Micro-loans changing the face and future of rural Minnesota


Financing ‘Mom and Pop’ entrepreneurs–and especially a lot of Moms.

Micro-lending is changing rural Minnesota – region by region, county by county, city by city — as word of new kinds of loans and business development services has spread to aspiring entrepreneurs.

You can throw in gender by gender and ethnic group by ethnic group as well, says Berny Berger, micro-enterprise program officer for the Southwest Minnesota Initiative Foundation in Hutchinson.

Micro-loans, generally of less than $30,000, are frequently extended to nontraditional borrowers.

Since 2003, Southwest Initiative has made 113 micro enterprise loans totaling $1.25 million for start-up and small businesses. The average loan is about $10,000; the smallest so far was $500 for a new business.

Southwest Initiative is one of several regional offices established by the McKnight Foundation to foster economic development through grants, loans and technical training programs. Most micro-loans are made to start-up and small companies lacking the equity or assets usually needed to leverage commercial loans.

“There are some limited liability companies in the program, but most are independent or individual proprietorships,” Berger said. “You might say we specialize in helping ‘Mom and Pop’ entrepreneurs and especially a lot of Moms.”

More than half of the entrepreneurs helped by the loan program have been women. And reflecting demographic changes in rural Minnesota, 25 percent of the loan recipients are minority business entrepreneurs.

The four regional centers in the 18-county area served by Southwest Initiative – Hutchinson, Marshall, Willmar and Worthington — are magnets for new immigrants to Minnesota. They bring “a lot of creativity, a lot of new entrepreneurs,” Berger said.

Reaching prospective entrepreneurs in small towns far from regional centers remains a challenge, economic development specialists say. Without coordinated economic development information reaching all cities and counties, people with business dreams don’t always learn about venture capital and business education resources available to them in rural communities.

This has long been a problem in Minnesota and, indeed, almost everywhere in the world. Government agencies tend to channel resources to larger businesses and projects that offer potential for greater returns on public investment. Nonprofits like the regional initiatives and nongovernmental organizations are starting to change public thinking about the importance of small business.

Some of the renewed understanding of micro-enterprise is coming from business experiences abroad.

Micro-lending became widely recognized in 2006 when economist Muhammad Yunus received the Nobel Peace Prize for his pioneering work through the Grameen Bank in Bangladesh. Grameen’s small business loans seldom exceeded $100, but they turned impoverished and unemployed Third World people into entrepreneurs. Bank records show that 97 percent of the micro-loan clients were women.

Pressure from local economic developers and nonprofit groups is nudging U.S. states away from chasing smokestacks and toward helping entrepreneurs start or expand small companies.

All too often, states put all their eggs — resources and services — into big-factory basket, where they compete for transient firms that might well move to China or Third World countries after state and community subsidies expire.

By contrast, local entrepreneurs and their firms are connected to their communities. While small, these businesses grow by adding one, three or five jobs over time, stabilizing and diversifying local economies.

Nonprofit groups such as regional initiative funds, Small Business Development Centers based primarily at Minnesota State Colleges and Universities and community banks are now emphasizing economic development from the ground up, through local entrepreneurs.

The Southwest Minnesota Initiative Foundation offers a Micro-Enterprise Loan Program, a Small Communities Loan Program, a Regional Centers Loan Program, a Renewable Energy Loan Program and a Revolving Loan Fund. Details can be found at www.swmnfoundation.org/home.html

The Twin Cities metropolitan area has several micro lenders, too, including the Minneapolis Consortium of Community Developers, the African Development Center, the Neighborhood Development Center and WomenVenture.

The Aspen Institute lists 500 micro-lending institutions now at work across the United States. Check here for micro- enterprise and lending programs in Minnesota.