Micro loans, macro effects
By ALEXANDER SOULE
North Fork Bancorp., whose nearly 20 downstate branches
converted in March to the Capital One brand, closed
out its history by becoming one of the 10 most focused
lenders to small businesses, a recent federal report
shows.
North Fork was acquired in 2006 by Capital One Financial
Corp., itself the second largest provider of small-business
loans in the nation. The McLean, Va.-based company
trailed only New York City-based American Express Corp.
in small-business lending among the 100 largest lenders
in the U.S.
The Small Business Administration defines a small-business
loan as any loan under $1 million, and a micro loan
as $35,000 or less, although for an annual study it
conducts it uses a $100,000 measure for the latter
category. Credit card purchases are included in the
data.
Micro loans are considered risky because of the limited
business experience of many entrepreneurs who seek
them, but are also regarded as a promising alternative
for individuals to extricate themselves from dead-end
jobs or public welfare. The Self-Employment Learning
Project found that 49 percent of micro-loan recipients
were still in business after five years, a slightly
higher percentage than the average for all small businesses.
In a study of microfinance in upstate New York between
2000 and 2004, the Federal Reserve Bank of New York
found that about half of loan recipients received funding
to support existing businesses, including retail, professional
services and personal services like child care.
On average, loan recipients paid an average interest
rate of 8 percent over a term of at least four years,
and many were allowed to place vehicles, tools or other
equipment as collateral.
In its annual ranking of small-business lending, SBA
assesses banks and credit-card issuers by the percentage
of loans that are made to small business, against total
commercial loans and assets. The North Fork operations
inherited by Capital One placed eighth nationally,
and were tops in New York ahead of M&T Bank owner
Manufacturers and Traders Trust Co., with the Buffalo-based
company which ranked 15th nationally. M&T Bank
has about 50 branches in the lower Hudson River Valley,
with double the deposits of Capital One.
JPMorgan Chase & Co., the largest bank in the local
area with 20 percent of all deposits, ranked 28th nationally
in small-business loans and fourth in New York behind
Citigroup Inc.
Citigroup ranked third nationally in small micro loans
after American Express and Capital One, with JPMorgan
Chase fifth and M&T seventh. North Fork fared exceptionally
well by that measure as well, however, appearing in
the top 25.
Among smaller banks in New York, Poughkeepsie-based
Riverside Bank landed among the statewide leaders for
small-business and micro loans.
Micro lending was very much in the headlines this month,
following the opening of the first Grameen branch in
the U.S., in Queens. Grameen founder Muhammad Yunus
won the Nobel Peace Prize two years ago for pioneering
the concept of micro loans to aid development and entrepreneurship
in his native Bangladesh.
Today, organizations like San Francisco-based Kiva
operate Web sites allowing individuals to lend small
amounts of money to entrepreneurs in developing nations
and follow their progress.
Closer to home in Purchase, MasterCard Inc.’s foundation
recently awarded $600,000 to six organizations that
provide microfinance training.
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