Economic Brief

May 2012, No. 12-05

Microenterprise and the Small-Dollar Loan Market

Tammie Hoy, Jessie Romero and Kimberly Zeuli

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"Small business" is a designation that includes businesses of many different sizes with varying financial needs and access to credit. Microenterprises — businesses with fewer than five employees — are served primarily by the small-dollar loan market, which ranges from payday lending to microloans offered by nonprofit organizations and, to a lesser extent, loans from traditional financial institutions. This Economic Brief explores the need for and challenges facing the small-dollar loan market in the United States.

Additional Resources

Directory of Community Development Financial Institutions in the Southeast

Acs, Zoltan J., Brian Headd, and Hezekiah Agwara, "Nonemployer Start-Up Puzzle," SBA Office of Advocacy Working Paper, December 2009.

"Community Development Financial Institutions: A Unique Partnership for Banks," Federal Reserve Bank of Richmond Community Development, 2011.

Elliehausen, Gregory, and Edward C. Lawrence, "Payday Advance Credit in America: An Analysis of Customer Demand," Monograph No. 35, Georgetown University Credit Research Center, April 2001.

"Microenterprise: Creating Wealth for Individuals and Communities," Federal Reserve Bank of Cleveland Community Reinvestment Report, Summer 2006.

Nash, Betty Joyce, and Kimberly Zeuli, "Small Business Lending During the Recession," Federal Reserve Bank of Richmond Economic Brief No. 11-02, February 2011.

Prescott, Edward S., "Group Lending and Financial Intermediation: An Example," Federal Reserve Bank of Richmond Economic Quarterly, Fall 1997, vol. 83, no. 4, pp. 23-48.

Proceedings of "Small Business and Entrepreneurship during an Economic Recovery," Federal Reserve Board of Governors, Washington, D.C., November 9-10, 2011.

Schreiner, Mark, and Jonathan Morduch, "Replicating Microfinance in the United States: Opportunities and Challenges," in Replicating Microfinance in the United States, James H. Carr and Zhong Yi Tong, eds. Woodrow Wilson Center Press, Washington, D.C.: 2002. (A working paper version of this book chapter is available online.)

Sengupta, Rajdeep, and Craig P. Aubuchon, "The Microfinance Revolution: An Overview," Federal Reserve Bank of St. Louis Review, January/February 2008, vol. 90, no. 1, pp. 9-30.