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Replicating Microfinance in the United States: Opportunities and Challenges


  • Mark Schreiner

    (Washington University in St. Louis)

  • Jonathan Morduch

    (New York University and Princeton University)


In developing countries, microfinance has been the darling of the development community, and in developed countries, microfinance fits well with Third Ways ideas. What are the challenges and opportunities for the attempt to replicate microfinance in the United States? This paper attempts to sketch some answers. Two factors color much of the discussion. First, compared to the Third World, the structure of the U.S. economy makes the hurdles to starting small-businesses much higher in the United States, and, second, the microenterprise sector itself is much smaller. The two aspects combine to make business training a far more important component in the United States than in the Third World. They also limit potential demand for microfinance and drive up costs. With costs well above revenues, U.S. programs are far from achieving financial self-sufficiency. With continued reliance on donors, U.S. programs will have to work toward justifying their place among other subsidized anti-poverty interventions, including education and community-building initiatives. This suggests that serious, regular cost-effectiveness analyses should become a much higher priority than it has been. Our second broad conclusion is that developing inexpensive saving services for the "unbanked" appears to have greater potential for cost-recovery in the United States, and this could open up opportunities for millions of poor households that are poorly served by existing for- profit and non-profit financial institutions. The current focus on microlending in the US echoes the initial focus on lending in Third World programs, but those programs are increasingly recognizing the importance of also developing facilities for safe, convenient savings.

Suggested Citation

  • Mark Schreiner & Jonathan Morduch, 2001. "Replicating Microfinance in the United States: Opportunities and Challenges," Development and Comp Systems 0109002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpdc:0109002
    Note: Type of Document - Adobe Acrobat 3.0; prepared on Windows 98; to print on Adobe Acrobat 3.0; pages: ; figures: Included in pdf file

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    Cited by:

    1. Canale, Rosaria Rita, 2010. "Microcredit in advanced economies as a "third way”: a theoretical reflection," MPRA Paper 21109, University Library of Munich, Germany.
    2. Mark Schreiner, 2001. "Microenterprise in the First and Third Worlds," Development and Comp Systems 0108001, University Library of Munich, Germany, revised 27 Dec 2001.
    3. Schreiner, Mark & Woller, Gary, 2003. "Microenterprise Development Programs in the United States and in the Developing World," World Development, Elsevier, vol. 31(9), pages 1567-1580, September.
    4. Mark Schreiner, 2001. "Evaluation and Microenterprise Programs," Development and Comp Systems 0108002, University Library of Munich, Germany, revised 27 Dec 2001.

    More about this item


    Replication; microfinance; microenterprise; outreach; sustainability; financial education; self-employment; welfare reform; affordable housing; community development;

    JEL classification:

    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy

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