Incubating Microfinance: The Texas Border Experience

This article presents a brief overview of the microfinance initiatives in the Texas-Mexico border in United States of America. The United States has millions of low-income, minority and immigrant households that lack access to some of the most basic banking and financial services. This is because:

• Low-income families often lack the basic financial literacy or simply do not trust banks;
• These individuals, sometimes, find it difficult to maintain minimum balances required for checking and savings accounts. Fees and penalties make mainstream banking too expensive for people;
• Many low-income individuals lack the credit and work histories and other documentation required to obtain bank loans.

Microfinance operations in the U.S. offer more services in addition to supplying loans to small businesses. They provide technical training, business planning assistance, market awareness and financial literacy.The article presents the following statistics that suggest that microfinance has played this vital role by facilitating entrepreneurial activity on the Texas border:

• Texas data from 1994 through 2005 reveal that 34 percent of clients were border residents, accounting for 31 percent of the number of loans and 28 percent of the dollar amount. Given that the border accounts for 12 percent of the state's population, these numbers indicate strong demand for microfinance on the border;
• Texas estimates, its $11.7 million in micro-loans created nearly $19 million in sales revenue and household spending, nearly $6 million in additional income and 244 new jobs.