Micro Lending in the U.S.

December 15, 2014

While microfinance is largely associated with developing nations, microfinance in the United States has been around since the 1980s, according to a 2011 report, “American Offshoots: Will Microfinance Ever Really Take Root in the U.S.?,” published by the Wharton School of Business.

At the time the report was published, there were around 362 microfinance institutions in the United States, the largest of which, Accion USA, was launched in the early 1990s. By January 2010, Accion USA, an offshoot of Accion International, had provided around 19,500 small business loans worth more than $119 million, the report said.

Interest rates are generally high with microloans and are based on the cost of the money being lent, the cost of default and transaction costs, according to the international non-profit micro lending facilitator, Kiva. The lower the amount lent, the higher the interest rate, largely because transaction costs are basically the same whether a loan is for $25, $50, $100 or $500.

Some of the larger microfinance institutions in the United States include:

  • Grameen America. The financial organization, Grameen America, founded by Nobel Peace Prize recipient Muhammad Yunus, offers microloans, training and support to women creating small businesses. Since its launch in New York City in January 2008, Grameen America has provided nearly 97,000 microloans to close to 38,000 women in the United States. The Grameen America approach is based on a group model, in which women create support groups and build peer networks, to help ensure the success of their businesses.
  • Kiva. Kiva is a non-profit organization that works internationally with microfinance institutions to provide loans to people without access to traditional banking systems. Kiva.org dubs itself as a person-to-person micro-lending website, which allows individuals to make small loans to entrepreneurs. In 2009, Kiva.org launched an online portal to serve small business owners in the United States.
  • Accion USA. The Accion U.S. Network has made nearly 50,000 loans totaling over $406 million since its inception, according to information found on its website. In addition to loans that range from $200 to $300,000, Accion USA provides counseling, group training, access to online business resources and referrals.