NSBW: U.S. Microfinance – Making an Impact

June 17, 2013 § 2 Comments

Microloans

Image Source: Accion

Back in 2010, I became massively interested in the subject of microfinance and, in particular, microfinance, or lack thereof, in the United States.  I began to research the topic online and off, reading articles, attending seminars, speaking to organizations making loans and to loan recipients.  I wrote about what I was learning.  And others appeared to be hungry for the information, as much of what I published seemed to find an audience.

While I last blogged on the topic two-and-a-half years ago, I noticed that these posts still draw readers on a weekly basis.  This realization got me thinking about what has changed in U.S microfinance in the intervening years and, given the rise of crowdfunding during this period, how it currently fits into the small business financing landscape.  Here is some of what I found.

Since November 2010:

According to a survey of 362 platforms released today by research firm Massolution, crowdfunders raised $2.7 billion worldwide in 2012, up 81 percent from 2011.  The study projected $5.1 billion this year.

Equity crowdfunding was relatively tiny, accounting for more than $116 million in 2012, up 30 percent from the year before. That’s not unexpected, given that at the moment only accredited investors can use crowdfunding to invest in companies.

More surprising is that crowdfunded loans, made over lending platforms such as Prosper and Kiva, more than doubled, to $1.17 billion from $555 million the year before.  Crowdfunding donations, meanwhile, hit $979 million last year, up 45 percent from 2011. Crowdfunding for rewards—funders put up cash, fundees offer a product they’re developing, say, in return—grew even faster, to $383 million in 2012, from $62 million the year before.”

  • Kiva launched Kiva Zip in the United States and Kenya.  Kiva Zip is a program that makes “it possible for lenders to send funds directly to the entrepreneurs they support.”  This new initiative reduces the time necessary for the money to reach the entrepreneur, lowers fees and interest rates, and provides a means of direct communication between lender and borrower. Check out the small business owners currently raising funds with this new scheme.  They runs shuttle services, florists, coffee shops, bakeries, catering businesses and more.
  • The Tory Burch Foundation continued to make loans in the amount of $500 to $50,000 through national non-profit microlender Accion.  In 2010, the foundation established a mentorship program “to support women entrepreneurs as they start and grow their businesses.”  In addition, TBF created a partnership “with Women’s Initiative for Self Employment, a national microenterprise training and funding organization, to provide entrepreneurship training and guidance for high-potential, low-income women.  In 2012, the Tory Burch Foundation launched its entrepreneurial education program in partnership with Goldman Sachs 10,000 Small Businesses, LaGuardia Community College and Babson College. Classes are customized specifically for early-stage, women-owned businesses with the passion and potential for growth.”
  • Accion U.S., the largest and only nationwide micro-and small business lending network in the United States, published that it has loaned a total of $360 million (46,000 loans) since its inception in 1994.  The organization refined it programs, adding targeted microlending programs: Green Loan; Brewing the American Dream Loan; Start-Up Loan, Transition Loan; Established Business Loan.  Further, “Accion’s 2012 microTracker study highlights the critical role that U.S. small businesses play in building our economy. Conducted in partnership with the Aspen Institute and California microlender  Opportunity Fund, the study takes a rigorous look at microloan outcomes for loans disbursed in 2010.”  The infographics included above and below show the results of the study.  You can read the report here.
  • The Opportunity Fund continued to focus on expanding its impact in California.  In addition to microloans, the organization launched microsavings and real estate programs.

Microlender Loans and Dollar Dispersed

Who Microlenders Serve

It seems something is going on and it’s something good.  What have you experienced, learned, heard?  Let’s keep this conversation going.

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