Microfinance/Microenterprise:

Last week, I attended the Microfinance Conference 2011 in New York. Being in a room with hundreds of people who are following their dream, taking and managing risks for that dream, and assisting others along this path (for many, a path out of poverty) was FABULOUS! The transfer of knowledge and experience from the international stage to the United States was refreshing. The innovative energy was tangible. A question was addressed head on: Is microenterprise the panacea to poverty in US communities? Most, if not everyone in attendance pretty much agreed – microenterprise by itself, no. However, in its own right, microenterprise is a growing and viable strategy to alleviate poverty for families and communities in the US. Like anything, it is the “how” that really makes the difference – coaching and financial education, responsible financing and access to capital, smart regulation, planning with an eye toward flexibility and adaptability to more emerging learning and opportunity. Early indications for the impact of microenterprise are very good, and more research is being done. I've included links to some of that early research:

• According to the most recent MicroTest impact study conducted in partnership with the Aspen Institute, the Accion USA loans empower borrowers to create employment opportunity in low-to-moderate income communities (creating 3 new jobs for each loan recipient) and living wages for borrowers and their employees (24% higher than the national minimum wage). I was most intrigued by the finding on sustainability of business creation - The business survival rate among AUSA clients is 98% for established businesses and 89% for start-up businesses!   Talk about a testament to getting the "how" right!

• “Ripple Effect: The Economic Impact of Micro-lending (a case study on Opportunity Fund’s Microfinance Program from 1995 to 2010” prepared by TXP calculates the macroeconomic impact of micro-lending. The headlines: Every new dollar that the Opportunity Fund lends to local businesses spurs nearly two dollars in additional economic activity. That means that the loans generate more than $22 million in annual economic activity in the Bay Area today. By 2012, Opportunity Fund’s micro-lending is projected to pump at least $50 million into the Bay Area (CA) economy each year.

• The FIELD review, “Opening Opportunities, Building Ownership: Fulfilling the Promise of Microenterprise in the United States (2005)” found that the return on investment of between $6,580 and $7,094 per business by these programs was conservatively estimated at between 1.3 and 1.4 times the initial investment.

There were even some Boston entrepreneurs attending including Jim Koch of Sam Adams and Stacy Madison, founder of Stacy’s Pita Chips. Accion USA, Kiva, and Opportunity Fund coordinated the conference, with many corporate sponsors.

Some of my favorite statements from the conference:

The real risk is wasting your life, not following your heart!

A different skill set is often needed to start a business than the skill set needed to run the business!

What do you think about microenterprise as an economic development strategy?  Do you think it lifts families out of poverty?