Banks vs. the New Kids: Microfinance in the United States

While microfinance has been a popular and successful tool in third world countries for more than four decades, the overt theme at the Microfinance USA 2010 conference in San Francisco is that domestic micro lending is an untapped, growing market that is not only much in demand, but is greatly in need. In simplest terms, the conference fuels the debate that the system of banking for our communities, small businesses and entrepreneurs is broken. If you have tried to get a small business loan recently you will most likely agree.

Microfinance organizations including Opportunity Fund and Kiva are seeing not only a need for entrepreneurs based locally to use their services, but significant success in lending to small businesses in their own back yards. It’s interesting to note that this could even be a driver to our economic recovery. Every new dollar invested with Opportunity Fund has a proven return of 2 to 1, as it flows through the regional economy creating new wages, new spending, and new tax revenues. The general opinion here is that new micro lenders are not saddled with legacy systems/thinking, are nimble, and embrace technology to bring more loans more quickly to entrepreneurs.

On the other side of the coin, it’s interesting to note that the Community Development Financial Institutions (CDFIs), the US Small Business Administration and the major banks are rushing to catch up to this growth in micro lending (judging by their presence at the conference, both in terms of bodies and signage). It will be interesting to watch as these organizations seem to be caught up in legacy systems (CDFIs), irrelevance (SBA), or greed (banks). The truth may really be in the numbers, as Jonathan Brereton of Accion Chicago noted, SBA lending in the Chicago region alone is down 70% over the last two years. Interesting.


Bryan Stubbs has spent the last decade working to positively impact our communities through entrepreneurial and consultative initiatives at the Chicago Sustainable Business Alliance (senior advisor) and Chicago Community Ventures (director). Most recently he finished a five-month residency at San Francisco’s Presidio Graduate School, researching the role of early adaptation of sustainable business practices on start-up ventures versus traditional start-ups (with the goal of affecting policy on the federal level). He earned a Master’s of Business Administration with a concentration in Entrepreneurship from the University of Illinois.

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