April 2006 // Volume 44 // Number 2 // Feature Articles // 2FEA1

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The Impact of Microenterprise Development Training on Low-Income Clients

The study reported here examined the impact of microenterprise development (MED) programs on low-income individuals using a case study of 140 clients of the Vermont Micro Business Development Program who participated in a statewide telephone survey. The study also examined variables that are associated with change in client reliance on public assistance. Outcomes achieved include: access to capital, positive attitude changes, business start up and growth, job creation, increased household income, decreased reliance on public assistance, and satisfaction with services. Significant relationships were found between certain client characteristics and outcomes and decreased reliance on public assistance.

Michele Cranwell Schmidt
Evaluation Coordinator
Center for Rural Studies
University of Vermont
Burlington, Vermont

Jane M. Kolodinsky
Co-Director and Chair
Center for Rural Studies
Department of Community Development and Applied Economics
University of Vermont
Burlington, Vermont

Carol Flint
Program Coordinator
Micro Business Development Program
Central Vermont Community Action Council, Inc.
Barre, Vermont

Bruce Whitney
Statewide Facilitator (former)
Micro Business Development Program
Vermont Community Action Agency
Putney, Vermont


Microenterprise development (MED) programs that serve lower income individuals have grown over the past 16 years from a few to 650 programs throughout the United States (Severens & Kays, 2002). MED programs serve the 10.3 million self-employed workers in the United States economy, with 70% reporting that more than half of their clients are low-income, defined as below 80% of Housing and Urban Development median income (Hipple, 2004). In 2002, 20.1% of all employment in rural America came from the microenterprise sector. From 2000-2002, employment in this sector grew by 3.5% compared to private sector employment that decreased by .7% (Sanders, 2003).

The MED movement has grown in response to unemployment and poverty in the United States (Clark & Huston, 1993; Clark & Kays, 1999; Dabson, 2002; Henderson, 2002). Research on MED training programs shows that MED impacts client's lives and businesses in a variety of ways, including increasing social and human capital and household income, decreasing reliance on public assistance, and generating jobs in the community.

Microenterprise Development in Vermont

Self-employment represented 22% of Vermont's private employment in 2002, which is 2nd highest in the United States (Levy-Benitez, Sanders, & Hansen, 2003). Data from the University of Vermont's Center for Rural Studies statewide representative survey showed that 22.7% of respondents were self-employed (Cranwell, 2004). Because self-employment is an important sector to the economy, Vermont offers MED training programs to low- to moderate-income Vermonters through the statewide Micro Business Development Program (MBDP).

The case study reported here examined the impact of MED programs offered by the Vermont MBDP to determine the impact of training and assistance on low-income individuals. The study examined overall MBDP program impacts and the relationship between client demographics and outcomes achieved, with a specific focus on change in reliance on public assistance.

Case Study: The Micro Business Development Program

The Micro Business Development Program (MBDP) is a statewide program of Vermont's five Community Action agencies. The program follows an MED model similar to those in other states (Blair & Klein, 2001; Clark & Kays, 1999; Edgcomb, Klein, & Clark, 1996; Philadelphia Development Partnership, 1999). Through technical assistance, individual counseling, continuous post-start-up support, classroom training, loan packaging services, and referrals to outside resources, these programs educate low- to moderate-income Vermonters on how to start and run a business so they may successfully pursue self-employment. These services provide a foundation for clients to build skills so they may start a business and gain the resources necessary to be a successful entrepreneur (Kolodinsky & Cranwell, 2002; Micro Business Development Program, 2000).

Reasons the Low-Income Seek Self-Employment and MED Services

Research shows that people who seek self employment, specifically the low-income, do so because they need a job, an additional source of income, or are creating jobs for others in their community (Bates & Servon, 2000; Blair & Klein, 2001; Clark & Huston, 1993; Clark & Kays, 1995, 1999; Dabson, 2002; Servon, 1998). Establishing and growing a business in rural America is laden with obstacles and risks such as low population density and geographic isolation, which impede one's access to markets, capital, labor, peers, and infrastructure (Dabson, 2002). MED programs provide low-income persons with access to these and other resources that they might not otherwise have access to from mainstream organizations (Bates & Servon, 2000; Clark & Huston, 1993; Clark & Kays, 1995, 1999; Servon, 1998).

