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© shirinxoxo

Top banks in Indonesia are seeing the profit potential in microloans or small business loans and they are rapidly expanding their microlending branches across the archipelago. These services are usually handled through charitable groups, government programs and specialty-finance companies in many countries, but in Indonesia the biggest banks like Mandiri and Danamon are leading growth in this market.

Danamon has calculated that 60% of small businesses in Indonesia are currently underserved by the country's banking system. Microlending has expanded too quickly in countries like India, triggering a debt crisis in that country, yet that hasn't dampened the global enthusiasm for the business. It is being viewed as a new driver of investment in Indonesia, where the ratio of loans to GDP remains below 30%. That's lower than in any other Asian country; in Singapore, Malaysia and China this ratio is above 100%.

© HowardLake

The South Eastern Economic Development Corporation (SEED) is a micro small business loan program for small businesses in the state of Massachusetts. Thanks to recent approval from the Small Business Administration (SBA) the program is extending its territory for making microloans of up to $50,000 to small businesses in Suffolk and Middlesex counties in Massachusetts.

SEED hopes to boost its loan volume in the added territories and provide financing to many businesses that aren't eligible bank loans. The high unemployment rate in the US has led many to consider starting small businesses, but only a small percentage of those have the foundation necessary to qualify for traditional funding. One of the ways SEED can approve financing for businesses denied traditional bank finding is by considering additional sources of income that banks don't typically allow for.

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Grameen bank is famous for pioneering the concept of the micro loan, and since its founding in 1976 the organization has made more than $9 billion of these loans to poor and unemployed borrowers. Its US offshoot is having difficulty in raising $6 million to bring micro loans for the poor to Washington DC, however. The founder of Grameen, Muhammad Yunus, visited DC a year ago in April to announce his plans to open a local micro-lending center in one of the city's poorer communities.

The idea was to provide loans in small amounts to poor women, just as has been done overseas, so that they could start their own businesses without having to pay fees and high interest rates required by other loan providers. Corporate partners pledged to aid the effort with $1.2 million in funding, but Grameen America has raised barely $100,000 more since that time, leaving it about $4.7 million short of its target.