Third World Version of Venture Capital

Forbes has an uplifting article profiling tiny businesses that have broken the cycle of poverty and desperation. With the help of microloans, entrepreneurs in places like Pakistan, Haiti, Burma, El Salvador, Tanzania and Afghanistan have started businesses, become self-sufficient, and even employed others:

“In 1995 Mkama was barely scratching out a living for herself, her husband and her ten children by raising and selling tomatoes. With a $50 loan from the Foundation for International Community Assistance, she bought spare parts for her bicycle so she could get to the ferry that would take her to the market in nearby Mwanza [Tanzania]. With subsequent loans, she bought better seed and fertilizer. Now, on a good day, she can pull in a profit of $4.”

In underdeveloped countries, especially rural areas, venture capital and traditional bank loans are simply not available. Microloan programs (and related microenterprise programs such as grants and pension savings) play crucial roles.

Take, for example, the Grameen Bank. It is the grandaddy of microlending programs. It has over 3 million borrowers, 95% of whom are women. World is Green reports that Grameen even has started a microgrant program for beggars in Bangaladesh.

What’s the secret behind microlending? Peruvian economist Hernando de Soto says private ownership rights foster entrepreneurship. I think that’s a big part of the success of microlending. Building something you know is — and will stay — yours is a powerful motivator.

Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.