Microlenders typically require a co-signer in the absence of collateral, and will turn bad debts over to a law firm for collection. Anecdotal evidence does suggest that microlenders can jump-start a struggling small business and change lives, but the record on job creation and defaults is less encouraging. A 1999 Accion International study of 537 clients with two loans apiece found they had created only 193 jobs. Resources include both money and volunteer mentors from established small-businesses. For example, in Brooklyn, Valentin Feliciano, president of Citywide Security Services, has helped Accion get the city's Latino-owned banks to refer rejected loan applicants.
Banks are on the case, too.
But, motivated by good citizenship or by federal requirements for community reinvestment, commercial lenders are partnering with micro agencies. A few states are getting in on the act, too. Even though these programs are seeking funds to expand, it's not always easy to attract would-be entrepreneurs. Some shun training and advice programs that aren't sensitive to their cultures and backgrounds, says Rutgers' Servon. So, Accion's Ludwig has hired an ad agency to attract borrowers.