Microlenders provide access to capital and technical assistance to help start and grow small businesses in low- to moderate-income (LMI) communities. The microlending industry has more than $100 million in outstanding loans to more than 13,000 microentrepreneurs in the United States, according to the Aspen Institute Microlenders serve small businesses that do not have access to traditional sources of business capital.

Many economic and social forces prompt people to start small businesses. The effects of corporate downsizing, outsourcing, changing rural economies, and emerging markets push people into self-employment as well as the desire to balance work and family. All indications suggest that these trends will continue, making small business financing all the more important to sustaining our economy.  In 2005, 20 million microentrepreneurs were responsible for more than 24 million jobs. It is estimated that in the years ahead, 10 million of those business owners could benefit from the financing and technical assistance that microlenders provide.
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A federal capital access program would secure loans and provide financing for businesses and nonprofit organizations that face barriers in accessing capital.

Research shows that after working with a microlender, a business owner is more bankable and builds more equity and assets over time. Those outcomes also lead to higher rates of homeownership, greater civic participation, and higher educational attainment for that entrepreneur’s children. By any measure, the microfinance industry has made a significant impact on the assets and self-determination of low- and moderate-income people as well as the economic development of LMI communities.

This is an excerpt from The NEXT American Opportunity. The full text can be downloaded as an Adobe PDF Document.