CHICAGO (TheStreet) -- Microfinance is an economic concept that wins approval across party lines, whether you're a do-gooder type who wants to end Third World poverty or a free-marketer who believes in the transformative power of entrepreneurship. But it's a practice we associate with rural villages in Asia or Africa, where tiny loans help women produce local handcrafts or maybe open a small shop.
Now, however, microfinance has found a new, underserved market: the United States. With banks cracking down on risk, even well-established small businesses are finding it harder to get credit. And few lending institutions are willing to take a chance on startups or expansions of two- or three-person businesses, where the potential profit is minimal.
That's where microlenders see an opportunity. The most high-profile entry into the U.S. market is Grameen America, an offshoot of Bangladesh-based Grameen Bank, whose founder, Muhammad Yunus, won the Nobel Peace Prize for his work. Grameen America has offices in New York and Omaha and plans to expand across the country in the coming years.Following the Grameen philosophy, the loans are tiny by traditional finance standards -- up to $1,500 -- and aimed at low-income entrepreneurs. Anyone who takes out a loan must agree to save a percentage of their weekly income and meet regularly with a group of other borrowers. (Loans are more likely to be repaid when there is social pressure to do so.)
While Grameen America will undoubtedly help nurture small businesses that otherwise would never get off the ground, it's unlikely to make much of a difference for established companies that are struggling. Like many microlenders, Grameen's mission is to help the poor become self-sufficient. Most American entrepreneurs -- though they may have seen their revenues crash over the past few years -- still don't fit such microlenders' low-income threshold.