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A Modified Microfinance Model Proposed for the United States

Author

Listed:
  • Yu Da

    (Associate Professor, Alaska Pacific University, Business Administration Department, 4101 University Drive, Anchorage, AK 99508,)

  • Eldon H. Bernstein

    (Professor, Lynn University, College of Business and Management, 3601 North Military Trail, Boca Raton FL 33437,)

Abstract

Microfinancing is the concept of providing very small amounts of funds to a person or project who would otherwise be unable to obtain a loan. The concept has been successful in many developing countries. However, attempts to apply it to the United States have had little if any success. This paper cites earlier research that identified several critical conditions that exist in the United States that help to explain its failings. Significant differences exist in the size of the microenterprise sector, the existence of the functional social safety net, competition from both large firms and commercial lenders, and limits to forming a group based upon joint liability all differ. While the goal in the traditional model in developing markets is the elimination of poverty, we show how those critical conditions help to explain the lack of success in the United States. We propose a modified model whose goal is the establishment of an entrepreneurial venture that would lead to the creation of new jobs.

Suggested Citation

  • Yu Da & Eldon H. Bernstein, 2014. "A Modified Microfinance Model Proposed for the United States," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 4(7), pages 87-99, July.
    • Handle: RePEc:mir:mirbus:v:4:y:2014:i:7:p:87-99
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    Cited by:

    1. Rozzani, Nabilah & Mohamed, Intan Salwani & Syed Yusuf, Sharifah Norzehan, 2017. "Risk management process: Profiling of islamic microfinance providers," Research in International Business and Finance, Elsevier, vol. 41(C), pages 20-27.

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