Tuesday, October 22, 2013

Lend for America Summit

Almost immediately following Opportunity Fund’s “Taste of Microfinance” event that I wrote about in my last post, I traveled to Philadelphia to attend the Lend for America Summit, a conference for college students who have or are in the process of opening their own microfinance organizations to serve their local communities. Stockton Impact Corps was there and Banking on the Poor was a sponsor.

Kudos to Vanessa Carter and her team for putting on a fantastic conference for close to 200 college students from around the country. They assembled an outstanding cast of presenters who spoke and facilitated workshops on topics of great relevance to their work. People like the ever passionate and inspiring Galen Gondolfi from one of the leading anti-poverty micro-lenders in the country, Justine Petersen of St. Louis Missouri, who spoke on what it means to be “un-banked” in America and how student organizations can make a significant difference in the lives of their clients by helping them improve their credit scores and build their savings.

There were highly practical sessions on marketing and risk management provided by Leslie Hoffman of LEH Consulting, and a number of presentations on the importance of information systems and data needed to run an effective MFI. What impressed me was how intent the students were in absorbing the information and asking really astute questions. One of my take-aways from the conference is the observation that the students have much to learn to be effective in helping the low-income community with their financial issues. This is why in developing Stockton Impact Corps, we are focusing so much on training.

A second take-away came from a panel discussion regarding community development efforts in Philadelphia. One panelist, Bertha Sarmina, described how her organization, Finanta, was unable to find “qualified” borrowers to whom they could on-lend money available through the Small Business Administration. I asked whether this was because of stringent requirements of the SBA. She replied that the requirements were their own. She said the clients they serve need a great deal of mentoring to be “credit worthy.” It would cost Finanta about $2,500 per client to provide such support. I remembered this is exactly the same number Opportunity Fund came up with regarding their clients. So, my big take-away from the conference is that these student led organizations, given the right tools, are perfectly positioned to work with such lenders as Opportunity Fund and Finanta to ensure that low-income borrowers are able to make effective use of the credit extended them.

From Philadelphia I traveled to Ixtapa, Mexico for the annual Opportunity Collaboration un-conference. I’ll write more about that in my next post. For now suffice it to say it was a smorgasbord of serendipitous contacts with amazing people working to end global poverty.

Friday, October 11, 2013

A Taste of Microfinance

Opportunity Fund, California’s largest, non-profit micro lender held a fundraiser last night (10/10/13) in San Francisco featuring several “superstar” ventures they support with working capital loans. Since its inception in 1993 Opportunity Fund (OF) has made loans totaling $39 million to small business owners in the Bay Area and Los Angeles to start or grow their businesses. Not satisfied with this level of scale, CEO and Founder Eric Weaver announced their goal of lending an additional $100 million over the next five years. Based on OF’s experience to date, this level of lending will support 5,000 new or expanded small businesses and create 15,000 new jobs.

As the theme “A Taste of Microfinance” implies, the highlighted ventures were food service providers. Outside the event venue two food trucks, “Kung Fu Tacos” and “Triple Dash 3” offered delicious Latin-Asian fusion tacos. Inside, several other ventures such as “Chiefo’s Kitchen” (West African cuisine), “d’maize” (modern Salvadorian food) and “El Buen Comer” kept the crowd well fed. The founder of “Cool Haus” addressed the crowd and spoke of how her company has been able to grow into a company with $5 million in annual sales and 65 employees thanks to the support of Opportunity Fund.

Micro lenders like Opportunity Fund play a critical role in creating economic opportunity in our local communities. Small businesses create 64% of net new jobs in the U.S. economy yet many fail due to a lack of financing they need to grow. “Opportunity Funded” business on the other hand have a 90% success rate. Not all achieve the “superstar” levels of the ventures highlighted in the event, but they are able to provide a family with a living income. When roughly 40% of households in California have less the $500 in financial reserves, financing from OF is literally a life line. In addition to its lending programs, OF also provides savings programs for its clients which has enabled them to save more than $15 million.

