What is a Micro Enterprise?

What is a micro enterprise? The grocery store in your locality that sells groceries, FMCG goods, sometimes dairy products and fruits and vegetables is a classic example of micro enterprise. Let us learn more about them.

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Micro Enterprise

A micro enterprise is a small business which sells goods and/or services to a local area or a local market. It employs less than 10 people generally and is geographically restricted. Typically a micro enterprise starts with some form of funding – known as micro credit or micro finance.

Micro enterprises are usually a trademark of a developing country and economy, like India’s. There is a dearth of jobs in the formal sector and micro enterprises aim to fill in the gap. They help the economy by not only creating jobs but also lowering production costs, increasing purchasing power and providing convenience.

In fact, the government encourages micro enterprises, especially in low-income areas. It helps the business and economy grow. And such enterprises also show promise of sustainable development. They help fill a necessary niche in developing economies.

For example, the local tailor shop in your area may be called a micro enterprise. He may take a small loan (micro credit) to set up his shop and buy materials. He or she employees a few workers and assistants. And they provide their goods and services in a limited area, i.e. they do not have a wide distribution network.

Browse more Topics under Scales Of Business

• Small Scale Industries
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• Large Scale Industries
• Public Enterprises and their Structures
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Objectives of Micro Enterprise

• Micro enterprises aim to create large-scale employment in the economy, separate from the formal sector. And they can achieve this target with very limited finances and investment.
• Another objective is to spread industries and trade in an economically backward area. This helps in the development of the overall economy.
• The objective is to bring the backward areas into the plan for national development. So they aim to promote regional development.
• Micro enterprises also aim to improve the mobilization of the abundance of natural resources in our country.
• Also to improve the living conditions of all the citizens of the country, irrespective of where they live and work.

Role of Micro Enterprises in the Development of the Indian Economy

The improvement and subsequent development of small-scale industries and micro enterprises in the country have led to a significant increase in the per capita income in our economy. This can be developed as economic development.

Also, micro enterprises majorly contribute to the employment of our country. They help with the economic development of smaller towns and villages and close the development gap between rural and urban economies.

Micro Financing in India

One key component in the growth and development of micro enterprises is the establishment of micro-financing and micro credit in India. Micro finance is described as when credit or other such loan facilities of relatively small amounts are given to entrepreneurs and business people to start or fund a small business or a micro enterprise.

In India, banks and NBFC provide micro finance to individuals. The aim is to help them out of poverty and set them up with micro enterprises so they can earn a living and promote economic development.

Solved Question on Micro Enterprise

Q: A micro enterprise is an enterprise in the business of providing services, where the investment in equipment does not increase ___

1. 25 lacs
2. 15 lacs
3. 10 lacs
4. None of the above

Ans: The correct option is C – 10 lacs. And in case, the enterprise is in the business of manufacturing goods then such investment is 25 lacs.