The New Yorker has a fascinating article about the limits of microloans -- you know, the small loans that usually go to budding entrepreneurs in developing countries. Or perhaps familiarly, the kind of loans promoted by Kiva, which I wrote glowingly about here. The main issue's that these microloans are usually going to one-person businesses, most of which aren't looking to hire employees:
in any successful economy most people aren’t entrepreneurs—they make a living by working for someone else. Just fourteen per cent of Americans, for instance, are running (or trying to run) their own business. That percentage is much higher in developing countries—in Peru, it’s almost forty per cent. That’s not because Peruvians are more entrepreneurial. It’s because they don’t have other options.
The author, James Surowiecki, says the developing world needs "more small-to-medium-sized enterprises, the kind that are bigger than a fruit stand but smaller than a Fortune 1000 corporation." The point here is not that microloans to teensy businesses are bad, but that somewhat bigger loans to somewhat bigger businesses might be more effective and helpful.
Even as I love the idea of the teensy mom and pop shop or the lone writer (me!), I'm wondering if the next Kiva loan I make should go to a small biz, not a one-woman shop. Kiva does, after all, list many different types of businesses -- which perhaps explains why the nonprofit has many many fans.
In fact, I found out via Sarah E. Endline of Sweetriot that GOOD Magazine recently threw a party for Kiva -- attended by Natalie Portman and other many other socially conscious people. Recently, Liz Fuller of Business and Blogging discussed Kiva's innovative business model, and Denise Wakeman of Biz Tips Blog noted that Kiva successfully uses a Facebook app as a business building tool.
My Kiva loan to Maribel Del Carmen Rodriguez a couple months ago is already 25% repaid, btw. I'll soon be ready to reinvest -- in a multi-employee business!
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