Social and Human Capital Development

Social and human capital models are the essence of the MED philosophy, which recognizes the ability of people to apply their talent, creativity, and hard work to improve their lives and work towards self-sufficiency. These models contribute to long-term economic sustainability rather than traditional models of economic development that focus on external investment in wage employment (Dabson, 2002; Edgcomb et al., 1996). MED training builds social and human capital through an increase in intangible assets, including increased self-esteem and self-worth, positive attitude changes, personal and life skill building, and building community networks and trust (Putnam, 1993a, 1993b; Sherraden, 1991). Once this foundation is built, small business owners are more able to succeed in operating their business (Blair & Klein, 2001; Clark & Huston, 1993; Clark & Kays, 1995, 1999; Dabson, 2002; Edgcomb et al., 1996; Else & Gallagher, 2000; Kolodinsky & Cranwell, 2002; Mount Auburn Associates, 1994; Servon, 1998).

Poverty Alleviation

Research demonstrates that self-employment, either alone or as a supplement to wage income, is a viable option for poverty alleviation and decreasing reliance on public assistance.

  • Findings from the Self Employment Learning Program (SELP), a study of 405 low- to moderate-income entrepreneurs from seven programs, showed that after 5 years, 72% of business owners experienced gains in household income, with an average change of $8,484. More than half of low-income entrepreneurs were able to move out of poverty, and 61% no longer received public assistance (Clark & Kays, 1999).

  • A similar study of 590 welfare and post-welfare recipients from 10 programs showed that after 2 years of MED training, only 25% reported receiving welfare, compared to 94% at intake, and median household income increased by 87%, from $10,114 to $18,952 (Klein, Alisultanov, & Blair, 2003).

  • The Self-Employment Investment Demonstration (SEID) program's evaluation showed 52% of clients no longer received welfare and 43% no longer received Food Stamps after starting their businesses (Raheim & Alter, 1995).

  • A Department of Labor study reported that Massachusetts MED participants earned substantially less unemployment benefits ($876) and paid substantially more taxes ($2,229) than the control group after starting their business (Benus, Johnson, Wood, Grover, & Shen, 1994).

Community Impact

MED programs also have substantial impact on communities, especially in rural areas. These businesses allow community members to shop locally, which increases the marketability of other local businesses (Else & Gallagher, 2000). Locally owned businesses return a larger share of revenue back into the local economy, support other local businesses through the purchase of goods and services, and maintain a larger local payroll (Mitchell, 2003).

MED programs also create jobs in their communities. Else and Gallagher (2000) reported that three low-income targeted MED programs created over 2,500 jobs, for an average of .5 jobs for every new venture started. The SELP study found that 34% of MED participants employed people in addition to themselves (Clark & Kays, 1995). A study in Iowa demonstrated that 49% of clients created 225 businesses and an additional 70 jobs, 31 of which were filled by low-income individuals (Raheim & Friedman, 1999). Data for Vermont shows that for every one microenteprise business, 1.7 jobs are created (Levy-Benitez et al., 2003).

Purpose of Study

The purpose of the study was to determine the impact of MED training on low-income clients after at least 1 year of training. Impacts examined included:

  1. Program outputs of capital accessed, positive attitude gained, and overall satisfaction with services;

  2. Personal and business outcomes of business start-up and growth, business sales, change in income, other job creation, and change in reliance on public assistance and unemployment; and

  3. Variables that are associated with a client's decreased reliance on Temporary Assistance for Needy Families (TANF) and unemployment as sources of income.

Figure 1 shows the MED program theory used by MBDP (MBDP, 2000).

