Maybe Microfinance is More about Jobs than Poverty?
There have been few articles highlighting the U.S. microfinance industry that I have enjoyed as much as the one published today by Maria Aspan in American Banker (ACCION USA Avoids Anti-Poverty Pitch – February 10, 2010). While industry critics frequently link success (or lack thereof) to the ability for microfinance institutions to alleviate poverty, Ms. Aspan, through her thoughtful interview with ACCION USA president and CEO Gina Harman, recognizes that in the U.S., microfinance isn’t the silver bullet. Ms. Aspan wrote:
“It is true that microfinance is a means of lifting people out of poverty, but it, in and of itself, will not get the job done,” Harman, the president and chief executive of the nonprofit microlender Accion USA, said in an interview last month…”I think if we cast ourselves in the language of, ‘We solve poverty,’ we become part of the big universe of antipoverty fighters, without a big, systematic, programmatic way of describing how we do so,” she said. “If microfinance is the answer to every question, we’re going to answer no questions — and that’s why I want to stay focused on small business.”
In addition, Ms. Aspan painted an accurate portrait of the spectrum of microfinance providers in the U.S., complementing Ms. Harman’s remarks with insightful comments from other industry leaders, including Stephen Vogel of Grameen America:
Stephen Vogel, Grameen America’s CEO, said by e-mail that it “focuses on providing small loans to people living at or below the poverty line. … Accion is an excellent next source of capital for our borrowers and their businesses”…
And Premal Shah of Kiva:
Premal Shah, Kiva’s president, acknowledged “a good, healthy tension” between the language of poverty and that of small business, especially as Kiva facilitates lending domestically and abroad.
“Unlike Ghana or Bangladesh … where it’s clear that the people on our Web site are coping with some form of poverty,” marketing is trickier in this country “because of the wealth, because there are small businesses that still can’t get loans from banks,” Shah said. “We have to be more thoughtful in the United States, because the U.S. microfinance sector serves a broader range of clients.”
So, then, what is microfinance about if not directly alleviating poverty? Frankly, in today’s unemployment-plagued economy microlenders like ACCION USA are focused on one impact indicator: job creation. Each loan we provide helps to create or save nearly 2.5 jobs—that’s 2.5 people that could have gone from lower-income to no-income in a heartbeat. Moreover, these jobs are relatively higher paying (compared to the national minimum wage) and sustainable (as over 98% of our borrowers’ businesses survive).
I’d be interested in hearing from someone who could argue that that’s not success.
Please Mr. President, More Support for Microloans
“The true engine of job creation in this country will always be America’s businesses,” said President Obama in last night’s State of the Union address.
While I couldn’t agree more, I wished that the President drew increased focus to America’s microbusinesses — the “mom-and-pop” establishments (typically with fewer than five employees) that are the lifeblood of communities nationwide. These are the businesses that start when “an entrepreneur takes a chance on a dream, or [when] a worker decides its time she became her own boss.”
Mom-and-pop microbusinseses are the true drivers of job creation.
Eighty-seven percent of all American businesses are, in fact, microbusinesses, which represent 18 percent of all U.S. private employment (according to the Association for Enterprise Opportunity). These are the businesses that have proven to support job creation in previous economic downturns, and will be the businesses that guide America out of the current recession.
President Obama’s pledge of $30 billion in funding to help community development banks get critical capital into the hands of small business owners is a step in the right direction for American microbusinesses. It will be a bigger, stronger step in the right direction if microlenders like ACCION USA are included as part of the solution along with community banks. We are ready, and a proven path to deploy loans to deserving business across the country.
Regardless, the President’s commitment to small businesses was abundantly clear, and the importance of ACCION USA’s work with small businesses in good and bad economic times was reinforced. We’ll renew our focus on getting more attention in Washington for microlending programs, and remain committed to the small businesses we serve.
Survey Says … Microloans Working
Over 100 ACCION USA clients completed the 2009 MicroTest Client Outcomes Survey.
Despite an extremely challenging environment for small businesses during 2007-2009, the vast majority of ACCION USA clients managed to sustain their businesses, with many creating new jobs. So says a new report made possible by the hard work of two intrepid summer interns (thank you Max and Kathryn!) and the Aspen Institute’s MicroTest Client Outcomes Survey project. You can read the full report here.
To generate the data in the report, ACCION USA surveyed over 100 clients who had received microloans in 2007. We questioned them on number of employees, business contributions to household income, owners’ draw, etc. By comparing responses to those in the clients’ loan applications, we found several important longitudinal results, including:
- Job creation. Client businesses that received loans created or retained on average 2.4 jobs (not counting the owner), predominantly in low- to moderate-income communities.
