Many like the Grameen Bank, Acción, and even Elmseed Enterprise Fund are trying to make microcredit work here in the US, but many challenges remain.  Time Magazine has a great overview of the state of domestic microfinance called “Can Microfinance Make It in America?”

I know as well as anyone how difficult the promise of microfinance has been to fulfill.  The hardest part is having quality workers at the microlender — normally the associated overhead forces interest rates too high.  The alternative is having insufficiently trained staff which results in default rates that are too high.  Elmseed is interesting because it has quality staffers — typically Yale students with some finance or consulting backgrounds — with virtually zero staffing costs.  However, it has been difficult to replicate its success elsewhere due to uncommon intersection of availability of such talent and concentration of need in the surrounding area.

Grameen’s strategy of focusing on the default rates while maintaining high interest rates seems the most scalable across geographies at the moment.  However, I am more fascinated by what Acción Texas  is doing — particularly what it does in underwriting other institutions’ microloans.

I had some brief experience with it at Mangrove Partners, which sought to provide a fund of funds for microfinance by essentially buying microloans to free up capital for more lending.  Our novel fundraising and cash flow process was how we tried to fix the existing domestic microlending ecosystem, and at the time, Acción Texas seemed the most receptive to new financing engineering to achieve the goal of greater microlending in the states.  I think that such embrace of financial innovation will be what changes the question “can microfinance make it in America?” into “when will microfinance make it in America?”