Funding the home-based enterprise: Finance and credit in developing country livelihoods

Micro-credit is centre-stage in international development circles, not least because of the UN Year of Micro-credit in 2005. This paper examines data collected for a study of the environmental impacts of home-based enterprises (HBEs) to assess the nature of micro-credit use by their operators. Our case studies were of 150 HBE operators in each of the following locations: Surabaya, New Delhi, Pretoria and Cochabamba. Though micro-credit is available in each of our case study cities, we found much less use of any credit source, and many more problems of accessing micro-credit than might be expected from the literature. Only in Cochabamba was routine use made of such loans, but only by a minority of HBEs. Most HBEs are financed out of earnings from elsewhere, windfall gains and savings. Only in India were other loan sources, especially money-lenders, used to any great extent. Problems in accessing micro-credit included the extortion of bribes by bank officials, and a general debt-aversion by HBE operators, especially in Pretoria.