Microfinance and Entrepreneurship Among Minority Communities
Since its introduction to the world stage in 1983 through Professor Muhammed Yunus’ Grameen Bank (see www.grameen-info.org) in Bangladesh, microfinance has evolved into a key mechanism for individuals in poverty to step towards self-sufficiency. Under the Grameen Bank model, the bank provides financial loans to members of a five-person group of borrowers sequentially, dependent upon the commencement of repayment of the prior loan. The guarantee of repayment is derived not through any contractual term, but rather through group members’ reliance on and trust in one another. Following the Grameen Bank model, numerous microfinance-related organizations have sprouted in various forms in the United States and throughout the world, at smaller, regional levels, and at larger, global levels. Kiva, self-described as the “world’s first person-to-person micro-lending website” (www.kiva.org), and ACCION USA, a microfinance institution that has lent over $132 million in over 20,000 loans across the United States (www.accionusa.org), are two key examples of such institutions. Indeed, while microlending occurs prominently in developing nations, where poverty rates are extremely high, this tool also is used in developed nations. For example, in 2009, Kiva launched a pilot expansion in the United States, allowing individuals anywhere to make small loans to entrepreneurs in the United States through the Kiva.org website. (See www.kiva/org/press/releases/release_20130114-20.) The role of microfinance in creating opportunities for poor individuals to exit the cycle of poverty has been increasingly researched and tested. But can microfinance also be used as a tool to help disadvantaged, minority populations have a stronger voice in the political, economic and social spheres of their own democracies? My journey to Budapest, Hungary, as part of the 2013 Marshall Memorial Fellowship, led me to an organization whose work informs this question. In Budapest, I had the opportunity to meet with György Molnár, Board Member of the Kiútprogram and senior research fellow at the Institute of Economics, Hungarian Academy of Sciences. I talked with him about the Kiútprogram (meaning “Way Out”), a pilot program intended to explore whether microcredit can serve as a mechanism to (1) improve the employment status of the Roma population in Central-Eastern Europe and if so (2) whether it can improve the “social and economic integration of the Roma,” as referenced in “Social microcredit, self-employment and Roma inclusion”, Kiútprogram, p. 5, at www.kiutprogram.hu. The Roma population in Hungary, a minority group living primarily in remote, relatively underdeveloped areas, is severely underemployed. According to the Kiútprogram, the Roma population’s exclusion from the labor market can be attributed to two factors: (1) the “systemic presence of structural disadvantages” and (2) the “social discrimination sustaining the structural disadvantages.” (“Social microcredit, self-employment and Roma inclusion”, p. 10.) A key conclusion derived from the pilot program was that the value of such a microcredit program must be measured not by activities, profitability, or return rates of intermediary microcredit organizations, but rather its success in job creation or its performance as compared to employment expansion programs. “Inclusive social microcredit”, distinct from traditional microcredit, is necessary to assist in the integration of the Roma population, requiring the provision of basic professional training opportunities, training in community development and networking, financial and business administration training, business network development, and state and European Union support, among other forms of support. Significantly, field workers must have a more substantial role than in traditional microfinance programs, including taking steps to counter discrimination faced by Roma individuals receiving loans, particularly regarding administrative requirements (ex. receiving necessary licenses). The findings of the Kiútprogram suggests that microcredit, coupled with resources for borrowers to establish social and economic networks and counteract discrimination, may be key to employment, self-sufficiency, and thus stronger voices in democratic societies of populations directly or indirectly excluded from the private employment marketplace. Because of institutional and social discrimination against minority populations, a barrier to capital and resources necessary for entrepreneurship is a global problem, this model may be appropriate for broad application in other parts of the world and in modified forms. For example, the lives of the Roma in Central and Eastern Europe might be linked to the lives of Muslims in Belgium, where I learned from a member of the Association Belge des Professionnels Musulmans that members of the Muslim population in Belgium, facing employment discrimination, increasingly are viewing entrepreneurship as an answer to their lack of access to jobs. Yet the fight to strengthen the voice of minority populations in the social, economic, and political spheres of their societies does not stop at entrepreneurship. Government bodies still have a responsibility to establish legal frameworks and enforcement mechanisms to encourage integration of minority populations, whether new immigrants or minority populations who immigrated hundreds of years ago-- if these countries truly aim to be democracies. Vishali Singal, an associate in the Litigation practice at DLA Piper LLP, is a Spring 2013 American Marshall Memorial Fellow.