Microlending is a term you may begin to hear more often. The financial business that gained incredible popularity abroad seems to be infiltrating the United States - and success stories abound. While the industry itself is not immune from problems, microlending does appear to provide some opportunities for those whose financial options may seem limited.Earlier today, the New York Times published an article that highlighted how the small scale microlending business once associated with the developing world is taking off in America.In the NYT story, the author describes how the down economy and strict consumer credit limits at U.S. banks have forced many small businesses to explore non-traditional options for financial flow. As the author continues, "Kiva.org, one of the best known microlenders, has just begun a pilot program in the U.S. The NYT spotlights Amanda Keppert, the owner of a hot dog stand in San Jose, California."What is Microlending?Microcredit is the industry that creates microlending. It's the extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor. Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh. In that country, it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty. Due to the success of microcredit, many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source of future growth, even though almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun. The United Nations declared 2005 the International Year of Microcredit.
CONTRIBUTE TO THIS STORY
