Having been through Albuquerque and Seattle now, I can say that the Americans have embraced microcredit in a more full way than we have. And the impact has been huge upon some personal stories.
It has been said that if you owe the bank a thousand dollars, you have a problem. And if you owe the bank fifty million dollars, then the bank has a problem. It is true that for many working families, access to credit became a significant problem after the economic slowdown. For many people, that means that the small business that gave them an alternative to a dead-end job or a vulnerable industry was out of reach.
In town after town, we've seen community groups who have stepped up to fill this void. They don't just rally the community to loan money -- microcredit agencies are building grassroots organizations that can offer mentorship and social capital to potential entrepreneurs. Often the loan is accompanied by initial workshops, reviews of business plans and a relationship that can last several months. Frequently the loan is delivered in instruments designed to accelerate one's credit score so that the business can grow.
The results are impressive. In bad economic climates, there is still a 50% success rate for many lenders! and over half of the successful businesses have employees two years out. The community-based nature of the sector allows for organizations tailored to unique needs of some underrepresented groups -- we met organization leaders with expertise in serving immigrant families in Seattle, working out of what was once known as "the Coloured Y" in Charleston building businesses for African-American women, and a group in Albuquerque with a real success story among Hispanics.
What they have in common is a determination to help clients succeed in a way that goes beyond traditional lending instruments. Cynics could reasonably note that the growth of microcredit and small entrepreneurial venture is a growth market because more secure traditional employment in industrial sectors is declining. They would be right, but it is still inspiring to see community leaders step up when the macroeconomic problem doesn't have easy solutions.
There would have to be an attitude shift in government to make it work here -- trusting local NGOs, accepting some risk, and a move away from bailing out failing businesses. One policy shift would seem eminently sensible. Most US states now allow unemployment or social assistance benefits to continue if the recipient is starting a businesses through an approved microlender. Even this change might move us even further in the right direction of making social assistance a hand up, instead of a trap with few ways out.