What is Microfinance?  Does it work? Microfinance refers to financial services for people and small businesses that would otherwise not have access through traditional banks. Microfinance includes small business loans, credit-record building, savings accounts, financial literacy training and the other basic financial tools people need to succeed. 

Microfinance is a smart investment. Research shows that every microfinance loan creates 1.7 jobs and every dollar invested returns $2 - $2.72 to the economy. Small businesses provide more than half of U.S. jobs, fight poverty and create economic growth. Microfinance isn’t charity—it’s a pragmatic way to create economic growth and provide the opportunities that many people take for granted.

What is an MFI? MFI stands for “microfinance institution” – an organization which provides microfinance services. These services include small loans, matched savings accounts and financial literacy training. The World Bank estimates that 7,000 MFIs exist, mostly in developing countries. The U.S. is home to approximately 650 MFIs, the majority of which are small, local non-profit organizations.

Is the Tory Burch Foundation an MFI? No. The Tory Burch Foundation is a 501c3 nonprofit organization that seeks to economically empower women and their families. Our research shows that microfinance is a powerful way to do this. As our first step, we are partnering with ACCION USA to raise awareness about microfinance and support their entrepreneurs across the country.  This project is an example of how individuals, corporations and governments can give back to and improve our communities. We anticipate additional future partners and actively seek ways to create economic opportunity.

Why did you choose ACCION USA? ACCION USA is one of the largest, most respected and successful U.S. microfinance organizations. It was founded in 1991 as the domestic arm of ACCION International, a global microfinance organization. While most U.S. micro-lenders only make about 25 to 30 loans a year, ACCION USA gives 50-60 loans each month. ACCION USA has provided more than $115 million in loans since 1991 with a 92% repayment rate. 

Microentrepreneurs who have taken out two consecutive loans with Accion USA show an average 38 percent increase in monthly take-home income. In addition to loans, Accion USA works with clients to improve their financial position and knowledge so that they can “graduate” out of microfinance into the traditional finance system. The thousands of entrepreneurs and families they’ve helped speak for themselves. 

Accion USA has received numerous awards including the Fast Company/Monitor Group Social Capitalist Award in 2004-2007 and the Presidential Award for Excellence in Microenterprise.  It is rated three out of four stars by Charity Navigator.

With so much global poverty, why focus on the U.S.? While microfinance often conjures up images of small loans to buy livestock in developing countries, there is huge unmet demand for microfinance in the U.S. Today, microfinance is only available to 2% of the potential customers in the U.S.—compared to 17% of potential customers in developing countries.  Of the 23 million businesses with fewer than five employees in the United States, more than half have never received a loan. Far more can’t receive the level of funding they need in order to expand. During this most recent economic crisis, a staggering 4.3 million small businesses have gone out of business.  Our economy depends on the efforts of small businesses and we need to invest in them.

How is microfinance in the U.S. different from international microfinance?  Microfinance in the U.S. varies greatly from international microfinance.  Microfinance Institutions in the U.S. face greater regulation and a more complex financial system than in the developing world.  The complexity of the U.S. financial system means that loans alone are often not enough. Instead, microfinance is often paired with business training programs that give entrepreneurs the skills they need to build their businesses. In addition, start-up costs are greater in the U.S., meaning individual loans are larger.

Because the need for microfinance in the U.S. is largely unknown, it is primarily provided by non-profit organizations.  

Why focus on women?  Women are half the population but an estimated 57% of our poor citizens, with 13 million women living in what the Census Bureau calls “deep poverty”.  Poor women are most likely to be micro-entrepreneurs or self-employed.  These entrepreneurs support their families and are the front line investors in their communities.  They are more likely to be denied a loan by a traditional bank and face higher levels of financial discrimination. 

In addition, women, especially working moms, have been the worst affected by the recent economic crisis. One recent study showed that more than half of working mothers say they are working longer hours to make ends meet compared to only one third of men.  Fifty-two percent of working moms report taking money out of savings or investments to pay for basic expenses, placing their family's financial stability at risk. Sixty-five percent of women report that they have permanently changed their spending habits due to the recession. However, despite the tough times, mothers are dedicated to improving their economic futures. Nearly a third of women surveyed were pursuing more education to increase their employment opportunities and improve their families' futures.

The Tory Burch Foundation is inspired by Tory Burch’s experience as a businesswoman and working mother. It is dedicated to helping other women achieve their dreams and make their business plans succeed.

Why does microfinance matter in the current economic crisis?  Microfinance is especially important during an economic crisis. When large companies reduce the number of people they employ, self-employment is often the only income-generating option available to many people. Small businesses are the backbone of our economy; they provide more than half the jobs and productive activity for the nation. However, many of these businesses struggle because they cannot access the financial tools they need to start or grow. Without these businesses, the economy will not be able to recover.  As credit markets tighten in the current crisis, small businesses are being placed under even greater stress.  Microfinance provides these critical businesses with the tools they need to survive and thus stimulate economic growth that benefits the wider economy.  

Why is your logo a sunflower?
The Tory Burch Foundation logo is based on one of Tory’s favorite pieces of jewelry – a pendant her father designed for his mother, which Tory eventually received and often wears. This personal representation of inter-generational support and love is emblematic of what Tory helps to illustrate through her Foundation’s work.