Replicating Microfinance in the United States: Opportunities and Challenges
The paper assesses the progress of microfinance in the United States. It examines the success of microfinance in Africa, Eastern Europe, Asia, and South America and explores why microfinance in the U.S. appears to be more difficult. It looks at the lessons that developing-world experiences hold for efforts in the U.S and analyzes whether efforts in the U.S. must depart from international models.
Early microfinance efforts in the U. S. have failed to achieve the success of their Asian and Latin American counterparts. Conclusions include:
- Structure of the economy makes hurdles to starting small-businesses higher in the U.S.;
- Microenterprise sector is much smaller in the U.S.;
- These two aspects make business training an important component in the U.S. while also limiting potential demand for microfinance and driving up costs;
- U.S. microfinance programs rely on donors and will have to work to justify their place among other subsidized antipoverty interventions.
The paper states that developing inexpensive saving services for the unbanked appears to have greater potential for cost-recovery in the U.S. and would provide opportunities for poor households that are poorly served by existing for-profit and non-profit financial institutions.
