US Federal Reserve chief praises microfinance, urges use in US

This is one area that liberals and conservatives should be able to agree on.

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke, who has been devoting a lot of time lately to a credit crisis that has roiled global financial markets, found a smaller subject to focus on Tuesday. He sang the praises of organizations that provide tiny loans to people struggling to start their own businesses.

He said this movement, known as microfinance, had helped people all over the globe to start their own businesses and improve their lot in life. He said even more people can be helped in the future as organizations providing the loans improve their operating techniques.

While microfinance has gained the most attention in poor nations, Bernanke said that it also had a role to play in the United States through such organizations as Accion Texas.

"The microfinance movement has grown and adapted considerably during its short history in the United States," Bernanke said. "I hope that microfinance organizations will sustain their energetic spirit of innovation and experimentation as they strive to become more self-sufficient and adapt to our ever-changing economy."

Bernanke's comments were made to a conference sponsored by Accion in San Antonio. Copies of the remarks were made available in Washington.

The Fed last week cut a key interest rate for the second time in two months in an effort to make sure that a steep slump in housing and a severe credit crunch that hit financial markets in August don't push the country into a recession.

Bernanke, in his prepared remarks, made no comments on the current state of the economy. He is scheduled to testify on the economic outlook during an appearance before the Congressional Joint Economic Committee on Thursday.

Bernanke said that last month he had the opportunity to meet Muhammad Yunus, an economist from Bangladesh who founded the Grameen Bank and won the 1996 Nobel Peace Prize for his three decades of work promoting microfinance.

It has been estimated that providing small loans to people struggling to escape poverty by starting their own businesses had helped more than 100 million around the globe during that time.

Bernanke said that microfinance did not come to the United States until the 1980s and 1990s but that now through such organizations as Accion Texas there was a "lively network" of activity in this country.

"Since its founding, the U.S. Accion network has loaned $180 million to nearly 20,000 borrowers in 35 states," Bernanke said.

The Fed chairman said microfinance programs in the United States emphasize education, training and other services which he praised as important aids for people trying to start their own businesses.

"Here, even very small businesses are likely to have to deal with factors such as taxes, licenses and zoning laws that can prove daunting hurdles to the inexperienced, aspiring business owner," Bernanke said.

"Although some businesses will inevitably fall by the wayside, those that flourish and grow are likely to have better management and better long-term prospects than they would have without the support of microenterprise programs," he said.