Figure 1.
Micro Business Development Program Theory (MBDP, 2000)

MED program theory used by MBDP

Methods and Measures

In March 2003, the Center for Rural Studies (CRS) at the University of Vermont (UVM) conducted telephone interviews of MBDP clients who had received at least 10 hours of services between 2001 and 2002 or clients who had started a business. A total of 452 people (76%) had a working phone number, and 140 surveys were completed, for a response rate of 31%. Research shows that a lower response rate is common when surveying lower income persons because of the transient nature of the population (Clark & Kays, 1999; Klein et al., 2003; Servon, 1998). Reasons why clients did not complete the survey included:

  • The person did not answer the telephone (58%);
  • The number was not in service or the person was no longer at the number provided (31%); and
  • The person refused to complete the survey (11%).

MBDP clients were initially contacted by letter 1 week prior to surveying, informing them of the survey purpose and estimated duration, that their participation was optional and would not impact their services, and that responses would be kept confidential. Trained interviewers conducted the survey using computer-aided telephone interviewing (CATI), and up to 10 attempts were made for each client.

This study used a reflexive control design that compared participant outcomes after training to the baseline collected at client intake (Clark & Kays, 1995, 1999; Cranwell & Kolodinsky, 2003; Klein et al., 2003; Rugg, 2002). Participants were interviewed on business development, job creation, income changes, attitude change, satisfaction, and feedback. The instrument was developed in collaboration with the MBDP Statewide Facilitator using the models of previous surveys conducted by CRS (Cranwell & Kolodinsky, 2003) and other researchers (Clark & Kays, 1999; Klein et al., 2003).

Frequencies were calculated for all variables. Cross tabulation and McNemar analyses were conducted to determine if a significant change occurred in reliance on TANF and unemployment. Cross tabulation and chi square tests were run to determine the relationship between demographic, program output, and outcome variables change in public assistance. T-tests were conducted to determine change in client income from pre to post and to test the relationship of outcome variables with change in public assistance. Analyses were conducted using the Statistical Package for the Social Sciences 12.0.


Participant Characteristics

The demographic profile of participants who participated in the study parallels that of similar studies, with the exception of race (Blair & Klein, 2001; Clark & Kays, 1995, 1999; Philadelphia Development Partnership, 1999; Rugg, 2002). The U.S. Census of Population and Housing (2000) reports that 98% of Vermonters are white, thus the racial profile of MBDP clients resembles that of Vermont. In contrast, most related studies of MED were conducted in areas with higher minority representation. Client demographics include the following.

  • Gender: 71% (96) were female; 29% (40) were male.

  • Race: 98% (130) self-identified as Caucasian; 2% (3) identified themselves of an ethnic background.

  • Age: Age ranged from 20 to 75 with an average of 43 years.

  • Family size: Average was 2.5, with a range from 1 to 9, and 30% (27) of those with children were single parents.

  • Education: 47% (63) reported having a high school degree or GED equivalent or less education; 53% (72) had from 1 to 4 years of higher education.

  • Previous business experience: 32% (44) had prior business experience; 68% (94) had no prior experience running a business.

The following were social-economic statistics of clients at intake.

  • Public assistance: 35% (48) received Food Stamps; 34% (46) received disability income; and 19% (26) received TANF.

  • Employment status: 24% (32) were employed; 27% (37) self-employed; 24% (39) unemployed; and 24% (33) were not in the labor force (n=135).

  • Income: 50% (69) were at or below 100% poverty level, and 90% (123) were at or below 70% HUD median income. Over three-quarters of the respondents reported their income at intake to be $15,000.00 or less.

Services Received

Table 1 presents the services used and completion rate for the courses. Respondents completed between one and five classes, with an average of two (n = 100). The total number of services received (including completed classes only) ranged from 1 to 9 services, with an average of 2.5 (n = 138).