As I write this post I am on my way to the Lend for America Summit held this year at the University of Pennsylvania. It is a gathering of small micro financiers formed around university communities. Although these small, mostly student led organizations may never achieve the scale of an Opportunity Fund, they do have the capacity to have a significant impact on their communities. There are over 700 registered CDFIs (Community Development Finance Institutions) in the U.S. but only 10 report making at least 100 loans a year. They do however, offer critical financial literacy training, help improving credit scores, savings programs and business support services such as tax preparation assistance, help with business plans and accounting. One should also not discount the value of these programs to the students themselves. They are learning real life skills while helping others.

I had the chance to talk in some depth with one of the young entrepreneurs at the Taste of Microfinance event—Cathleen Li, the owner and pastry chef of Oui Oui! Macaron. After graduation from college, Cathleen set out to learn how to make pastry, especially the particularly tricky French macaroon. I can attest she succeeded spectacularly! Her macaroons are delicious. She has been selling her confections through other retail outlets, including the Kung Fu Taco truck. Now with the help of a loan from Opportunity Fund she will be able open her first brick and mortar shop. Her passion for pastry and her drive to succeed are impressive--clearly OF is backing a winner. But it has not been easy. How many other young entrepreneurs like Cathleen are out there waiting for the assistance a Lend for America MFI might be able to offer?

Sunday, October 6, 2013

"It Takes a Village"

Again, a long hiatus between posts. I certainly did not expect that it would take this long to make good on the promise in my last post to write about the development of Banker Corps—now called Impact Corps—a platform for student-led microfinance organizations to bring financial services to low-income communities. The first such organization is being launched in Stockton California. Stockton Impact Corps is the result of a yearlong study conducted by students at the University of the Pacific’s Global Center for Social Entrepreneurship that documented the needs of the low-income community in Stockton for financial services.

Unsurprisingly, the students discovered through their research that there are no easy answers to the myriad challenges facing low and even moderate-income citizens in our highly competitive, market driven economy. In fact, they discovered that it literally “takes a village” to have even a hope of creating meaningful opportunities for the poor to lift themselves out of poverty. They found a number of local groups working on various aspects of the problem but none that provides a comprehensive program resulting in tangible financial services such as reasonably priced credit.

Stockton Impact Corps aims to fill that gap. By working collaboratively with other community based organizations and stakeholders in mobilizing community resources for creating economic opportunity in Stockton, students from the University of the Pacific and Delta Community College will be developing their own skill sets while creating meaningful impact on the financial and social issues facing the Stockton community. Stockton Impact Corps aims to achieve the following outcomes:

1. New small businesses will be able to access the needed capital to begin or expand operations;
2. Small business owners will be able to sustain their operations through an elevated level of financial literacy and business know-how;
3. Clients will gain greater access to traditional financial services; and
4. University of the Pacific and Delta College students, through collaboration with other local community based organizations, will acquire a greater understanding of the issues confronting the low-income community and how they can assist in increasing financial inclusion and economic activity.

Another facet of the original vision of Banker Corps, training for students who aspire to work in the community with low-income entrepreneurs, is also being implemented with the launch of Stockton Impact Corps. A comprehensive program covering areas such as presentation skills, personal finance, basic accounting, marketing, business plan development, credit analysis and loan processing is an integral part of Stockton Impact Corps.

Although the incubation period has been much longer than I anticipated, Impact Corps is emerging from a deliberate and collaborative process that, I hope, augers well for its success. Banker Corps’ original vision remains well embedded in the vision for Impact Corps and that includes a future mechanism for leveraging the donor bases of the Impact Corps entities by providing social impact investors with a reliable way to invest in Impact Corps assets.

But more on that in a future post. Banking on the Poor is proud to support the Lend For America annual Summit in Philadelphia next week and to help introduce Stockton Impact Corps to the greater community of student-led microfinance organizations.