Need to Legitimize Microenterprise 
 

Your article on welfare fraud asks, " If they are willing and able to work, why are they still so poor?" One answer is the almost universal lack of access to the tiny amounts of credit needed to start or expand a microenterprise. When one factors in zoning laws that restrict even the tiniest home–based businesses and discriminate against street vendors, it is not only surprising, but inspiring that so many low income people and welfare recipients whose "street smarts" are undervalued by prospective employers, operate profitable micro-businesses.

 In recent years, some of the policies that made work lass rewarding than welfare have been changed. But welfare "reform" has legally ignored the micro-entrepreneurs– the thousands of welfare recipients who, despite formidable obstacles, run tiny, mostly home-based businesses and whose best hope to leave welfare, cross the poverty line and join the middle class may be by expanding their micro-enterprises.

During 1993 and 1994, when I was researching a book on an anti–poverty strategy known as "micro-credit" for helping inner-city entrepreneurs, I met dozens of women who were recieving loans and in some cases training from a Chicago-based program called the Full Circle Fund that was modelled on the Grameen Bank of Bangladesh. A single mother named Queenesta Harris started a business wholesaling and retailing books on Afro-American themes after being laid off by an insurance company. Later, she diversified, opening a small store selling cassettes, compact disks and T-shirts. Omiyale Dupart, a member of Queenesta’s support group, started manufacturing jewelry after being laid off from a factory job. Later she tried her hand as a seamstress and a baker, and she succeeded. Thelma Ali sold toys and household goods at street fairs and flea markets. The loans these women needed ranged from $300 to $5,500.

Recent studies indicate that encouraging self-employment as a way out of poverty and welfare is a viable strategy. In one five year, five-state pilot program, nearly two-thirds of those who started a business were long term welfare recipients. And encouragingly 79 percent of the businesses survived at least two years, and reliance on AFDC as a primary income source declined 65 percent. An independent study of self-employment programs for welfare recipients in Iowa found more than 80 percent of the beneficiaries left welfare within two years, and the government realized a net savings of nearly $1 million in welfare benefits. 

 

It is high time we stop seeing these people as "frauds" because they earn money from undercapitalized "hustles." Rather we must celebrate, promote and reward these efforts as part of a national initiative to legitimize micro-enterprise development as an effective– and very American – anti poverty strategy.