Table 1.
MBDP Services Used and Completed


% (n) Utilized*

% (n) Completed**

Entrepreneurial Training Program

49% (62)

84% (51)

NxLevel Business Plan Basics

40% (49)

87% (41)

VIP Computer classes

26% (35)

71% (25)

Business Readiness

25% (43)

83% (34)

Recipe for Success

15% (19)

72% (13)

On-Going Services

One-on-one technical assistance and counseling

60% (84)


Referred to other services

60% (80)



23% (32)


Business Roundtable

21% (29)



22% (30)


*Participants may have completed more than one course or service

**Completion rate is determined only for courses and not for on going services


Program Outputs Achieved

Table 2 shows client program outputs achieved, including the number of sources of capital accessed, positive attitude gains, and overall satisfaction with services. Research indicates that these outputs are often necessary stepping-stones to achieve longer term personal and business outcomes (Cranwell & Kolodinsky, 2002; Servon, 1998; Sherraden, 1991). Clients accessed between zero and eight sources of capital, with an average of two. The number of positive attitude changes clients reported ranged from zero and eight, with an average of four. Satisfaction was measured on a scale from 0 to 10, with 0 being very dissatisfied and 10 being very satisfied with services. Client satisfaction ratings ranged from 0 to 10, with an average of 7.8, indicating overall high satisfaction with services.

Table 2.
Program Output Gains--Capital, Attitude, and Satisfaction







Number of sources of capital accessed






Number of attitude gains






Overall satisfaction with services, 0 = very dissatisfied, 10 = very satisfied







Personal and Business Outcomes Achieved

Clients also achieved personal and business outcomes, including business start-up and growth, business sales, change in income, other job creation, and change in reliance on TANF and unemployment income.

Business Start-up, Growth, and Sales

More than half of clients (52%, 73) reported having an established business at the time of the survey. Of the 73 clients, 56% established their business while working with MBDP, and 44% had a business at intake. Overall, 64% reported achieving business growth through MBDP (n=128) as defined by self-reported movement along a continuum of business stages from planning to expanded. Client business sales in 2002 or the last year the business was open ranged from $75-$475,000 and averaged $36,000, with a median of $6,000 (n=51).

Change in Annual Household Income

Change in client income was calculated by subtracting annual household income reported at the time of the survey from their income at intake. This time frame ranged from 1 to 5 years, with an average of 2 years in the MED. Numbers are presented in actual dollars and are not adjusted for inflation. Change in annual household income ranged from $-29,000 to $64,000, with an average of $4,700, median of $3,400, and mode of $12,000 (n=116). Gains in annual household income ranged from $72 to $64,000, with an average of $11,800, median of $8,600 and mode of $12,000 (n=73). Loss in income ranged from $-12 to –29,000, with an average of $-7,500 and median of $-4,800 (n=43).

A paired sample t-test showed a statistically significant increase from annual household income at program intake to 2003 (t = 3.16; p<. 01). Overall, 25% of clients (35) reported an increase in their annual household income because of their business.

Other Job Creation

A quarter of clients surveyed (25%, 18) reported that their business created employment other than their own job. Number of jobs created ranged from one to 25 jobs, with an average of five jobs. Overall, 80 jobs were created by MBDP clients. Fifty-four were part time, paying an average of $9.00/hour, and 26 were full time, paying an average of $23.75/hour.

Change in Reliance on TANF and Unemployment

Figure 2 shows that respondents reported a decrease in reliance on public assistance and an increase in reliance on self-employment and employment income since their start with MBDP. A cross tabulation and McNemar test showed that reliance on these services had significantly changed from intake to the time of the survey. Table 3 shows that, of the 25 clients who received TANF benefits at intake, 72% (18) reported no longer receiving them at the time of the survey (p<.01). Of the 33 clients who reported receiving unemployment benefits at intake, 97% (32) reported no longer receiving these benefits at the time of the survey (p<.01).

Figure 2.
Change in Client Income Sources from Intake to Survey

Bar graph showing that respondents reported a decrease in reliance on public assistance.


