More Trouble With Microfinance

I've been meaning to write about James Surowiecki for a while. He's an amazing writer.  I read his "Financial Page" each week in the New Yorker and without fail I learn something new each time. This week's column is about microfinance and he makes a simple but interesting point.

That is, one of the problems with microfinance is that it doesn't address the real problem in underdeveloped countries: job creation.  He notes that there's tons of cash for one-man businesses (microfinance) and tons of cash for large and mature businesses (institutional investors) but there isn't any money for small businesses which he argues is where most new jobs come from.  In the U.S., angels and venture capital firms often fund these businesses.

I think it's a great point that I hope people that are as smart and as passionate as the pioneers of microfinance start to address.  Microfinance firms could easily partner to create funds that could fund businesses that have real growth potential.  There's no reason there couldn't be a variation of venture capital financing in the developed world.