Growing the microcredit industry in the United States : barriers to growth and strategies for success

The purpose of this paper is to examine the growth of a new industry - the microcredit industry. It is an interesting story because it is an important new area in the field of economic development. Microcredit itself has existed for centuries. Microcredit is the business of making small loans to men and women starting or running very small businesses for the purpose of assisting in the growth of their businesses. This process of informal credit delivery has occurred all over the world in the form of Tontins, Roscas, Sousous (informal lending groups) and direct credit lending by individuals, for hundreds of years (Berenbach 1994, 119). Borrowing money from one that has the advantage of capital, and then lending to another who promises future income or assets is not new. What is new is the formalizing of mechanisms to provide credit to micro businesses that by definition are owned and managed by poor to low income individuals. All countries have a formalized system of credit delivery that provides this very simple function to businesses and individuals so that they can accomplish things in the present that would otherwise never be possible or would take much longer to accomplish. Credit is not a new concept, nor is it disputed that it is an absolute necessity to the functioning of the economies of developed and developing countries alike.