Why do Minority Business Development Programs Generate so Little Minority Business Development?

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Abstract
Minority enterprise assistance programs are largely failures. They are flawed in intent, design, and implementation. Current minority business enterprise (MBE) loan programs share three flaws: (1) Lending is targeted to overcrowded lines of business with low profits, (2) tiny loans flow to marginally viable firms, and(3) consequent high-loan default rates erode funds available for relending. Three types of problems must be dealt with if MBE assistance is to be a useful tool for generating economic development: (1) Geographic targeting of MBE assistance to poor ghetto neighborhoods should be sharply reduced, (2) targeting aid to low-income individuals should be eliminated, and (3) poorly administered programs that destroy MBEs and encourage fraud should be reformed or eliminated.

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