Microfinance in the U.S. - Does it work?

Here's a link to an excellent article in Time magazine about microfinance in the U.S. The article is a little old, but I find it very interesting.  I would assume that microfinance would be successful only in "third-world" countries.  This article, however, states that these loans have a repayment rate of 99 percent in the U.S. What makes microfinance a successful lending instrument in both "poor" and "wealthy" countries?

http://www.time.com/time/magazine/article/0,9171,1950949,00.html

Microfinance IPO - Right or Wrong?

SKS, India’s largest microfinance company, recently issued an IPO of about $347 million.  Many people question if this IPO coincides with the "true spirit" of microfinance.  Muhammad Yunus came up with the idea of giving microloans to "the poor" to help them escape from the entrapment of greedy loan sharks.  I fear that SKS's issuance of this IPO is the awakening of another greedy giant – the loan shark's big brother. I sincerely hope this IPO helps people escape poverty and improve their families' wealth, health, education, and overall wellbeing without awakening another greedy, money-hungry giant.    


http://online.wsj.com/article/SB10001424052748704271804575405223356063904.html?mod=googlenews_wsj

http://www.microfinancemonitor.com/2010/08/08/sks-microfinance-ipo-fixed-at-rs-985-per-share/

http://www.businessweek.com/magazine/content/10_20/b4178016201790.htm

Create Jobs. Alleviate Poverty. Support Domestic Microfinance.

This following article was posted on Change.org.  The top 10 voted ideas will be presented at an event in Washington, DC to relevant members of the Obama Administration, and then promoted to Change.org's full community of more than 1 million people.  Please go to the following link and vote to help create jobs and alleviate poverty through domestic microfinance.  

http://www.change.org/ideas/view/job_creation_for_poor_americans_through_microloans_2

Create Jobs. Alleviate Poverty. Support Domestic Microfinance. 

Microfinance: Supporting this cause will expand domestic microfinance and will give impoverished Americans the chance to lift themselves out of poverty through their own hard work and determination.  Microfinance provides capital to low-income individuals so they can create and expand their small business.  It is a proven method to alleviate poverty and create jobs for low-income individuals.  Recipients of loans are not eligible for a typical loan from a bank and would be charged exorbitant interest rates and fees from predatory lenders.  Microfinance provides them with an opportunity that they would otherwise not have and supports job creation through small business growth.

- Grameen America Feb 04 @ 10:18AM PST

MicroBusiness Mentors

I recently became a Spanish trainer for a unique organization called MicroBusiness Mentors (MBM).

MBM was founded in 2002 by a group of students at Brigham Young University. These social entrepreneurs were committed to changing the world, and dove into the world of microcredit. They set out with the goal of out to provide sustainable assistance to the Hispanic community in Utah Valley.

Their development strategy was based on research that showed a need for small business training and financial services among the low-income Hispanic community in Provo and surrounding areas. Working with Dr. Warner Woodworth, the students launched a small-business training and microcredit program designed to provide opportunities to underprivileged Hispanic entrepreneurs. From the beginning, MBM experienced great success, providing quality training, mentoring, and funding to qualified microentrepreneurs. Program participants started or expanded successful business ventures in diverse areas.

In order to expand its impact, MBM has partnered with Community Action and Centro Hispano, Provo-based organizations supported by United Way. Under the United Way umbrella, MicroBusiness Mentors qualifies as an organization with 501(c)3 status.

Information taken from MBM's website http://www.microbusinessmentors.org/

Many people didn't believe microfinance would ever be successful when it was started by Mohammad Yunus in a small village in Bangladesh.  They didn't believe the borrowers would pay back their loans, nor did they believe such a small loan could help people improve their economic situation.  Now that indisputable evidence shows the effectiveness of microfinance in third-world countries, microfinance advocates are starting microfinance organizations in the United States. Despite societal norms suggesting that setting up microfinance organization in the U.S. will never work, microfinance pioneers like Warner Woodworth are motivated by the success stories of people creating better lives for them and their families through microfinance.

On the MicroBusiness Mentors website the founder of MBM, Warner Woodworth, talks about the success of the program and its impacts on society:
   
When we launched this little project in my Social Entrepreneur class back in 2003, many voices warned us we would not succeed....We knew the opposite was true. They claimed that BYU students were merely youngsters who knew nothing about microcredit, banking, or starting businesses. Again, [we]proved them wrong.

