Profitability Not the Only Indicator of US Microfinance Success
The year’s first high-profile news piece on U.S. microfinance hit Time magazine readers over the weekend (Barbara Kiviat’s “Can Microfinance Make It in America?”). For an industry that once struggled to catch the ear of the general public, major media coverage is a great way to kick off the New Year. However, as some of the oldest U.S. microlenders—like ACCION USA—enter their third decade, my one hope is that journalists can stop asking whether they can have a lasting impact and start focusing on the fact that they already have.
In gauging whether U.S. microfinance organizations have staying power, it’s critical to include more than just one measure: profitability.
In gauging whether U.S. microfinance organizations have staying power, it’s critical to include more than just one measure: profitability. Finding a model that is self-sustaining happens through understanding the marketplace, hard work, innovation and a commitment to continuous improvement.
Ms. Kiviat failed to explore what makes all that effort worthwhile— statistics indicate that microfinance IS successful as a way to keep people in the United States out of poverty. Our most recent impact study indicates that each loan ACCION USA provides contributes to the creation or retention of 2.4 jobs. At an average loan size of $8,000, that makes microfinance among the most efficient source of jobs in the nation. Moreover, those jobs pay an average of 24 percent above the national minimum wage and allow business owners to increase household income by 6 percent. Building personal assets is a key to getting and staying out of poverty.
With over 10 million microbusiness owners in the United States lacking access to affordable loans, there is vast unmet need. We are dedicated to finding effective ways to reach those in need, to scale our work and to do so in ways that generate enough income to sustain ourselves. One might argue that’s a pretty damn good reason for microfinance organizations to stick around.
Today, we all raise money through contributions large and small, from individuals, corporations and foundations. Each understands that interest rates are set not simply to abide by the laws of the land, but to allow the mircroentrepreneurs to accumulate assets, not be drained of them. While our rates don’t compare to those charged in other markets, repayment of the loan with interest is the obligation of every borrower. Ask anyone who has sacrificed and worked hard to repay her loan if what she received from ACCION USA was a hand out and I bet what you will hear is it was a hand up.
Profitability is something that microfinance organizations strive for, but shouldn’t solely define success. Nonprofits can have strong, lasting business models, too.
January 5th, 2010 at 11:55 am
Where does Accion USA lend in the U.S.?
January 6th, 2010 at 3:32 am
I appreciate your writing about the news. However, the article you are mentioning was published 1 year back on January 11, 2009. There is something wrong with google these days as it is throwing up 1 year old alerts which is very misleading (as you can see).
January 6th, 2010 at 12:22 pm
Hi Tarun,
We were confused too, but the article actually ran in the most recent print edition of TIME magazine. So, they are either using articles that previously ran online only, or there is a glitch in there online system.
January 6th, 2010 at 12:23 pm
Hi AJ,
ACCION USA lends nationwide via an online lending platform – check it out at http://www.accionusa.org/apply.