- Wage increases. The median hourly wage provided by businesses owned by ACCION USA borrowers ($9 an hour) is 24% higher than the federal minimum wage.
- Business survival. 98% of existing businesses were still in business by year-end 2008 (compared to a national average of 70%).
2009 was a year marked by debate about how to measure the impact of microfinance in the developing world. Here in the U.S., MicroTest remains the gold standard for measuring client outcomes, and ACCION USA is pleased to participate in this project. We look forward to teaming up with the Aspen Institute once again in 2010. (And we’re looking for interns to help!)
Tags: Aspen Institute, impact, outcomes, recession
ACCION USA Success Stories in the News: Everardo Branford
A couple blog posts ago, we profiled ACCION USA borrower Everardo, the owner of Branford’s Original Hot Sauce. Well, success stories spread quickly, and Everardo was recently featured on Primer Impacto, a Spanish-language news show airing on Univision.
For those who are fluent speakers or can at least muster up their high-school Spanish, here’s the segment:
http://www.univision.com/content/videoplayer.jhtml?cid=2224075
Microfinance Video Launch: It’s Not Charity, It’s a Chance
Over the past few weeks, we at ACCION USA have been thinking a lot about the impact microentrepreneurs have on our communities. Since their local impact is such a large part of our lives, we decided to put together an amazing microfinance video about it! The video launched yesterday as part of our It’s Not Charity campaign to raise donations this holiday season. And better yet—each dollar raised will be matched 100% by ACCION USA’s Board of Directors!
Making the microfinance video was an exciting opportunity for us to creatively think about what our communities get back from supporting microentrepreneurs. First, microentrepreneurs create new employment, which provides more people with the opportunity to earn a living wage, support their families, and spend their income at other businesses. Second, microentrepreneurs enliven and enrich the communities we live in—we all value the human connection and conversations we share with our local business owners on a daily basis.
Third, and perhaps most importantly, microfinance doesn’t mean giving charity—it means a chance. That’s why we’ve chosen “It’s Not Charity, It’s a Chance” as the overall theme of our campaign.
Consider giving back to your local community by donating to ACCION USA this holiday season and buying from local businesses. In the meantime, check out www.itsnotcharity.org and the video above!
MicroBike 2009: Pedaling Against Poverty
ACCION USA Loan Consultant Renzo Mendoza prepares for Sunday’s big ride.
In the summer of 2008, six college seniors rode across the United States to celebrate their graduation, and to raise funds and spread the word about microfinance. Calling their project MicroBike USA, the riders raised $35,000 and told the story of global poverty and microfinance to thousands.
This year, hundreds had the opportunity to participate in MicroBike 2009 through “micro-rides” in communities from Boston to Bogota. Through pledges from supporters, MicroBike 2009 has already raised more than $32,000 to fight global poverty.
Despite a rainy weekend here in Boston, on Sunday the ACCION Boston and Friends team pedaled the 15 miles from Bedford, Mass. to the State House in Downtown Boston. As of this writing, the team raised more than $4,600 toward the cause. The weekend’s other notable riders included teams from lead sponsor Eaton Vance, including the cleverly-named Tour de Vance, which raised more than $4,000.
Missed this weekend’s ride but want to participate? You can still sign up to organize a ride in your community, and you can contribute to MicroBike 2009 through the end of the year. Don’t forget to watch this blog for information about MicroBike 2010, which is sure to be even bigger and better!
Tags: ACCION International, microbike
A Commitment to Change: Reflecting on CGI 2009
It is hard not to be overwhelmed by the Clinton Global Initiative (CGI) experience (my first). It isn’t the glitter and the glamour, though there is plenty of that, but the energy of 1,000, multiplied by a determination to address the issues of the world and the belief that meaningful change can be affected, one commitment at a time. That’s what lights the days and evenings of CGI for me.
Education, energy and climate change, global health, poverty alleviation, and a special focus on women and girls were all topics of impassioned, informed, and lively discussions that engaged private investors, NGOs, multinational corporations, policy makers and world leaders.
Those of us whose work is dedicated to economic empowerment found our thinking informed by those who understand that hunger, water, infrastructure and health are driving factors in success or failure; that women and girls face incomprehensible challenges, yet are a natural resource capable of changing the world.
(This short video does a great job of presenting the case for investment in women and girls.)
Regardless of the issue, the need to get essential programs to scale was always a point of commonality and of struggle. I listened to those whose work has touched hundreds and those whose programs reach hundreds of thousands. I heard a commitment to see that three million additional girls receive an education. (According to statistics shared by Jordan’s Queen Rania, the cost of getting these girls into school is $11 billion, which is what Americans spend on pets every three months.)
