When the concept of microfinance was introduced in South America and most notably Bangladesh in the 1970’s, the concept of loaning money to the working poor to start businesses was inconceivable to the banks of the day. Banks simply saw the poor as “bad credit risks” and quickly dismissed the idea of microcredit as a passing fad that would end in bankruptcy for the institutions making the loans and over indebtedness for the world’s poor. The world is now viewing things a bit differently. Those traditional banks of that time are turning out to be “bad credit risks” themselves and even some investment banks of today are looking at microfinance not as a “fad” but as good business practice.
Today, over 150 million people globally are taking and repaying loans to microcredit organizations around the world. With historic default rates under 2%, microcredit is looking more and more like sound business practice, especially as Europe continues bailing out not only banks but entire countries that haven’t had any luck balancing their budgets and sovereign checkbooks. Americans and Western Europeans alike are finding themselves completely overwhelmed with mortgage and consumer debt and are defaulting on their obligations at a dizzying pace.
The element of microfinance that gives it such a solid standing is that the vast majority of it is NOT in consumer lending but in business loans. Helping the poor start businesses with loans ranging from $50 to a few thousand dollars is just the kick start that the world’s working poor need to get over the hump of poverty and begin a life of taking care of themselves and their families by starting and expanding their small enterprises. The business aspect of this is astonishing… if microfinance lenders are seeing loan paybacks in the 98% range, they can be profitable. This is good for shareholders but even better for the poor. Why? Because they can continue expanding their services through better products, lower interest rates and more branches and staff to service and offer loans.
It is currently estimated that over 1 billion of the world’s poor need a loan and could pay said loan back. And with only 150 million current borrowers, large banks and institutions are seeing “double bottom-line” possibilities. Reaching untapped markets of consumers who pay their loans back is very good business practice. HSBC bank predicts that the need is soaring for microcredit services and that demand is 10 times the current supply.
Microfinance Investment Vehicles are gathering more and more assets to put towards this sound business practice on investing in the poor. With assets over $10 billion USD, there is much room for growth and investment returns range from good to fantastic. Global Microfinance Partners is at the forefront of this emerging investment movement and at the intersection of Impact Investing and helping the poor through this hand-up philosophy. If you want to make a difference with your investment assets, contact us today and join this global movement to change how the world does business and enjoy the possibilities associated with excellent investment returns coupled with impacting the world for good.
Mark Robeson
President
Global Microfinance Partners, LLC
Tel +1 704 332-9390
mark@globalmicrofinancepartners.com
www.globalmicrofinancepartners.com
“Connecting Capital Markets with Village Markets”
Monday, January 9, 2012
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