Monday, November 22, 2010
Microfinance's Fight on the Homefront
In his most recent New York Times column ("Here's a Woman Fighting Terrorism. With Microloans"), Nicholas Kristof makes the provocative argument that successful microfinance efforts in the developing world help combat fundamental extremism. Kristof profiles Roshaneh Zafar, a banker turned social entrepreneur now working in Pakistan, who says "Charity is limited, but capitalism isn't. If you want to change the world, you need market-based solutions."
It might be surprising to those who know microfinance in the context of the developing world to learn that it is thriving in America as well. Here at home, microfinance is effectively fighting unemployment, economic exclusion and an evaporating middle class.
At first glance, microfinance looks very different in the U.S. than it does abroad. Domestically, loan sizes are higher to accommodate higher costs of living and doing business in our formalized economy. For example, ACCION has made loans as high as $100,000 in the U.S. (our average is about $7,500). In addition, interest rates must be kept in close proximity to market rates -- a 30 percent annual interest rate is common abroad, but would be considered usurious here.
However, if you take a deeper look at the work of U.S. microlenders, you'll see that we share a core philosophy with our international counterparts -- that sufficient access to small business capital can have lasting, positive change on communities and individuals. We also share a commitment to pairing loans with financial education to ensure long-term success, and know that being integrated in the communities that we serve is the best way to provide financial services that foster dignity and pride.
To read the rest of the article, please click here.
at 9:48 AM