A Modified Microfinance Model Proposed for the United States
Keywords:Job Creation, microfinance, refocusing, entrepreneurship
AbstractMicrofinancing 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.
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