By Michael Savage

I’m Michael Savage of New Canaan, CEO of 1-800Accountant, founder of Savage-Rivera Foundation, and I have spent most of my adult life inside spreadsheets, tax code, and the machinery of small business finance. I built a career on the idea that access to good financial infrastructure — the right accountant, the right credit, the right advice at the right moment — is the difference between a small business that survives and one that never gets off the ground. It took me longer than I’d like to admit to see that the same principle applies with even more force at the very bottom of the income ladder, in places like rural Honduras, where my wife Sandra and I do most of our philanthropic work.

Microfinance is not a new idea, and it is not a silver bullet. But of everything I have studied in the poverty alleviation space since Sandra and I started this Foundation, it is the concept that most closely matches how I already think about money: small, disciplined, well-underwritten capital, deployed to people who are creditworthy in every way except the one that traditional banks measure. That mismatch, more than any lack of ambition or work ethic, is what keeps so many families in Honduras and across Central America locked out of the formal economy.

What Microfinance Actually Is, Explained by an Accountant

Strip away the development-sector jargon and microfinance is simple: small loans, usually a few hundred dollars or less, extended to people who have no collateral, no credit history, and no realistic path to a traditional bank loan. The money typically funds something concrete and income-generating — a sewing machine, inventory for a market stall, chickens, seed and fertilizer for the next planting season. Repayment is usually structured in small, frequent installments, and many programs lend through group models, where a handful of borrowers guarantee each other’s loans and meet regularly to make payments together.

As someone who has spent two decades underwriting risk for small businesses, what strikes me most about a well-run microfinance program is how much it resembles good conventional lending, just recalibrated for a market that mainstream banks have decided is not worth the paperwork. The discipline is the same. The scale is just radically smaller.

The Idea Nobody Believed Would Work

Modern microfinance traces back to Bangladesh in the 1970s, when economist Muhammad Yunus started lending tiny amounts of his own money to basket weavers and street vendors who had no other access to credit. The model he built into Grameen Bank was considered a curiosity for years before it was taken seriously by mainstream development economics. In 2006, the Nobel Committee awarded Yunus and Grameen Bank the Nobel Peace Prize for demonstrating that credit, extended responsibly, could function as a genuine human right rather than a privilege reserved for people who already had money. That recognition did more than validate one bank; it opened the door for microfinance to become a global industry. By 2023 the global microfinance market was valued at roughly $195 billion, and it is projected to nearly double again by 2030 as more institutions replicate and refine the model.

What This Looks Like on the Ground in Honduras

Honduras remains the poorest country in Central America, with more than 70 percent of the population living in poverty by some estimates, and it is exactly the kind of market where conventional banks see too much risk and too little return to bother. That gap is where organizations like the Adelante Foundation have built an entire mission. Modeled directly on the Grameen approach, Adelante was founded after Hurricane Mitch devastated Honduras in 1999 and has since issued more than 77,000 loans, working with roughly 8,000 women at any given time to help them start or grow small businesses — produce stands, tortillerias, small retail shops, home-based manufacturing. The loans are almost always paired with financial literacy training, because handing someone capital without also handing them the tools to manage it is how well-intentioned lending programs fail.

I have seen this dynamic up close through our own Foundation work. The families we support are rarely short on work ethic or ideas. What they are short on is a bridge between an idea and the capital required to test it. I wrote more about the structural roots of that gap in my piece on how to solve the poverty problems in Honduras, and microfinance is one of the few tools I have found that addresses the problem directly, rather than treating the symptoms.

Where the Loans Actually Go, and Why It Matters for Families

The multiplier effect is the part that convinced me this was worth writing about at length. A loan to a mother running a produce stand does not just generate income for one person; it stabilizes an entire household budget, and a stabilized household budget changes decisions that ripple outward — whether a child stays in school instead of going to work, whether a family can absorb a medical emergency without selling off what little they own. I dug into that specific connection between family income and child labor in my earlier piece on the link between family poverty and child labor in Honduras, and microfinance shows up repeatedly in that research as one of the more reliable levers for keeping kids in the classroom rather than in the field.

Group lending models add a second layer of impact that does not show up on a balance sheet: social capital. When five or ten women in the same village guarantee each other’s loans and meet weekly to make payments, they are also building a support network that outlasts any individual loan cycle. I explored that community dimension more broadly in my piece on community-based approaches to poverty alleviation in Central America, and it is consistently one of the more underappreciated parts of how well-run microfinance actually functions on the ground.

The Part the Success Stories Leave Out

I would be doing this topic a disservice, and frankly doing my own profession a disservice, if I only told the flattering half of this story. Microfinance has real, well-documented failure modes, and the most serious one is over-indebtedness. CGAP, the microfinance research group housed at the World Bank, has tracked multiple markets where competition among lenders got ahead of responsible underwriting, and borrowers ended up stacking loans from multiple institutions with no central credit bureau to catch it. The result in several countries has been full-blown repayment crises that hurt the very borrowers the programs were designed to help.

There is also a structural criticism worth taking seriously: microloans push a meaningful share of income-shock risk onto borrowers who have the least capacity to absorb it. A bad harvest, a sick child, a stolen inventory of goods — any of these can turn a productive loan into a debt trap if the lending institution is not disciplined about loan sizing and repayment terms. This is exactly the kind of risk analysis I spent my career doing for small businesses in the United States, and it does not disappear just because the loan sizes are smaller and the mission is more sympathetic. If anything, it demands more discipline, not less.

How I Evaluate a Microfinance Partner

When Sandra and I decide which organizations to support or partner with through the Foundation, I apply roughly the same due diligence I would apply to any small business I was underwriting at 1-800Accountant: What is the actual repayment rate, not the marketed one? Is loan sizing tied to a realistic assessment of what the borrower’s business can support? Is there financial literacy training built in, or is the institution just handing out cash and hoping for the best? Programs that can answer those questions honestly, the way Adelante does, are the ones worth putting real money behind. I laid out more of the broader poverty-reduction framework I use to evaluate this kind of work in combating family poverty in Central American countries, and financial discipline runs through nearly every piece of it.

Why This Matters to Me Beyond the Balance Sheet

I did not expect the same instincts that built a national accounting firm to be useful in a Honduran village, but they have been. Good lending, whether it is financing a Connecticut small business or a market stall in rural Honduras, comes down to the same fundamentals: understand the borrower, size the loan to the reality of their situation, and build in the support that makes repayment possible rather than punishing. That is as true of the work Sandra and I do through the Foundation as it is of the businesses I have spent my career advising, and it is a big part of why I keep returning to this topic. You can read more about the rest of what keeps me busy outside the Foundation, from Lego collecting to koi keeping, over on Savage New Canaan, though I will admit none of those hobbies have taught me as much about resilience as watching a first-time borrower pay off her final installment.

Where to Go From Here

Microfinance will not single-handedly close the gap that keeps most of Honduras in poverty, and anyone who tells you it will is oversimplifying a genuinely hard problem. But paired with financial literacy training, honest underwriting, and community accountability, it remains one of the most effective tools I have encountered for turning a family’s ambition into an actual, sustainable business. That is the bet Sandra and I keep making with the Foundation, and it is a bet I would encourage anyone who cares about this issue to look into more closely.

I write more regularly about this work and the broader mission of the Foundation on LinkedIn, where I try to keep the finance community connected to what is actually happening on the ground in Honduras.

I’m Michael Savage of New Canaan, CEO of 1-800Accountant, founder of Savage-Rivera Foundation, and after a career spent underwriting American small businesses, I have come to believe that a well-structured microloan is one of the most powerful tools we have for underwriting someone’s way out of poverty.