Structural Heterogeneity and Poor Microenterprises in Argentina
Marta Bekerman and Cecilia Rikap
Results from field research

Throughout this study, the peculiarities of poor microenterprises in the south of Buenos Aires became evident. In our general analysis, we point out that the majority of these enterprises are independent (unipersonal) and/or family enterprises. While there are differences in the reproduction of capital, they are not significant enough to provide for the presence of permanent salaried workers. Thus, these microenterprises belong to what is known as the social or popular economy.

A significant percentage of the entrepreneurs interviewed dedicate more than 40 hours a week to their businesses, which could be related to low levels of productivity. In general, these businesses generate a low supply of jobs, which increases as we move from infra-subsistence microenterprises to those with small surpluses. This situation is relevant when we seek to envision a policy that can consolidate permanent jobs in this sector by strengthening these microenterprises, particularly when we take into account that work is the most abundant resource here and, thus, its value is a key aspect.

Although the majority of the entrepreneurs interviewed who use machinery expressed the need to renew it, there is a lack of reinvestment to replace machinery that is already amortized. In addition, there is a lack of self-owned spaces for carrying-out business activity. All of these situations can be linked to the lack of access to credit. Another important aspect is the level of informality in this sector: the transition to the formal sector is hampered by the extreme lack of information regarding current regulations.

At the same time, we did not observe development of management capacities, mainly due to the lack of knowledge about the kinds of actions that can be carried out, as well as their potential benefits for the business. This situation enables the entrance of new potential bidders and suppliers, which reduces the overall demand and the income of established businesses, thus restricting levels of investment. In addition, these enterprises do not keep financial records. Regular bookkeeping, together with the development of business plans, could be useful tools to improve business management.

In regards to the public policies requested by the microenterpreneurs, it is worth mentioning that only a small minority expressed knowledge about policies that help or harm them. Once again, this manifests the communications limitations and difficulties regarding policies developed by the public sector, which can become an obstacle for guaranteeing their effectiveness. Among their petitions, the entrepreneurs underscored three fundamental needs: greater access to credit, an exit from informality and greater access to training.

Based on these results from our field research and the analysis of existing policies presented above, we hereby present some guidelines for specific policies for this sector.

Guidelines for specific policies

In regards to the proposals to address insufficient credit, Microfinance Institutions (MFI's) can play an important role in terms of guaranteeing access to credit for the poorest sectors of the population, mainly because the logic of microfinancing uses a different structure than conventional credit. While some commercial banks have begun to make incursions into this field, their objective is to broaden their portfolio and they do not always include the poorest sectors of the population.

In Argentina, the fact that MFI's cannot operate as institutions regulated by the Central Bank prohibits them from receiving deposits, thus limiting their financing mechanisms. Other institutional limitations include the scarce existence of institutions that provide technical support and the poor coordination among these institutions. In sum, this means that the role of these institutions is incipient and still very small compared to other countries in Latin America and Asia. The National Microcredit Law promotes the development of these institutions but in-depth measures are needed in terms of financing and regulations.

Training is one of the main policy demands, however, at times the microenterpreneurs are reluctant to attend trainings so as not to interrupt their work. Since these are businesses whose profits are almost fully consumed by domestic needs, losing hours of work can mean not being able to face one's daily needs. At the same time, training would allow them to increase their productivity and develop business strategies to help their enterprises to grow. Therefore, we propose that a plan should be implemented to provide technical assistance scholarships to microentrepreneurs that would offer economic compensation for unworked hours dedicated to training.