| A 1991 fire in one of the busiest outdoor markets in Lima, Peru destroy the three food stands Teodora Acuña had worked 20 years to create. Not easily deterred, she saved for two years to buy another stand, but she couldn’t afford to stock her shelves like she had before. ACCION International’s local microlending affiliate, Mibanco, offered Teodora a loan of $100 that allowed her to increase her inventory. Over the years, with subsequent loans, Teodora has been able to expand her business and improve the life of her family.
Empowering individuals to become microentrepreneurs has proven to be a successful and rewarding lending strategy for CIIs. In 2005, a broad range of Community Investment Institutions (CIIs) provided the capital to finance 150,000 - 170,000 microentrepreneurs in the U.S., totaling $100.4 million in finance outstanding, as reported by the CDFI Data Project 2005. They also reported that 40 percent of all CIIs surveyed held some microenterprise in their portfolio, attesting to the broad support of microenterprise as both a successful investment and a long-term strategy to build wealth and economic independence in communities.1
Microenterprises are small businesses with fewer than 5 employees that require a loan or equity investment of $35,000 or less. A delicious taco vendor in New Mexico, a construction company in Illinois, and a flower shop in Texas, all have in common that their businesses began with a microenterprise loan. Microentrepreneurs use their financing for business expenses such as start-up capital, expansion, or equipment purchase.
By the numbers, microenterprise appears to be a small sector of community investing, comprising 3 percent of CII financing in dollars outstanding, but 30% in terms of the number of loans, as reported by the CDFI Data Project. Given that microloans are smaller than other loans, financial measures cannot accurately represent the far-reaching impact that microenterprise financing has on families and communities.2
The impact of community investing stretches far beyond the U.S. to developing nations where self-employed people comprise more than 50 percent of the labor force. Microenterprise loans are most often the vehicle for community investing abroad because they provide this large self-employed population with the skills, credit, and capital to turn their struggling business into a successful microenterprise.
1 This statistic includes jobs c reated as a result of microenterprise, but is significantly underreported. It does not capture all self-employment activities of microentrepreneurs, job data from the 138 credit unions for which the CDFI Data Project only has call report data, and those CDFIs that do not track this information.
2 Data as reported for the FY2005. Taken from CDFI Data Project study "CDFIs: Providing Capital, Building Communities, Creating Impact."