Microlending: What Business Can Do To Facilitate Community-Based Growth

Billions of dollars have been expended in foreign assistance throughout the third world, with much of this aid being provided by the not-for-profit community. While frequently effective in facilitating short-term benefits, these projects often do not improve the continuing living conditions for the residents of the community. Not-for-profits generally are in the business of short-term crisis relief; consequently, they do not have a focus on job provisions in the affected community that would increase their living standards in the long-term. Entrepreneurs, on the other hand, are in the business of job creation, which not only provides long-term benefits for the entrepreneur, but also for the entire community. Microlending, a term coined originally by Muhammad Yunus to describe very small loans made in third-world countries, has had an enormous impact on the lives of entrepreneurs, their families, and their communities. Many not-for-profits may wish to employ the techniques illustrated by Yunus and other successful microlending institutions. They may find the task overwhelming, however, without employing business professionals, whose services can be costly. For not-for-profits who might be interested in starting such a program, this paper will describe the process of microlending, articulate methods of selecting a loan recipient, and show mechanisms for documenting a microloan.