According to the newspaper La Voz de Galicia, the department for community support in the galician bank Caixa Galicia has financed more than 300 business projects in the last 4 years, projects that have been started by entrepreneurs without collateral. This financing consists of relatively small loans – up to 25.000 euros – with an average payout of 9.600 euros. The funding is just enough to get a small business started, so I guess you could call it a form of microcredit for the developed world.
Is this a good idea? It could be. The crisis causes layoffs. Many unemployed have sound business ideas and the time to work on a business plan, but no way of getting financing. Moreover, the results in Galicia are good so far. Caixa Galicia states that 65 % of these companies are still in operation after 4 years, while the average for start-ups in Spain is 53 %. Whether this type of financing will succeed in the long term is an open question, but it will definitively be worth keeping an eye on it.
By the way, Grameen Bank has just started a branch in New York City, which employs a solidarity lending model that has been successful in Bangladesh…
