Chabot's Microloan Legislation Passes House
Congressman Steve Chabot's (R-Cincinnati) Microloan Amendments and Modernization Act passed in the House of Representatives last night by a vote of 385 to 5. Chabot's bill, which represents the first substantive change to the Small Business Administration's microloan program in six years, improves the program's efficiency by expanding access to capital for entrepreneurs and providing lenders more flexibility to work with borrowers.
"This bill will help today's prospective entrepreneur become tomorrow's CEO," said Congressman Chabot, who serves as the Ranking Member of the House Small Business Committee. "By improving borrowers' access to capital, we are paving the way for business owners to establish and improve their ventures as well as to create jobs and enrich their community's economy."
The microlending program provides below-market rate loans to nonprofit intermediaries that in turn make loans to entrepreneurs. Aimed at assisting individuals who do not have access to commercial financial institutions, often due to unreliable credit history, the Microloan Amendments and Modernization Act would increase the average loan size from $7,500 to $10,000, a level that has been unchanged since 1992. Recognizing the value of entrepreneurial education, the bill increases the amount of pre-loan training that intermediaries may provide to borrowers. Further, the legislation improves the SBA program by providing assistance to lenders in obtaining borrower credit history and by allowing lenders more flexibility to determine the length of loans.
On the House floor today, Chabot noted that microlending programs were an efficient use of taxpayer dollars, providing training and capital to business owners who pay back the loans not only with money, but also with the benefits they provide to the community - producing nearly 10,000 jobs a year in areas that need economic revitalization.
Microloans have been successful both in the United States and abroad in creating opportunities for individuals to contribute to their local economic health. Chabot cited in his floor statement that microlending in the United States represents a variation of the concept developed by Dr. Muhammad Yunus, founder of Bangladesh's Grameen Bank. Yunus, recipient of the 2006 Nobel Peace Prize for his efforts to create economic and social development through microlending programs, met with Congressman Chabot earlier this year to discuss how microloans might be better utilized in the United States.