Microfinance: The Business Case for Poverty Alleviation

By Rebecca Busse
Doing well by doing good” is a commonly heard phrase in sustainability circles, and the Microfinance California Conference was no exception. Microfinance CA was held at Stanford University on May 28, 2009, and was remarkably well organized for a first effort. “Doing well by doing good” was spoken or alluded to by several of the conference sponsors, including Wells Fargo and Chevron, and the phrase could almost be the tagline for “Sustainability Marketing 101”. Julia Brown, the Community Reinvestment Act Officer for Charles Schwab, said this was her reason for attending the event. According to Brown, not only does microfinance encourage a strong community, it creates a strong future customer base. A common theme among conference presenters, microfinance is growing out of its nascent stage as a tool for poverty alleviation and into its adolescence as a financial investment tool that makes good business sense.

According to John Stumpf, the CEO of Wells Fargo, the 2 million underfunded businesses in California represent a big business opportunity. With domestic microfinance almost doubling every year, we’ve barely scratched the surface of its potential. Stumpf stated investment in small businesses as one of the solutions to the economic crisis: with layoffs continuing, many “accidental entrepreneurs” are made as people struggle to make ends meet. This year in the Bay Area alone, companies with fewer than 19 employees experienced job growth of 21%, compared with job losses of 30-40% in companies with 20 or more employees. Microfinance “marries profit margins to social aspirations”, according to Jonathan Lewis, founder of Microcredit Enterprises.
Microfinance California ’09 was educational to both seasoned microfinance practitioners as well as the uninitiated layperson. As the general perception of microfinance changes from a charity-based model to “good business sense”, microfinance will hopefully become a mainstream tool with even more reach to promote sustainable entrepreneurship both in the US and abroad.

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