Socio-Economic Impacts of Micro-enterprise Credit in the Informal Sector of Managua, Nicaragua

This analysis will characterize the informal sector in Managua, Nicaragua as small-scale units engaged in the production and distribution of goods and services whose primary objective is to generate employment for the participants rather than maximize their profits. Managua's informal sector employs forty-eight percent of the total employed urban population and plays an important role in the development of the country. Historically, informal sector growth has been constrained by the inaccessibility of credit. However in recent years, credit programs that focus on micro-enterprise lending have been established and are significantly stimulating informal sector activities. This paper evaluates the effectiveness of micro-enterprise credit as a tool for promoting socio-economic development for informal-sector participants. Its principal findings are that micro-enterprise credit promotes economic development by generating income and employment, increasing borrower assets, and facilitating expansion of micro-business enterprises. Secondly, micro-enterprise credit promotes social development by empowering females in the home and business, benefits to children, and improving borrowers' personal well being.