WHY DO MINORITY BUSINESS DEVELOPMENT PROGRAMS GENERATE SO LITTLE MINORITY BUSINESS DEVELOPMENT

Minority enterprise assistance programs are largely failures. They are flawed in intent design, and implementation. Current minority busines s enterprise (MBE) loan programs share three flaws: (1) Lending is tar geted to overcrowded lines of business with low profits, (2) tiny loan s flow to marginally viable firms, and (3) consequent high-loan defaul t rates erode funds available for relending. Three types of problems m ust be dealt with if MBE assistance is to be a useful tool for generat ing economic development: (1) Geographic targeting of MBE assistance t o poor ghetto neighborhoods should be sharply reduced, (2) targeting a id to low-income individuals should be eliminated, and (3) poorly admi nistered programs that destroy MBEs and encourage fraud should be refo rmed or eliminated.