By: Carolyn (Carolina) Kloecker
On Friday, May 7th, I attended the Chicago Microfinance Conference at the University of Chicago. I became interested in microfinance, and especially entrepreneurship, when I began to talk to a loan officer at ACCION Chicago
I will review some notes from a couple sessions that I found extremely interesting and relevant to both entrepreneurship, community relations, and the Spanish-speaking population.
The first session that I attended was entitled “Microfinance in the United States: Where are We Now and How Far can We Go?”. There were four panelists from different organzations involved with microfinance, including: Jonathan Brereton from ACCION Chicago, Jodina Hicks from Safer Foundation, Lolita Sereleas from FUND Consulting, and James Gutierrez from Progreso Financiero. First, Jonathan (CEO) from ACCION spoke about what the company does and how they have been evaluating success with local entrepreneurs. ACCION is a “community development financial institution”, and they have been receiving more funding due to the Community Reinvestment Act, requiring banks to give money to community organizations. May banks donate or make grants to ACCION, and these grants as well as other (usually government) grants make up 70% of ACCION’s operating funds. The other 30% of operating funds comes from the interest and fees that ACCION charges. One of the major costs that ACCION faces, especially as a non-profit, is the fact that they work with many clients, but not every one of them receives a loan. More and more, they have begun to look into what clients are doing after they receive the loan. They found that where the national average business survival rate is 70%, ACCION clients’ survival rate is at 83%.
Jodina from Safer Foundation spoke about her organization, a non-profit that helps people with criminal records get jobs after being in prison. Their clients are almost all young men, and about 60% of them were arrested on drug convictions. They have found that, when employed, those with a criminal record are 58% less likely to return to jail. The foundation provides them with mentoring, training, and classes, and they are also beginning a partnership with ACCION, as many of their participants have entrepreneurial interests. Because the economic impact of incarceration is so huge, both on society and on the person convicted, it is important to reverse that process by giving back to society as well as earning money in order to survive.
FUND Consulting is a company that works with start up businesses and helps them create jobs. Their basic function is business development and work with communities in both urban and rural areas, especially with the Native American population. Lolita explained the importance of a global view when dealing with microfinance, showing business owners their impact on the world and the benefits of having global connections. Even though microfinance is commonly thought of as an international phenomenon, it is taking root within the U.S. because of the need and the poverty that still exists in our country.
Finally, James Gutierrez of Progreso Financiero spoke about his for-profit microfinance institution, with headquarters located in California and a new office starting up in Houston. Their organization began with the realization that many people have a low credit score, or no credit score at all, especially those with low income or who have immigrated to the U.S. James realized that these people could not move as far up in society without this score, and not having a financial history was almost like not having a face in society. So he began by setting up a booth at a Latino supermarket, in order to start giving small loans that would help people build their credit scores. Now they have grown into an extremely large company with large offices and booths at hundreds of supermarkets. The loans are usually from $500 to $2500, and they also provide credit education, and the company always takes a photo of the client with their check, which is often a big event where clients will bring family members and even close friends to show their accomplishment in receiving a loan. The challenge becomes that the organization needs more capital in order to lend it out, and their plan is to build more scale, as in, give out more loans in order to make more money. James also talked about the importance of “social contracts” with clients, and the importance of building personal relationships.
In Part 2 I will go over a couple more sessions that I attended, including Microfincance and the U.S. Latin American population, and Microfinance as an Asset Class (“Wall Street” Investment in Microfinance).