TY - BOOK ID - 137490055 TI - Micro-Equity for Microenterprises AU - De Mel, Suresh. AU - Mckenzie, David J. AU - Woodruff, Christopher M. PY - 2019 PB - Washington, D.C. : The World Bank, DB - UniCat KW - Alternative Financing KW - Contract Enforcement KW - International Trade and Trade Rules KW - Labor Markets KW - Law and Development KW - Marketing KW - Micro-Equity KW - Microenterprises KW - Private Sector Development KW - Private Sector Development Law KW - Private Sector Economics KW - Rural Microfinance and SME KW - Social Protections and Labor UR - https://www.unicat.be/uniCat?func=search&query=sysid:137490055 AB - Many microenterprises in developing countries have high returns to capital, but also face risky revenue streams. In principle, equity offers several advantages over debt when financing investments of this nature, but the use of equity in practice has been largely limited to investments in much larger firms. The authors develop a model contract to make self-liquidating, quasi-equity investments in microenterprises. This contract has three key parameters that can be used to shift risk between the entrepreneur and the investor, resulting in a continuum of contracts ranging from a debt-like contract that shifts little risk from the entrepreneur to a pure revenue-sharing contract in which the investor absorbs much more of the risk. The paper discusses implementation choices, and then provides lessons from a proof-of-concept carried out by an investment partner, KGC Equity, which made nine investments averaging USD 3,800 in Sri Lankan microenterprises. This pilot demonstrates that this new contract structure can work in practice, but also highlights the difficulties of micro-equity investments in an environment with weak contract enforcement. ER -