The New York Times Concurs … Microfinance Is Making a Difference in America

July 28, 2010 § Leave a comment

Yesterday, I wrote the Green Chip Stocks believes that U.S. microfinance programs have had a positive impact on the growth of small businesses, and, given the importance of these businesses to a thriving economy, that these programs have become catalyst for economic recovery.

Now, there’s even more attention being paid to the growth and impact of microfinance in America.

Today, the Small Business section of The New York Times ran an article titled, “With Credit Tight, Microlending Blossoms.”  The piece begins by introducing us to microentrepeneur Amanda Keppert, owner/operator of Mandy’s Korner, a hotdog stand in San Jose, CA.  Like many business owners, she ran into trouble with the downturn in the economy.  Not able to obtain financing from traditional banks, she turned to local microlender Opportunity Fund, who, through their partnership with Kiva, provided Ms. Keppert with “a $6,500 loan that she has three years to pay back and that carries a 6 percent interest rate. She used the money to buy an ice maker, a generator to save on propane costs and large signs to advertise her business.”

Her story is not uncommon.  The recession has increased demand for microloans, broadening the base of borrowers, from the un-banked and under-banked to those with decent credit scores.  Entrepreneurs new to the microfinance game will see an upside in the acquisition of smaller loans than the typical Small Business Administration loan, and also the added value of business counseling, which is an integral part of most microlending programs.  The Times explains:

Most banks, large or small, do not bother granting business loans of less than $50,000 because there’s not enough profit to balance the risk. By contrast, microfinance programs in the United States typically lend $35,000 or less to small businesses with five or fewer employees. They charge more than traditional banks, of course, with interest rates ranging from 5 to 18 percent.

The benefit for all borrowers is a history high repayment rates in which money continues to cycle through the system.

Read the full article to gain insight into the need for, and power of, microlending in the United States.  Microfinance in America is a game changer.

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