A Modified Microfinance Model Proposed for the United States

Eldon H Bernstein

Abstract


Microfinancing is the concept of providing very small amounts of funds to a person or project who would otherwise be unable to obtain a loan.  The concept has been successful in many developing counties.  However, attempts to apply it to the United States have had little if any success. 
This paper identified several critical conditions that exist in the United States that help to explain its failings.  Significant differences exist in the size of the microenterprise sector, the existence of the functional social safety net, competition from both large firms and commercial lenders, and limits to forming a group based upon joint liability all differ.
While the goal in the traditional model in developing markets is the elimination of poverty, we show how those critical conditions help to explain the lack of success in the United States.  We propose a modified model whose goal is the creation of an entrepreneurial venture or improving the performance of an existing small enterprise.

Keywords


Job Creation;microfinance;refocusing;entrepreneurship

Full Text:

PDF

References


References

ACCION Report: “U.S. Microfinance: Small Loans, Big Results” U.S. Accion U.S. Network, Opportunity Fund & Aspen Institute (2012. ).

Armendariz de Aghion, Beatriz & Jonathan Morduch, “The Economics of Microfinance Cambridge, MA: MIT Press. (2005).

Bateman Milford, “Microfinance as a development and poverty reduction policy: is it everything it’s cracked up to be?” Overseas Development Institute, Background Note, March, 2011

Besley, Timothy, Steven Coate, S., & Glenn Loury, “The Economics of Rotating Savings and Credit Associations”, The American Economic Review, 83 (4), (1993)

Bhatt, Nitin & Shui-Yan Tang, “Making Microcredit Work in the United States: Social, Financial, and Administrative Dimensions”, Economic Development Quarterly, August 2001 vol. 15 no. 3

Bird, Edward J., Paul A. Hagstrom, & Robert Wild (1997) “Credit Cards and the Poor”, Institute for Research on Poverty Discussion Paper No. 1148-97

Bouman, F.J.A. “Rotating and Accumulating Savings and Credit Associations: A Development Perspective”, World Development, Vol. 23, No. 3 (1995)

Bredberg, Sofia & Sara Ek, How to Apply Microfinance Activities in The Developed World: A Case Study in New York City, KTH Architecture and the Built Environment, 2011

Bressler, Martin S. & Melissa Wiseman, “Understanding Asian-American business and their role in economic growth and development”. Research in Business and Economics Journal, 2011

Brown, Adam, Steve Garguilo, & Khanjian Metha, “The Relentless Pursuit of Financial Capital for Micro-enterprises: Importance of Trust and Social Capital” International Journal for Service Learning in Engineering. Fall 2011, Vol. 6 Issue 2

Canale, Rosaria Rita, “Microcredit in advanced economies as a “third way”: a theoretical reflection”, Munich Personal RePEc Archive, Feb. 2010

Christen, Robert Peck, “What Microenterprise Credit Programs Can Learn From the Moneylenders” ACCION Discussion Papers Document No. 4. (1989)

Cull, Robert, Asli Demirgüç-Kunt, & Jonathan Morduch “Microfinance Meets the Market. Moving Beyond Storytelling: Emerging Research in Microfinance”. Contemporary Studies in Economic and Financial Analysis, Vol. 92

de Sousa-Shields Marc, Cheryl Frankiewicz, Eileen Miamidian, Jos Van der Steeren, & Brad King , “Financing Microfinance Institutions: The Context for Transitions to Private Capital, 2004

Edgcomb, Elaine, Joyce Klein, & Peggy Clark, “The practice of microcredit in the U.S. Washington, DC: Aspen Institute (1996).

Edgcomb, Elaine. “What a 'Microfinance Heretic' Has to Say to U.S. Microlenders” available at www.huffingtonpost.com/elaine-edgcomb/microfinance-industry-_b_1758261.html (2012)

Fikkert, Brian. “Alternative Microfinance Strategies for Churches and Missionaries” The Chalmers Center for Economic Development (2013)

Fernando, Jude, Microfinance: Perils and Prospects, Taylor and Francis, 2004.

Hishigsuren, Gaamaa, “Raising capital for microfinance: sources of funding and opportunities for equity financing”, Journal of Developmental Entrepreneurship, (2006)

Hulme, David & Paul Mosley, Finance Against Poverty, Routledge, (1996)

Hung, Chi-Kan Richard “From South to North: A Comparative Study of Group-Based Microcredit in LDCs and the United States”, “Replicating Microfinance in the United States: Opportunities and Challenges, (2001)

Hung, Chi-Kan Richard, “Access to Credit in Low-Income Communities: The Experience of Group-based Microcredit Programs in the U.S.”, manuscript, Indiana University, available at: ckhung@indiana.edu (1998)

Koor, Peter, Raising Capital through Equity Investment in MFIs: Lessons from ACLEDA” In put paper for the UNCDF/SUM and UNDP Africa Global Meeting, 2001, available at www.uncdf.org/sm

Lieberman, Ira, Jenifer Mudd & Phil Goodeve “U.S Microfinance at the crossroads: Scale and sustainability”, The Omega Foundation, (2012)

Light, Ivan. "Immigrant and ethnic enterprise in North America" Ethnic and Racial Studies 7, no. 2 (1984)

Novogratz, Jaqueline “Hopeful Change: The Potential of Microenterprise Programs as a Community Revitalization Intervention” New York, Rockefeller Foundation (1992)

Schreiner, Mark & Jonathan Morduch, “Replicating Microfinance in the United States: Opportunities and Challenges” in Jim Carr and Zhong Yi Tong, eds Replicating Microfinance in the United States, Baltimore, Johns Hopkins University Press, 2002.

Servon, L. J., “Microenterprise Development in the US: Current Challenges and New Directions”. Economic Development Quarterly, Vol. 20, No. 4, 2006

Sternberg, Matthew T. “Peer Lending: Social Service or Good Business?” Economic Development Commentary, Vol. 22, No. 3, 1996

Taub, Richard P. “Making the Adaptation Across cultures and Societies: A Report on an Attempt to Clone the Grameen Bank in Southern Arkansas”, Journal of Development entrepreneurship, Vol. 3, No. 1, 1998

Wrenn Eoin, Microfinance Literature Review, 2005




DOI: http://dx.doi.org/10.18533/ijbsr.v4i7.543

Refbacks

  • There are currently no refbacks.




Copyright (c)

 ...........................................................................................................................

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

............................................................................................................................

If you find difficulties in submitting manuscript please forward your doc file to support@thejournalofbusiness.org. Our support team will assist you in submission process and other technical matters.

In order to get notifications on inbox please add  this domain thejournalofbusiness.org in your email safe list.

International journal of business and social research (Print)
ISSN 2164-2540

International journal of business and social research (Online)
ISSN 2164-2559

[International Journal of Business and Social Research (IJBSR) previously published by MIR Center for Socio-Economic Research, MD, USA. From February 2018 this journal is published by the LAR Center Press, OR, USA]