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Her children thought the loan offer was a scam, but the Nicaraguan immigrant had tried to take out bank loans to no avail and pressed on. She repaid her $3,300 loan plus interest within a year and has taken out three more. Things worked out for Briones, but her children's worries weren't unprecedented. The microfinance industry isn't without some controversy. The total number of active microloan accounts fell 22 percent in India after that country's largest microfinance market, Andhra Pradesh, blamed a spate of suicides in late 2010 on aggressive lending and collection tactics by lenders. To date, the kinds of problems experienced in India haven't emerged in the U.S. Getting even small loans is tough for the growing number of Americans facing foreclosure or who have otherwise seen their credit suffer in the weak economy. John Giraldo and his wife Francy Bedoya were in that group. In 2008, they began selling brightly colored smartphone cases wholesale. The Colombian-born couple initially worked out of their garage before renting a small office and warehouse. To expand they needed cash, but Giraldo's credit rating was dismal following a foreclosure. "The banks wanted us to show our business had been running for at least two years before we could get a loan," he says. "We couldn't do that, and with my credit shot, we had no chance." Through a friend, they heard about the OUR Microlending program. Francy Bedoya received five loans for more than $9,000 to expand inventory and later to rent a larger office. The company, Movil Wireless, now ships throughout South Florida and to a handful of other cities across the country and to Colombia. The couple is currently looking for a larger bank loan to further expand their merchandise and offices. An estimated 20 million microenterprises exist in the U.S., according to The Aspen Institute's FIELD program. The think tank puts the number of annual microloans in this country at more than 17,000. Getting the loans can make a significant difference in the entrepreneurs' lives. A 2008 survey by the institute found the average household income of families participating in a microenterprise program rose 20 percent to $36,000. The OUR Microlending program used by Bedoya is among the rare for-profit groups. Former Venezuelan banking executive and CEO Emilio Santandreu says he believes a "good and successful business model can be built upon socially responsible lending." His company's loans have interest rates ranging between 15 and 18 percent but don't require credit checks. His sales representatives get personal references and determine whether the borrower's business plan is strong enough that the loan will likely be repaid. His experience shows the need for lenders interested in this market to be careful. Since 2008, his company has provided $6 million in loans, averaging about $5,000 each, to more than 1,000 clients, but it has yet to make a profit. The first year, 20 percent of the loans weren't repaid. Now, the default rate is closer to 5 percent, he says, adding, "We paid a high price for our learning curve."
[Associated
Press;
Joyce M. Rosenberg will return next week.
Copyright 2012 The Associated
Press. All rights reserved. This material may not be published,
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