Microlending at Crossroads After 20 Years, by John Pain

Monday, May 23, 2005

Microlenders are becoming more popular, but they are at a crossroads. The money that they lend comes from government grants and foundations, whose generosity ebbs and flows with the health of the economy. And after two decades, they still don’t have enough customers to be self-sufficient.
The Aspen Institute, a Washington-based research group, estimates that 10 million microbusinesses have trouble getting bank financing, but only 150,000 to 170,000 are currently working with lenders and programs designed for microbusinesses.
Microlenders are also facing growing competition from banks and credit card issuers, which are beginning to take on riskier clients as they look to expand revenue. Banks more than doubled their lending to small businesses under several government-sponsored programs from 2002 to 2004, according to the Small Business Administration.
Some microlenders have begun to merge or diversify into other areas such as investment funds or savings accounts to combat the growing pressures on their business, said Lisa Servon, a senior research fellow at the New America Foundation, a research group in Washington.
Story found here.

Source: Associated Press