I think such individuals just simply could not envision the possibilities. Remember the insightful words of the great German philosopher, Johann Wolfgang von Goethe: “If the eye were not attuned to the sun, men could not see it.” As we look back on 5 years of increasing social and economic impacts, the evidence is clear: We could see the light of the sun. By doing so we now have a business model that works right here in Utah Valley.

Go Green

How do people "go green?" Maybe they start by bringing their own bags to the supermarket instead of using plastic ones, even though remembering to bring them to the store can be a hassle. Maybe they begin recycling, even though it's not convenient. Or maybe they eat organic food, even though it's more expensive than their favorite item on the dollar menu at their favorite fast food restaurant.

We can do many things to "go green." I would like to add one more way to the list that has seldom, if ever, been mentioned. The next time you have the choice between paper and plastic, choose paper. I'm not taking about paper and plastic bags at the grocery store (even though that's not a bad idea). I'm talking about plastic cards (debit or credit) and cash.

VS.

Being able to open your wallet, purse, etc. and physically see how much money you have promotes more intelligent and cautious spending. Many people, when they make the majority of their purchases with a card, become somewhat careless and desensitized with their spending. Trading one item for another creates the feeling that you're giving up something in order to receive something else in return. This feeling does not completely die when a card is used to make purchases, because people still understand that they're giving something up; however, the feeling significantly weakens.

Like using your own bags at the grocery store, recycling, and eating more organic food, using cash instead of a card to make purchases is not convenient. However, making the sacrifice to "go green" will help you improve the purchases you make and save you the money you need in these difficult economic times.

$5 Cardboard Solar-powered Oven

A few months ago I read a great article written by Saeed Ahmed on cnn.com entitled "Inventor Turns Cardboard Boxes into Eco-friendly Oven." While it has its setbacks, this box oven is an amazing idea! In the article Saeed explains how the oven works:

The ingeniously simple design uses two cardboard boxes, one inside the other, and an acrylic cover that lets in the sun's rays and traps them.

Black paint on the inner box, and silver foil on the outer one, help concentrate the heat. The trapped rays make the inside hot enough to cook casseroles, bake bread and boil water.

I served a mission for the Church of Jesus Christ of Latter-day Saints in Guatemala. I lived there for about two years. I know that many the Chapines (Guatemalans) could benefit greatly from the box oven. Many people in Guatemala use open fires or wood-burning stoves to cook their food or boil their water (which needs boiling in order to be drinkable). The smoke from these fires is trapped inside the people's one room houses/huts and is very hazerdous to the residents' health. If used more widely in devolping countries, the box oven would improve health by decreasing smoke inhalation and decrease deforistation. The oven box would also save several lives by enabling people to boil their drinking water.

In all its glory, the oven box does have some setbacks. In Guatemala there are two seasons: the sunny season and the rainy season. During the rainy season I walked through streets with water up to my knees on several occasions. So, how would the oven box work during the rainy season? The answer is that it wouldn't work. The people would have to return to an open fire or wood-burning stove during these months. While this may be a setback for the box oven, it does not discount the great benefit it could provide during the sunny months.

The oven box is not only a practical solution to many problems, but also an economical solution as well. According to Saeed, the oven box can be produced for about $5. Five dollars may not seem like much money to you, but it seems like a lot of money to people who are making less than a dollar a day. However, If the people understand how much money they would save each month by not having to purchase wood, they would easily find ways to save enough money for one of these box ovens.

Humanitarian groups should consider taking on the box oven as a new project because of it's high demand, significant benefits, and low cost.

Follow this link to read the article mentioned above and learn more about the box oven.

http://www.cnn.com/2009/TECH/04/09/solar.oven.global.warming/index.html

Kiva.org

I have lent money to both Florence Ewaleifoh from Nigeria and Pov Saroeurn from Cambodia to help them provide a better life for their children. How is this possible? Kiva.org. I started by lending $25 to Florence. A few months later she paid me back and I was able to lend that money to Pov. Kiva is a great way to learn about microfinance and to start loaning money.

Pov

Florence

This video gives a simple definition of what microfinance is and how Kiva is used.

This is a Kiva promo video.

Recent Articles

• Now Kiva is Making Loans in the U.S. - BusinessWeek
• US Entrepreneurs Turn to Microfinance - BusinessWeek