Why Micro-Friendly Lenders Could Save the Day
Oct 6th, 2008 | By Dawn R. Rivers | Category: EconomyWhile many of the banks with easily recognized names are writhing in the grip of the financial markets meltdown, there’s a set of financial institutions that seem to be doing just fine. They are the community banks and non-profits that provide most of what little debt financing is available for the nation’s microbusinesses. In one of those cosmic ironies that you just have to savor, these outfits that took on the “high risk” small business loans are in great shape while those larger banks (that apparently thought securitized sub-prime mortgages were less risky) are looking decidedly peaky.
Perhaps the most important difference between the community banks and non-profits and their larger banking industry cousins is that they recognize small business lending as a part of overall community development. The inverse of that is true, too; when you support the small businesses in a community, you are essentially developing an important part of the community’s human capital infrastructure. The most important lesson of the financial markets debacle may be that the safest and most beneficial investments are those made in people and their communities. If policy makers could learn that lesson, perhaps it will inspire them to finally craft a small business lending program that works for microbusinesses as well as for banks.