During all this, I couldn’t keep my thoughts from wandering to the microfinance field here in the U.S. Our numbers remain small, yet the impact on each borrower, his or her family, and the communities in which they live is large. Commitments are the promises of change at CGI. Our commitment, though not announced on the stage by Brad, Demi, Bill, or Hillary, is to focus on innovative ways to reach those microenterprises where small infusions of capital will unleash extraordinary power to change the world.
We have a great deal to be proud of and oh so much more to contribute.
Is ACCION USA in the Era of Web 3.0?
Staff member Erika Eurkus assists an ACCION USA client in building a website for free using Yola.com
I first heard the term Web 3.0 last week at the SOCAP conference in San Francisco. To be honest, I am still trying to understand Web 2.0, but leave it to the technologically savvy San Franciscans to bring me up to speed on online social innovations.
If you’ve joined ACCION USA’s Facebook Page or if you have lent money via our Kiva.org lending team, then you have entered the age of Web 2.0. Web 3.0 is stepping from that online social space back into the offline community. This definition is still up for debate, but using the context of online-to-offline social good I will make an attempt to draw ACCION USA’s path to Web 3.0.
ACCION USA has been working offline in communities throughout the U.S. since 1991. I recently observed one of our New York-based loan consultants as she worked late every day for an entire week, doing everything she could to help her client get the capital he needed for his business. Next, by directing her client to Yola.com to build a website for free, she helped to bring her offline work with this client into the online space.
ACCION USA has recently partnered with Yola.com, which deserves a big round of applause for the great service that it is providing to our clients. The partnership offers clients that create websites through Yola.com the chance to be featured on the Yola.com website — a great marketing opportunity! ACCION USA’s longtime goal of helping our clients create a web presence is now becoming a reality. Yola.com provides a simple drag-and-drop application that makes it easy for anyone to build a website. And in our New York office, Yola.com has sponsored a workstation where volunteers can provide one-on-one assistance to help a microentrepreneur build a website for free! Could this be Web 3.0?
So as you engage in Web 2.0 by reading this blog and commenting on it, consider volunteering with ACCION USA. Empower a business owner by helping them create a website through Yola.com. You could even help them start their own blog! This is my take on Web 3.0 and ACCION USA’s role in it. What are some ways that you’re engaging in Web 3.0?
Tags: accion usa, us microfinance, web 3.0, yola.com
Honoring a Community Development Lion
Sen. Kennedy meets with an ACCION USA client from Lawrence, Massachusetts in 1999.
It is with heavy hearts that we at ACCION USA heard the news of Sen. Edward Kennedy’s passing.
As a great supporter of ACCION USA, Senator Kennedy will be missed dearly. His commitment to economic justice made him a natural ally to the microenterprise and community development fields. And as he did throughout his 43-year career in the United States Senate, Senator Kennedy put his beliefs into action – and got results. Among his long list of accomplishments, Senator Kennedy:
- Introduced legislation that created the SBA’s Program for Investment in Micro-entrepreneurs (PRIME), which has provided assistance to organizations that help low-income entrepreneurs for nearly ten years
- Fought to keep intact the Community Development Block Grant (CDBG) program of the Department of Housing and Urban Development
- Consistently pushed for increased funding of the Community Development Financial Institutions (CDFI) Fund, work which appears to be paying huge dividends in the FY2010 budget.
Although Senator Kennedy is no longer with us in body, his advocacy and work on behalf of low-income Americans will endure for decades. And so on this day of mourning, we remember the words of Senator Kennedy’s iconic 1980 speech, in which he vowed that “the work goes on, the cause endures, the hope still lives, and the dream shall never die.”
AUSA Financial Education Programs Get Webinar Techonology Boost
Today, small business owners are thirsting for a leg-up in the down economy. ACCION USA’s small business loans can provide the much-needed capital for today’s entrepreneurs to maintain, strengthen and grow their small businesses. We could stop there, but that’s just not our style.
As a leading microlender, AUSA has always focused on complementing loans with financial education, which gives businesses an even bigger boost towards long term success. Now, ACCION USA has taken financial education to a whole new level by launching an online workshop, or Webinar, series. We’re bringing live credit and business education to business owners where it’s most convenient for them—in their homes, at their businesses, or on-the-go.
This innovative strategy is helping us to streamline our financial education efforts—ACCION USA staff spends less time in transit, setting up workshop locations, and waiting for workshop participants to arrive—meaning we can reach more people with less effort and budget.
Webinars are gaining ground in the world of financial education, and ACCION USA is leading the pack. You can help ACCION USA reach even more small business owners with financial education by spreading the word about our Webinars. Our first batch, focused on business survival, take place twice a month in English and Spanish. Visit our workshop calendar for our upcoming online and in-person workshop schedule.