US Microfinance: Then, Now, and Next
What are the challenges domestic microfinance faces in these crucial economic times, and how can we move forward? On Monday night, the ACCION USA Microfinance Council started a conversation on this topic with a stimulating panel discussion at the New School. Advocacy Committee Chair Madeleine Gordillo moderated, asking timely questions of ACCION USA President Gina Harman, Lisa Servon, Dean of the New School for Management and Urban Policy, and Jonathan Morduch, Professor of Public Policy and Economics at NYU and Managing Director of the Financial Access Initiative. The panelists agreed that microfinance has achieved impressive scale, but there is still more to learn in meeting the most urgent needs of low-income communities.
One of the areas that stood out most vividly was the demand for smaller non-business-related loans. Gina Harman spoke of the payday lending and check cashing industries that serve the needs of low-income borrowers without bank accounts. At the same time, these industries remain profitable by charging high interest rates and encouraging a dangerous cycle of debt. It may be easy to think we are better off putting these types of predatory practices out of business, but consider the myriad of products they offer: a check casher may offer 27 different products – remittances and rent check writing, for example – that are vital to their clients. The success of these industries proves that there is a deep need for their services – so perhaps lawmakers should focus on aiding service providers to meet these needs profitably and justly, rather than on eradicating the businesses altogether.
How can domestic microfinance providers meet these needs while remaining profitable? Though economic times are tough, one advantage of the current environment is that the government has dedicated new funding to regulated CDFIs like ACCION USA and other institutions that promote the creation of small businesses and, therefore, jobs. Organizations can use these funds to develop innovative products that meet the needs of their customers without having to charge exorbitant rates. In the coming years, domestic microfinance will hopefully be able to provide more of these needed services, enabling low-income communities to take ownership of their financial future.
The ACCION USA Microfinance Council plans to continue to host similar events to get the word out about domestic microfinance. If you are interested in raising awareness for domestic microfinance or becoming involved in one of the many exciting consulting projects the Council organizes, visit their webpage.
By Microfinance Council member Elise Tosun
Tags: microfinance, Microfinance Council