T. Bates, WHY DO MINORITY BUSINESS DEVELOPMENT PROGRAMS GENERATE SO LITTLE MINORITY BUSINESS DEVELOPMENT, Economic development quarterly, 9(1), 1995, pp. 3-14
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.