Using Individual Development Accounts for Microenterprise Development

This study examines whether there is a role for microenterprise development as an anti-poverty strategy in the United States. This question is important because skeptical views exist regarding whether, generally, poor Americans would have the enthusiasm to undertake the risk of dealing with small-businesses, especially given that the United States has a public welfare system to take care of the poor and “abundant jobs” for those with the skills–compared to most developing countries where the only alternative open for a family investing in a small-business may be starvation. Using data from 14 community-based programs promoting small-business investment through Individual Development Accounts (IDAs), this study finds that overall there is a considerable level of interest in saving for and investing in small-businesses among poor Americans, including those who are less advantaged in terms of income poverty and employment. Policy makers should thus consider promoting IDAs/subsidized savings for small-businesses development as a potentially viable strategy to address income poverty and inequality in the United States.

Project: American Dream Policy Demonstration (ADD)