Microcredit for Americans
Tuesday, October 29, 2013
The purpose of the loans, as conceived by Muhammad Yunus, the Nobel Prize-winning founder of Grameen Bank, is to help countless millions of poor people unlock their inner entrepreneur, to “use money to make money,” as he put it in a telephone interview. But its newfound popularity may say more about the increasingly unstable nature of American poverty, in which credit is hard to come by and sustenance is cobbled together from part-time jobs and threatened by unpredictable expenses.
“Families in rural Africa are more like U.S. families than everyone wants to believe,” said Jonathan J. Morduch, the executive director of the Financial Access Initiative at New York University, who has studied microcredit and is taking a close look at the financial lives of low- and moderate-income Americans. “The hidden inequality in America is about fundamental security, the ability to plan.”
In the United States, microcredit has generally been defined as loans of less than $50,000 to people — mostly entrepreneurs — who cannot, for various reasons, borrow from a bank. Most nonprofit microlenders include services like financial literacy training and business plan consultations, which contribute to the expense of providing such loans but also, those groups say, to the success of their borrowers.