Maybe Microfinance is More about Jobs than Poverty?
There have been few articles highlighting the U.S. microfinance industry that I have enjoyed as much as the one published today by Maria Aspan in American Banker (ACCION USA Avoids Anti-Poverty Pitch – February 10, 2010). While industry critics frequently link success (or lack thereof) to the ability for microfinance institutions to alleviate poverty, Ms. Aspan, through her thoughtful interview with ACCION USA president and CEO Gina Harman, recognizes that in the U.S., microfinance isn’t the silver bullet. Ms. Aspan wrote:
“It is true that microfinance is a means of lifting people out of poverty, but it, in and of itself, will not get the job done,” Harman, the president and chief executive of the nonprofit microlender Accion USA, said in an interview last month…”I think if we cast ourselves in the language of, ‘We solve poverty,’ we become part of the big universe of antipoverty fighters, without a big, systematic, programmatic way of describing how we do so,” she said. “If microfinance is the answer to every question, we’re going to answer no questions — and that’s why I want to stay focused on small business.”
In addition, Ms. Aspan painted an accurate portrait of the spectrum of microfinance providers in the U.S., complementing Ms. Harman’s remarks with insightful comments from other industry leaders, including Stephen Vogel of Grameen America:
Stephen Vogel, Grameen America’s CEO, said by e-mail that it “focuses on providing small loans to people living at or below the poverty line. … Accion is an excellent next source of capital for our borrowers and their businesses”…
And Premal Shah of Kiva:
Premal Shah, Kiva’s president, acknowledged “a good, healthy tension” between the language of poverty and that of small business, especially as Kiva facilitates lending domestically and abroad.
“Unlike Ghana or Bangladesh … where it’s clear that the people on our Web site are coping with some form of poverty,” marketing is trickier in this country “because of the wealth, because there are small businesses that still can’t get loans from banks,” Shah said. “We have to be more thoughtful in the United States, because the U.S. microfinance sector serves a broader range of clients.”
So, then, what is microfinance about if not directly alleviating poverty? Frankly, in today’s unemployment-plagued economy microlenders like ACCION USA are focused on one impact indicator: job creation. Each loan we provide helps to create or save nearly 2.5 jobs—that’s 2.5 people that could have gone from lower-income to no-income in a heartbeat. Moreover, these jobs are relatively higher paying (compared to the national minimum wage) and sustainable (as over 98% of our borrowers’ businesses survive).
I’d be interested in hearing from someone who could argue that that’s not success.