Microloans can give small businesses the boost they need to become successful, Federal Reserve chairman says.
By Regis L. Roberts
For small businesses, there is a very good chance that many will not make it to see their second year of operation.
Microloans can change that, Ben Bernanke, chairman of the Federal Reserve System, said during the Summit on Microfinance by Acción Texas Tuesday.
The summit, which continued Wednesday, brought the banking community to the Henry B. Gonzalez Convention Center to discuss microfinance — the theory and practice of making small loans to businesses that do not qualify for loans from large banks.
Pioneered by Dr. Mohammad Yunus, who founded the Grameen Bank of Bangladesh in 1976, microfinance — also called microcredit and microlending — took off in popularity and press coverage following Yunus being awarded the Nobel Prize in 2006.
Bernanke praised Yunus’ work, calling him “someone very well-known to this audience but not so well known to Americans generally.”
Bernanke said the microfinance movement has spread to the developing world in Asia, Africa and Latin America but has also found footing in the United States.
Indeed, Acción Texas, the largest microlender in the United States, was founded in 1994 as a branch of Acción USA, which was created from the South American microlending company of the same name.
“Acción Texas, our host, has been an exemplar of the movement in the United States,” Bernanke said.
Acción Texas makes individual business loans from $500-$50,000 and business credit lines from $5,000-$25,000.
Although the numbers on microfinace’s impact are not concrete, Bernanke said, its use has been instrumental in getting small businesses off the ground.
“Acción Texas, for instance, reports that it loaned $42 million between 1994 and 2005. It estimates that those loans created 982 new jobs and generated about $78 million in economic activity,” he said.
Employing about half the workforce, small businesses are an integral part of the American economy, and how they perform can greatly affect the economy’s performance, he said.
“The enterprises that microlenders finance are, of course, the very smallest of small businesses, but such firms make up a substantial share of the U.S. small business sector: 20 percent of small businesses in the United States have only one individual working in the firm, and 40 percent have two to four people working,” he said.
When Bernanke finished, he was treated to the work of one of those businesses.
Janie Barrera, president and CEO of Acción Texas, said she was extremely pleased to have someone as important as Bernanke visit San Antonio.
She said Bernanke did not need much prompting; she only needed to send him a letter asking him to speak at the summit.
Before Bernanke left the stage, Barrera presented him with cowboy boots made by one of Acción Texas’ clients, Juarez Boot Co. in El Paso.