*Can Micro-Lending Fuel a Real Recovery?*
**By Phil Hall**
***I saw an article the other week in the Los Angeles Business Journal that called attention to an interesting loan program run by Pan American Bank in East Los Angeles. The program offers $1,000 loans to working-class immigrants with green cards. These borrowers, who need to pass a number of qualifications, use the loans to cover the cost of applying for citizenship.
****Jesse Torres, Pan American Bank’s CEO, told the Los Angeles Business Journal that this loan program makes good business sense, both for today and in the near future.
****“It’s the right thing to do, and it fits with our mission, but it also makes sense because it will allow us to grow our business as they grow themselves,” Torres said in his interview. “Immigrants are very entrepreneurial. We’re looking to use this as a product that introduces them to us.”
****Pan American Bank’s program is part of an under-the-radar trend to encourage micro-lending in the United States. Although common throughout the developing world, most notably in the work of Bangladesh’s Grameen Bank, micro-lending is still something of an unknown commodity in this country.
****But in view of the current situation – an economy that is producing a lopsided surplus of low-paying part-time jobs, an out-of-control student loan debt crisis, a rising cost of living and a housing market that has spent the past five years crawling toward an increasingly elusive stability – perhaps it is time to fully import the micro-lending model to encourage a new push for American prosperity.
****Micro-lending is designed to help those in severe financial need who lack stable employment and, often, a credit record. As its name suggests, these loans are on the small side – and the focus of this lending has primarily been for the creation of a small business. The Pan American Bank example is taking this concept into a bold new direction. Micro-lending can either take the form of a traditional loan or the so-called peer-to-peer model.
****Micro-lending should not be confused with payday lending, which is a completely different animal – and according to some people, that animal has razor-sharp teeth and a merciless bite!
****Today’s microloans have helped to establish new businesses and create a flurry of employment opportunities. According to the Associated Press, the San Jose, Calif.,-based Opportunity Fund, a micro-lending operation, invested $7.6 million in loans to Silicon Valley-area small businesses during 2012, which created approximately 1,900 jobs.
****Of course, micro-lending does not apply directly to housing, but its role in building a new foundation of private enterprise and consumer self-reliance cannot be overlooked. And the example set by Pan American Bank offers a cogent argument in encouraging citizenship among the nation’s immigrant population – which, in turn, will help further fuel a stronger housing market. Lest we forget, recently published research by Americas Society/Council of the Americas (AS/COA) and the Partnership for a New American Economy found that the 40 million immigrants in this country were responsible for creating $3.7 trillion in housing wealth, particularly in the areas that the politically correct refer to as being “at risk.”
****My advice is simple: depositories should take a good look at the Pan American Bank experience in order to determine whether a profitable product line can be created with micro-lending. And for the nonbanks, especially in the mortgage industry, this might be a good time to consider partnerships or philanthropic investing in nonprofit micro-lending organizations. After all, if we can plant the seeds of economic self-reliance today, we will have a better chance of working with financially responsible borrowers tomorrow.