Enhancing the Financial Health of Micro-entrepreneurs: Beyond a mere assessment

Financial support from the JP Morgan Chase Foundation enabled the European Microfinance Network (EMN) and Appui au Développement Autonome (ADA) to lead a joint research project to help improve the financial health of micro-entrepreneurs. The purpose of the research was to: (1) understand the financial health issues faced by micro-entrepreneurs, particularly those supported by organisations providing either technical assistance/business development services, referred to as non-financial service providers-NFSP) or (micro)finance services, called financial service providers (FSP), and (2) develop an operational guide for the staff of FSPs and NFSPs in assessing the financial health of micro-entrepreneurs and supporting micro-entrepreneurs in dealing with financial issues that affect both the financial performance of their enterprises and personal well-being.

This cross-country research activity covered a mix of sixteen pre-selected FSPs and NFSPs in four European Union member states and four emerging economies. The data and information obtained from the sixteen organisations generated in-depth understanding on the financial health issues of micro-enterprises, the financial well-being of the micro-entrepreneurs and the ways in which such financial health and well-being might be enhanced.

The research was carried out between July 2018 and September 2019 by Klaas Molenaar (Timpoc Consultants) as lead researcher contracted by EMN, and Mathilde Bauwin as field researcher, working for ADA. The research was based on literature reviews, surveys, field studies, interviews and consultative discussions with a strong qualitative approach.

Given the geographical scope of their activities, the EMN managed the regional coordination for Europe, while ADA was tasked with the same role for the activities in emerging economies. In all phases of the project, an expert group provided support, guidance and oversight ensuring quality deliverables focused on the needs of project beneficiaries. Project partners (NFSPs and FSPs) were also actively engaged at all stages.

The two major outputs of this research include:

1. A paper synthesising the major findings, and;
2. An operational guide for FSPs and NFSPs to assist coaches and mentors in assessing the financial health of micro-entrepreneurs and supporting them to deal with financial issues affecting both the financial performance of their enterprises and personal well-being.
The major finding is that programmes related to the financial health of micro-enterprises must not only focus on assessing a micro-entrepreneur’s understanding of the financial issues related to his/her business and be able to measure their capacity to deal with those issues, but more relevantly, programmes must also draw up action plans to broaden and deepen the understanding and capacity of the micro-entrepreneurs.