No, this idea is not how much of the world owes money to Microsoft. It's not how small the fine print on your credit card agreements is written, either. Microcredit is the extension of very small loans (microloans) to the unemployed, to poor entrepreneurs and to others living in poverty who are not considered bankable (ordinary lending institutions would not extend them credit). 1 The principle behind microcredit, which have been shown to work in third world countries before, show that even small loans can allow new businesses to form and increase an economy. Most applications have worked to create cash-based economies where none existed before, such as in African villages. The profits from the businesses created are used to repay the original loans with interest.
The reason I am writing about this idea, though, is not to discuss third-world applications. This week, Todd and I were discussing how the principles of microcredit could work in the United States. When he proposed it, my mind immediately started reeling with possibilities. The first suggestion he had was to implement microloans in my industry, trucking. By giving small loans to individual drivers, more owner-operators (drivers who own their own trucks) would enter the market which has shown a shortage for several years. I have been told by drivers over the years that the federal government helps foreign drivers buy their equipment (I have never researched the truth of their claims), but I see no reason such loans could not be extended to citizens. My business helps small trucking companies and individual drivers manage short-term cash flow crunches by paying them quickly, and we help them find more work to keep them busy. The existence of more such small trucking businesses helps my company be more profitable. More people have jobs, the economy grows, and so on down the line. The main point of microcredit is to eradicate poverty in the world, but there is no reason it could not work here in the U.S. While I love the financial opportunity available to creditors willing to take the risk of becoming involved in microcredit, I would love to see instead what might be achieved of welfare was used in a similar fashion. Welfare recipients could receive training in a field of interest, and upon leaving their training, they could have the opportunity to receive a microloan to start a business with their new training. I certainly hope to further explore these ideas in the future.
In researching the idea, I found several links that offer the opportunity to loan money or receive loans, which I am listing here. I would love to see more links related to U.S. loans.
http://www.mcenterprises.org/
http://www.kiva.org/
http://www.microcreditnh.org/ - help with getting loans for business owners in New Hampshire
1. Quoted from Wikipedia
-- Robert
Note: this post was not as well researched as I'd hoped. We're finally starting to get better around here, but it's been a long week.
7 comments:
I love this concept. I actually gave some of them as Christmas "presents" to people (I donated in their name) this year. Like you, I wish that we did more of that at home. Sometimes thinking small instead of big is the answer.
Small definitely can be the answer. When we look at the big picture of world poverty, it is easy to get overwhelmed and give up before trying. If we instead think of something we can do ourselves, then we can combat it ourselves. I truly love the Perpetual Education Fund our church has (we regularly give to it) to help people find training and education they might not otherwise have. The recipients can pay back the money they receive so others can receive it as well. It operates on much the same principle of microcredit discussed here. With the repayment of funds, more can be helped than if the funds were simply dispersed never to be repaid. I also personally believe that paying someone back for something gives a person a greater feeling of ownership of what they have, which tends to mean they'll take greater care of it. Thanks for the comment.
I love the idea of this in the 3rd world, especially as it is used to make women more independent. Do you think we could sell it here, too?
I agree this is a good plan.
I keep hearing a lot about grants, too.
Yes, Gwen, I do think this concept could work here. I've seen it work in how my business operates. We've loaned money to people the bank wouldn't loan it to, and in some cases they have repaid the money and kept their business alive. In a more formalized setting, the repayment would be more likely (whether the lenders were banks, government agencies, or lenders who specialized in microcredit), and new businesses could be formed that would help the primary funds be maintained instead of continually depleted (like welfare distributions).
Julie, I'd love to hear more about what you're referring to that you've heard about.
You will be pleased to know that microfinance is hard at work in the United States. Serving those on the economic margin, primarily immigrants and minorities, ACCION USA (www.accionusa.org) has lent over $25 million since its inception in 2000. With a repayment rate of about 95%, ACCION USA has demonstrated that microfinance can be an effective tool in Brooklyn, Boston, and Boise just as it is in Bangladesh and Brazil.
Thanks for the contribution, nicholson. I'm hopeful, though, for microcredit to also help Americans looking for a way out of poverty. I'm not anti-immigrant, but I would like to see programs that focus on helping Americans first. Thanks for the information, though. I am sure one of those programs is the one my truck drivers describe.
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