Blog 5

Although well-organized microlending programs have experienced success in developing countries, I don't think similar success would be realized in most areas of the United States. One of the key factors of this is the fact that developed nations have well-developed economies, and the entry barriers for entreprenual companies are very high. If you think about the businesses that are the products of microloans, many of them are on a very small scale, and are grocery stores, restaurants/food-stands, or the owner sells their own hand-made crafts. This type of business is able to thrive in the lower developed nations, mostly because the market is not over-flowed with huge corporations or chain restaurants. On the other hand, in the United States, forum.belmont.edu states that for entreprenuer-based companies, "credible studies show success rates five years out...to be around 50% +/- 5%". It is important to note that many of the people in the United States that start their own companies are those that most likely have acheived a higher education, have experience in the given field, and have some sort of financial resources or other means of capital to serve as initial investment in their company. Microloaning, by definition, encompasses small amounts of money that are extended to applicants. Also, the aim of a program of this type is to alleviate poverty. In a country such as the United States, an impoverished person would most likely need a considerable loan to start a business and be successful, because the loan would serve as most, if not all, of the initial investment. Here, a microloan would not suffice because the materials, certifications, land, etc. would require a lot of financial capital, most likely not equitable to the amount of money a microloan would offer.

However, in the United States, although a microloan in its true form would not be efficient in starting a business, it would work to build credit. In this sense, it is possible that a microlending program in the United States would have similar success to a comprable program in a developing nation.

My trip to Belize confirmed my opinions of the potential success of microlending programs in the United States. For example, the grocery store that we helped to expand, although successful in Belize, would not survive in the United States. I think that many Americans would opt for a store like Wal-mart, for example, that would have lower prices, a wide variety of inventory, and more convenient locations. I do think that there are limited situations within the United States where microlending could experience success, but I feel like this would only occur in isolated areas of extreme poverty, such as Eastern Kentucky, where outside (but nearby) developed communities could extend support in the form of microloans. I feel like in this case, the impoverished areas of developed nations would be in similar conditions of developing countries, and microlending would work.

Although I have identified circumstances in which I think microlending could experience success in the United States, overall, I feel like there are too many institutional and social boundaries that would prevent the success of microlending programs.