Table 3.
Cross Tabulation and McNemar Analysis of Change in Client Reliance on TANF and Unemployment, Pre and Post MBDP Services


Receiving Assistance at Survey





Receiving TANF at intake

72% (18)

28% (7)



Receiving unemployment at intake

97% (32)

3% (1)




Demographic Variables and TANF and Unemployment Changes

Cross tabulation and chi square tests were run for dichotomous participant demographic variables to determine if there was a significant relationship between these variables and change in TANF and unemployment reliance (Table 4). Clients with a two-parent family (8, 100%) were more likely to no longer receive TANF compared to single parents (10, 59%) (x2=4.575, p<.05). Further, clients who entered the program with a business (5, 83%) were more likely to no longer receive TANF, compared to clients who started their business after intake (2, 33%) (x2=3.086, p<.05). All other variables did not show significance.

Thus, the majority of clients were no longer reliant on TANF at the time of the survey regardless of age, educational status, reported increase in annual household income, business growth, or created other employment. No significant relationships were found for the demographic variables and unemployment.

Table 4.
Cross Tabulation and Chi Square Analysis of Client Characteristics and Change in Reliance on TANF


Still Reliant on TANF

No Longer Reliant on TANF


Not a single parent


100% (8)


Single parent

41% (7)

59% (10)


Started business before entering MBDP

17% (1)

83% (5)


Started business while working with MBDP

67% (4)

33% (2)

** p<.05., *p<.10.


Output and Outcome Variables and TANF and Unemployment Changes

Paired t-tests were conducted to compare the averages of continuous variables with change in reliance on TANF and unemployment (Table 5). Only two variables showed significance. More clients who reported a greater loss in annual household income (average $–5,600) reported no longer receiving TANF compared to those who experienced a more mild loss of annual household income ($-768). Further, clients who reported higher average business sales ($22,900) reported no longer receiving TANF compared to those who earned a lower average of $2,300.

Regardless of number of services received and completed, number of sources of capital, positive attitude gains, satisfaction, months with MBDP, annual household income change, positive income change, and the number of jobs created, clients were no longer reliant on TANF at the time of the survey. Regardless of all variables tested, clients were no longer reliant on unemployment at the time of the survey.

Table 5.
T-Test of Client Outcomes and Change in Reliance on TANF

Client Outcome

Change in TANF Receipt




Negative income change

Still receiving at post




No longer receiving at post




Annual business sales in 2002

Still receiving at post




No longer receiving at post






The findings of the study show that MED training programs lead to varying degrees of success, ranging from personal growth and positive attitude changes to business growth, sales, and income gains. Many clients also were able to hire other employees and pay them an hourly wage that is higher than the minimum wage in Vermont of $7.25 per hour worked (Vermont Statutes, 2006).

Further, most clients surveyed reported no longer being reliant on TANF and unemployment benefits after completing MED training. Those from a two-parent family and who started the program with an established business were significantly more likely to no longer receive TANF compared to single parents and those with no business experience at intake. This may be due to the fact that most businesses take three years to break even and start earning a profit, whereas most clients surveyed had worked with MBDP for only two years. Thus, those who started the program with a business would most likely have passed this point to earn a profit. Being no longer reliant on TANF was also significantly related to those who reported a greater loss in annual household income, which is possibly due to an increase in business assets, and higher average business sales.

The findings of the study support similar research that MED programs contribute to rural economic sustainability and development through the establishment and support of microenterprises and their employees. The results also correspond with literature that MED services are a viable option for assisting low- to moderate-income individuals to achieve personal growth, self-employment, and self-reliance towards poverty alleviation.

Extension specialists and social service agencies should promote the development of microenterprises, especially in rural communities, to provide either supplemental or primary income. Rural development councils will want to take note of these findings and incorporate them into their economic development plans and programs.

Microenterprises contribute to local economic development and sustainability by providing good-paying employment opportunities in rural and impoverished areas. Although some clients may be more successful in these programs because of certain characteristics and experience, all clients have the opportunity to achieve success through training and program support. Services should continue to be offered to low- to moderate-income Vermonters and those throughout the United States to assist them to become self-employed, achieve personal gains such as skills and knowledge, and work toward economic self-sufficiency.


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