I have a friend who works for the Grameen Foundation in Washington D.C. who recently explained microfinancing coming to America. In case you are unfamiliar with microfinancing or sometimes known as microlending, here is a quick explanation. The Grameen Foundation is a non-profit organization that aims to tackle global poverty by lending money to small businesses in 3rd world nations. For example, I heard a success story where they lent $1000 USD to an entrepreneur in Somalia, who bought a dozen bicycles. His business rents bicycles to the community and paid back the money lent to him within 6 months.
Microfinancing has been so successful, that it is spreading out of poverty stricken countries and into other countries. In fact, there was an article today in San Francisco:
For growing ranks of very small businesses, nonprofits are becoming de facto banks by extending microloans.
Once viewed as a way for investors to help small entrepreneurs in less-developed nations, microloans are helping to create jobs here in the Bay Area. Such loans, ranging from a few thousand to $50,000, are lubricating the region’s small business engine even as traditional bank funding remains frozen.
The rollout of San Francisco’s Revolving Loan Fund, which will be administered by Working Solutions, the nonprofit, microlending arm of TMC Development, means even more local entrepreneurs will turn to microfinance to fund their dreams.
“As a commercial real estate lender, we reach a certain (upper) segment of the small business market,” said Barbara Morrison, founder of TMC and Working Solutions. “I wanted a way to reach the other end of the spectrum, the non-bankable end of the spectrum, and help them grow.”
I’m not sure if I would qualify a $50,000 loan as a microloan, but the idea is the same.
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