BerkShares are an alternative currency used in Berkshire County under a program initiated by the E. F. Schumacher Society in 2006 (see last week’s Imperium Watch). Since BerkShares debuted, 2.7 million have been put in circulation in the state’s westernmost county, and the people who invented them plan to start a lending program using the alternative currency.
The lending program will concentrate on projects appropriate to the area; a typical concept would be to establish a furniture factory using the hardwoods that are abundant in the county’s scenic hills, a factory that might not qualify for funding from a conventional lender.
That brings us to the concept of microlending, the loaning of very small amounts of money to very small businesses. Microlending is a practice most people associate with the Third World, especially since Muhammad Yunus won the Nobel Peace Prize in 2006 for founding and operating Grameen Bank, a microlending project that began in Bangladesh.
But now microlending—including microlending by Grameen Bank—is growing in the U.S.
Microlending has always been done here and there; if you count the type of microlending that goes on within extended families, especially immigrant families, it’s quite common. An example comes, again, from the Schumacher Society, which in the early 1980s loaned a Berkshire County woman $500 to buy yarn to make sweaters. The loan so boosted her credit with her wool supplier that she was able to buy wool at lower prices. Then she borrowed to buy a knitting machine—which, unlike a bank, the Schumacher Society was willing to count as collateral—and eventually her business did so well that she was able to begin getting funding from banks.
The Wall Street Journal now reports that microlending is getting a firm foothold in the U.S. An important name in the field is ACCION, started up in the slums of Caracas by students in 1961. In 1991 ACCION began making loans in Brooklyn and today it’s helping small businesses in the oil-soaked Gulf area who can’t get loans from banks.
Newer in the field is Kiva, a San Francisco-based online lender whose average loan is $381. “The poor,” Kiva’s mission statement declares, “are highly motivated and can be highly successful when given an opportunity.” They also have a high payback rate (97 percent). By now Kiva has loaned over $170 million and operates in 54 countries, including the U.S., where it sometimes cooperates with other microlenders like ACCION.
