creates employment under one larger company whereby community members can use their skills and allegedly earn a higher profit due to lower competition. Many borrowers who use microloans to become microentrepreneurs might also prefer to work as employees if they could receive a salary that covered their needs. According to Dr Dar, this situation also creates the opportunity to make a national chain of businesses that can brand products and make more profit.

According to the National Venture Capital Association, the practice of venture philanthropy varies between organizations. Some institutions that currently use micro-private equity models include Accion, a US-based nonprofit organization, and Acumen Fund, a US-based nonprofit venture fund.

By Charlotte Newman, Research Associate

Sources and Additional Resources:

The Express Tribune: “Managing Micro-Equity: The Economics of Numbers and Poverty,” http://tribune.com.pk/story/358322/managing-micro-equity-the-economics-of-numbers-and-poverty/

National Venture Capital Association: “Venture Philanthropy,” http://www.nvca.org/index.php?option=com_content&view=article&id=104&Itemid=171

MicroCapital.org story, March 12, 2012, “MICROCAPITAL BRIEF: Singapore Totalisator Board, POSBank, Social Enterprise Hub Launch $4m MicroCredit Business Scheme (MCBS),” https://www.microcapital.org/microcapital-brief-singapore-totalisator-board-posbank-social-enterprise-hub-launch-4m-microcredit-business-scheme-mcbs/

MicroCapital.org story, March 6, 2012, “MICROCAPITAL BRIEF: Benefit Corporation Type Allows Companies to Balance Societal Benefit, Profits,” https://www.microcapital.org/microcapital-brief-benefit-corporation-type-allows-companies-to-balance-societal-benefit-profits/

MicroCapital.org story, June 16, 2012, “MICROCAPITAL BRIEF: Bhagwan Chowdhry Proposes Microequity as a New Financing Model for Microfinance,” https://www.microcapital.org/microcapital-brief-bhagwan-chowdhry-proposes-microequity-as-a-new-financing-model-for-microfinance/

MicroCapital Universe Profile: Accion
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Accion

MicroCapital Universe Profile: Acumen Fund
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Acumen+Fund

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

Similar Posts: