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Micro-Equity for Microenterprises

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dc.contributor.authorDe Mel, Suresh
dc.contributor.authorMcKenzie, David
dc.contributor.authorWoodruff, Christopher
dc.date.accessioned2019-04-03T19:50:58Z
dc.date.available2019-04-03T19:50:58Z
dc.date.issued2019-04
dc.description.abstractMany microenterprises in developing countries have high returns to capital, but also face risky revenue streams. In principle, equity offers several advantages over debt when financing investments of this nature, but the use of equity in practice has been largely limited to investments in much larger firms. The authors develop a model contract to make self-liquidating, quasi-equity investments in microenterprises. This contract has three key parameters that can be used to shift risk between the entrepreneur and the investor, resulting in a continuum of contracts ranging from a debt-like contract that shifts little risk from the entrepreneur to a pure revenue-sharing contract in which the investor absorbs much more of the risk. The paper discusses implementation choices, and then provides lessons from a proof-of-concept carried out by an investment partner, KGC Equity, which made nine investments averaging $3,800 in Sri Lankan microenterprises. This pilot demonstrates that this new contract structure can work in practice, but also highlights the difficulties of micro-equity investments in an environment with weak contract enforcement.en
dc.identifierhttp://documents.worldbank.org/curated/en/647381554128100263/Micro-Equity-for-Microenterprises
dc.identifier.doi10.1596/1813-9450-8799
dc.identifier.urihttps://hdl.handle.net/10986/31494
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 8799
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectMICROENTERPRISES
dc.subjectMICROFINANCE
dc.subjectENTREPRENEURS
dc.subjectINVESTMENT ENTERPRISE
dc.subjectEQUITY FINANCE
dc.subjectCONTRACT LAW
dc.subjectALTERNATIVE FINANCING
dc.titleMicro-Equity for Microenterprisesen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleMicro-Equity for Microenterprises
okr.date.disclosure2019-04-01
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/647381554128100263/Micro-Equity-for-Microenterprises
okr.guid647381554128100263
okr.identifier.doi10.1596/1813-9450-8799
okr.identifier.externaldocumentum090224b086b1f8a8_1_0
okr.identifier.internaldocumentum30947745
okr.identifier.reportWPS8799
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/647381554128100263/pdf/Micro-Equity-for-Microenterprises.pdfen
okr.region.administrativeSouth Asia
okr.region.countrySri Lanka
okr.statistics.combined3123
okr.statistics.dr647381554128100263
okr.statistics.drstats2221
okr.topicFinance and Financial Sector Development::Microfinance
okr.topicPrivate Sector Development::Enterprise Development & Reform
okr.topicPrivate Sector Development::Microenterprises
okr.topicPrivate Sector Development::Private Sector Economics
okr.unitDevelopment Research Group, Development Economic
relation.isAuthorOfPublication148d6d6d-76e5-5d6f-9af9-98313e30551f
relation.isAuthorOfPublication.latestForDiscovery148d6d6d-76e5-5d6f-9af9-98313e30551f
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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