ben s bernanke : microfinance in the united states remarks by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the accion texas summit on microfinance in the united states, san antonio, texas, 6 november 2007. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * last month i had the pleasure of meeting with someone very well known to this audience but not so well known to americans generally : dr. muhammad yunus. perhaps more than any other individual, dr. yunus inspired the movement that has become known as microfinance. in 1976, dr. yunus founded the grameen bank in bangladesh, which became one of the pioneers of the concept of offering small loans to people deemed too poor or insufficiently creditworthy to qualify for traditional bank loans. the organization and the larger movement it helped spawn have financed the entrepreneurial aspirations of many thousands of people. the great majority of those who have benefited from grameen bank loans have been women, particularly poor rural women. microfinance has offered borrowers, in dr. yunus's words, " a fair chance to unleash their energy and creativity " ( yunus, 2006 ). his innovative thinking and dedication to poverty relief through the extension of credit were honored in 2006 by the award of the nobel peace prize. and the movement itself was recognized when the united nations declared 2005 to be the international year of microcredit. 1 the microfinance, or microcredit, movement has spread throughout the world – to other parts of asia, africa, latin america, and, more recently, to the united states. although the social and economic contexts differ widely across countries, the fundamental purpose of microfinance programs remains the same : to offer small loans and other financial services to low - income people to help them increase their incomes through entrepreneurship and selfemployment. accion texas has been an exemplar of the movement in the united states. i am very pleased to speak at your summit meeting today for many reasons, not the least of which is the opportunity to visit again with janie barrera, the president of accion texas. i had the pleasure of working with janie when she was a member of the federal reserve board's consumer advisory council, which has been an invaluable resource for the board over

the years on all aspects of consumer protection regulation and community development initiatives. soon after i became a member of the board in 2002, janie collaborated with the federal reserve bank of dallas to invite me and one of my fellow board members, susan bies, to brownsville, texas. we toured local housing and community development projects and visited a small business that had gotten its start with the help of a microloan from accion texas. in the remainder of my remarks i will speak about the development of the microfinance movement in the united states, putting it into an international context and discussing as well how it fits into the broader landscape of small business financing in this country. i will close with some thoughts on the challenges facing the u. s. movement as it continues to grow and mature. additional information is available on the united nations website, " international year of microcredit, " www. yearofmicrocredit. org. the development of the u. s. microfinance movement although the united states came relatively late to the microfinance movement, experimentation in the 1980s and 1990s laid the groundwork for the lively network of programs we see today. accion has been at the forefront of the development of microfinance in the united states. accion international began its microlending activities in latin america in 1961 and established an affiliate organization in the united states, accion usa, in 1991. over the years, the u. s. accion network has grown to become one of the country's largest microfinance providers. since its founding, the u. s. accion network has loaned $ 180 million to nearly 20, 000 borrowers in thirty - five states. 2 of course, the operational details of u. s. microfinance programs differ significantly from those in overseas programs, but as i mentioned, they share similar goals and core values. as it does in developing countries, the microfinance movement in the united states seeks to expand economic opportunities for individuals and to foster community economic development by providing small loans and other business services to people who have been traditionally underserved by mainstream financial institutions. loan features – including size, collateral requirements, and repayment terms – are typically more flexible than those of standard bank loans and are tailored to the needs of low - and moderate - income entrepreneurs. in the united states, however, credit is only one part of the microfinance package. to a greater extent than overseas, microfinance