Imagine a woman who founded a courier company and now has
offices and employees in two counties shuttling documents for clients such as
architectural and law firms. Envision another woman who turns the love of her
native country into a living by selling Colombian souvenirs, crafts, food and
clothing. Or dream of a man and his staff who profit from their talents by
crafting creative signage and painting custom designs on cars and boats.
These are just three of hundreds of hard-working South
Florida entrepreneurs who have wielded maybes and can-dos into realized storefronts
and American middle class status. And they’ve done this through a unique
financial channel called microlending. While microlending is well known across
Latin America and in developing nations, sadly its existence, popularity and
prevalence stateside remain in a nascent phase.
Unfortunately, most of the news I read and hear about
microfinance in the U.S. involves providing those services abroad when in fact
a vast underserved population exists right here. Don’t get me wrong, helping
the disenfranchised in places like Sub-Saharan Africa and Asia is a noble thing.
But I’m often left wondering why so little of the microfinance conversation
involves helping out low-income entrepreneurs right here at home.
Now more than ever, microfinance can be the homegrown
vehicle that turns this trend around - especially as the latest jobs report
shows the same stubbornly high unemployment, lackluster job creation and
consumer penny pinching across the board. The result is that hundreds of
thousands of marginal-income families have slipped through the proverbial
cracks and our snail-paced economic recovery continues to widen that fissure.
Good credit becomes bad credit and access to traditional bank loans dries up.
People can help, and not just by giving donations or
crowdfunding, the latest personal investing trend. Many of the recession’s
forgotten casualties don’t want handouts; they want opportunities to work
themselves out of a financial hole. Kiva
Microfunds, a San Francisco-based tiny loan lender, clearly has the right
approach. The company connects donors who wish to give money in as little as
$25 increments and has lent out $335 million across 62 countries, boasting a
99% repayment rate. Closer to home, Our MicroLending, of Miami, has disbursed
over 1,050 loans totaling $6.2 million to over 600 micro-enterprises whose
owners use the funds to restock, remodel, expand and hire.
Fortunately there’s other good news as well. Microlending is
also increasingly interwoven with the phenomenon of impact investing. Impact
investing is the process by which investment takes into account not only direct
ROI, but evaluates the social and environmental benefits of doing so. Like mircolending,
social impact investing has numerous secondary and tertiary benefits. Blighted
neighborhoods on the brink of collapse revitalize, crime rates fall, juvenile
delinquency drops and a community or neighborhood has the chance to rebuild. And
just this past spring, Morgan
Stanley, inspired by its own studies on the matter, announced the launch of
its Investing With Impact Platform. J.P.
Morgan predicts that, by 2020, there will between $400 billion and $1 trillion
invested in ways that have a positive social impact.
So it’s definitely possible to do well by doing good, no
matter where funding comes from. A November 2011 report by the University of
Pennsylvania’s Wharton School of Business put the number of microfinance
institutions in the U.S. at 362. A strong start for sure. But clearly there can
(and should) be more. Investing in microfinance for American entrepreneurs and
making sure people out there know that this service is available, that
self-employment is an option if they’ve lost their jobs, can do a lot to help
ease the protracted financial suffering that has left so many of our fellow
Americans penniless and without hope.
To dream is priceless. But acting on dreams comes at a price.
Mircofinance and social impact investing are paving – and paying – the way
forward to turn entrepreneurial dreams into reality.
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