During the Ronald Reagan presidency, Reagan along with the prodding of Donald Regan (Secretary of State and former Merrill Lynch Chairman), issued an executive order to cut funding the S.B.A. lending program for small business in the USA.
The logic of this was that it was "welfare for small businessmen and women". After only a month, the order was rescinded, due to massive public demand. The Bush Administration is repeating history by proposals to end the funding for the Small Business Administration's "Micro-loan" program.
These are the reasons the SBA loan programs are important and valuable:
- 85% of all new jobs in the USA are created by small business
- Micro-loans have traditionally shown lower loan losses than any other segment of lending.
- Micro-loans provide impetus for "start ups" and new entrepreneurial enterprises.
- Women receive the greatest share of micro- loans, where the S.B.A. provides seed capital for lending. Women have often been disadvantaged by the traditional banking system in the U.S.A.
- Micro loans fill a gap of credit availability not provided for by the U.S. banking system.
- Micro loan programs also include "hands on" advice and consulting by representatives of the S.B.A., which serves as a boost in professionalism.
- Micro-loan programs are profitable for the SBA. Why cut programs of our government that actually make the tax-payers money?
A few years ago, I visited the Grameen Bank, of Bangladesh. There, they implemented a micro-loan program that is now the most successful lending program in the nation. I recall visiting a woman who borrowed money to purchase a milk cow. She sold enough milk, with that cow, to build a new small thatched house. As she showed me her one room house, her 2 children walked in. They had just come home from school, using books, also purchased with the profits from her "micro-loan" enterprise. I also met a woman who had bought a cell phone with a micro-loan. She was the village phone company. She introduced me to her daughter, wearing a nice school uniform. She told me, with some pride: "I not only feed my family with the proceeds of the phone company, but I was able to buy this school uniform for my daughter."
Micro-loan performance has by all indicators shown a higher pay back, and lower loan loss ratio than some of the leading commercial banks in the world. Inform your politicians and leaders of the facts about micro- lending, and how important it is to our world. It would seem that Bangladesh has a better banking and credit system availability for "Micro-Lending" than Washington D.C. these days. Hmmmmmmmmmmmm.