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The Paradox of Inclusive Finance: How America's Small Lenders Can Survive the Microloan Crisis
As US community banks grapple with a 6.2% default rate on small business loans (FDIC Q1 2025), the original promise of inclusive finance—to empower marginalized borrowers while maintaining profitability—has devolved into a vicious cycle of aggressive lending and toxic collections. This deep dive reveals why mid-tier lenders are caught between megabank tech dominance and rising delinquencies, and how to rebuild a sustainable model. I. The Microloan Squeeze: Small Banks vs. Tech Titans 1. The JPMorgan Effect 2. The Collateral Crisis II. Why Collections Turn Toxic 1. The Borrower Trap 2. Regulatory Whiplash III. The Survival Playbook for Lenders 1. Smarter Underwriting 2. Collections 2.0 3. Risk-Pooling Innovations Model How It Works Adoption Loan Guarantees State-backed 80% loss coverage (e.g., CA’s...
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