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Microcredit in the USA (California Central Coast)
Category: Microcredit | By SDR, 4-Mar-2017 | Viewed 1844  Comments 0



Nick Frankle

In 2011, the US and much of the world was experiencing the negative economic impact of The Great Recession. If you read any newspaper; watched CNN; or listened to Fox News at that time you knew that hot topics was jobs, or more accurately the lack of them, and the associated poverty. According to the Census Bureau report issued on September 13, 2011, nearly 1 in 6 Americans were living in poverty - the highest rate in 50 years. The recession had hit low-income and low-educated sections of the population hardest. Bill Buratto, president and CEO of the Ventura County California USA Economic Development Association stated, "It boils down to finding a way to stimulate job growth. At this stage in the game, it's not going to be fueled by the government sector....Job growth will depend on the private sector."

Heather Frankle

, a Rotarian in the Rotary Club of Simi Sunrise in District 5240 (central coast of California), had just completed a successful microfinance grant from The Rotary Foundation in the developing country of Honduras.  Seeing the economic challenges present in her District, she approached The Rotary Foundation for guidance on microfinance grants where the host club was in a developed country. She was told that there was none because no microfinance grant had been done in a developed country. 

Led by Heather, with the support of the leadership of District 5240 and the help of the grant coordinators at Rotary International, the Rotary Club of Simi Sunrise was awarded the first Rotary Foundation microfinance grant performed in a developed country.  To fund the grant, Rotarians in District 5240 reached out to clubs and districts that they had helped in earlier grants.   The District 5240 Microcredit grant was financially supported by eleven Rotary districts and had a value of $US 240,476. . 

The grant area of focus is Community and Economic Development. The grant was focused on building the financial competency of low income Hispanic women living in Ventura and Santa Barbara Counties, California, USA enabling them to open and/or increase the stability of their own small businesses, thereby giving them a sustainable means of increasing their standard of living and that of others around them. The grant established a Revolving Loan Fund that will be available to people who have taken a set of classes focused on self-employment training; are low-income based upon HUD Poverty Guidelines for Ventura County; produce a proof of legal residency and one year's tax return. 

Grant Goals:

The grant had the following goals at the time of award:
>Provide self-employment training classes for 135 low-income entrepreneurs (mostly women).
>Initiate 80 loans ranging from $1,500 - $10,000 to low-income and underserved borrowers over a five-year period.
>Establish a 93.5 % repayment rate (default rate of 6.5%)
>Demonstrate that within 24 months of taking classes and opening a new business, 50% of the beneficiaries will have moved out of poverty.

The grant has been administered with Rotarian involvement and oversight by Women's Economic Ventures (WEV- pronounced " Weave"), a non-profit organization headquartered in Santa Barbara, CA, WEV has a 25 year track record of providing small business training, technical assistance and micro loans. 

The grant had three components - outreach to the Hispanic community; creation of a Spanish language self-employment training curriculum that would be used to educate the target population; and a revolving loan fund. 
WEV Graduating Class

Community Outreach and Awareness:

The first and most important task was to establish a relationship of trust with the local Hispanic community.  WEV created a new bilingual Loan Fund Program Specialist position that was partially funded by the grant and was required to support the community outreach and education objectives of the grant. Once this position was filled, a program of community outreach was developed. It included letters and flyers to individuals and organizations that were influential in the Hispanic community; use of local radio, television and print media,  participation in job fairs and economic forums; and publicity by Rotarians in District 5240.

WEV offered free, one-hour group orientation sessions to help potential beneficiaries assess their readiness for self-employment and to choose the WEV program(s) that best suited their needs. During the life of the grant, more than 1000 people received some type of outreach informing them of the availability of the education and funding provided by the grant. This outreach was responsible for driving enrollment in subsequent instructional classes.

Beneficiary Education:

Pasos Basicos para Comenzar un Negocio is a 6-week self-employment training course that was developed using funds from the grant. It was the first program offered by WEV in Spanish and helped beneficiaries determine if they were ready to start a business. Using the "Simple Steps for Starting Your Business" workbook, provided in collaboration with SCORE Ventura (Service Corps of Retired Executives), participants received the tools and knowledge to help them in the beginning stages of self-employment. Business professionals from Ventura County were invited to speak at three of the classes on QuickBooks, legal issues and social media. This allowed WEV to provide clients with an immediate connection to resources in the community. 

Also, many of the speakers were Latino, which not only provided the beneficiaries with a connection to someone who was bilingual/bicultural, but also to someone they could see as a role model.At the end of the course, they had enough understanding of marketing, financing, and management & operations to apply for a WEV loan up to $5,000 if they had attended all of the classes. After graduation, clients had a direct referral to a SCORE counselor who could then assist them with expanding upon their plan at no cost. 
Women's Economic Ventures & Rotary

Capacitacion Empresarial is a Spanish language program developed with funds from the grant. It translates WEV's proprietary curriculum into Spanish to help beneficiaries/clients write a business plan and start or formalize a small business. The training covers self-assessment, business feasibility, marketing, finance, operational and personnel management and business-planning. The first class was held in 2014. Beneficiary businesses in the initial class included child care provider, salon, catering, upholstery, seamstress, cloth diaper supplier. 

Capacitacion Empresarial is taught by contracted instructors with significant business and teaching experience. Program content is enhanced by weekly volunteer guest speakers who shared their expertise. Capacitacion Empresarial provides beneficiaries with the tools and knowledge to develop a comprehensive business plan, which could then be used to start or grow a small business. In addition, the course prepares clients to be able to apply for loans up to $25,000.

Revolving Loan Fund:

The Revolving Loan Fund had an initial value of $US 120,000 The Rotary Foundation requires that the funds in the revolving loan fund be loaned out, repaid and loaned out a second time to close the grant.  The grant was officially closed in July 2016 having loaned out $US 251,579.09.  A final report has been submitted and is undergoing review by the Rotary grant coordinator.  Twenty one businesses were either started or were able to expand using funds from this grant. The average loan was $US 12,000.  Representative businesses are included in Appendix A.  Appendix B tells the story of beneficiary Reyna Chavez who was the WEV entrepreneur of the year for 2015. 

During the time of the loan and subsequent to repayment, WEV continues to offer training and business support to the beneficiaries.  This training ensures the success of the business including the ability to adapt to changing economic conditions.  It also builds a network among the beneficiaries who not only help each other but become each other's clients.

The collaboration between Rotary and WEV is continuing with no expected date of termination of the project or the use of the loan funds for the purposes stated in the grant. More important, as a result of the success of the grant in reaching out to the Hispanic community, other financial institutions including Wells Fargo, Bank of America and the Santa Barbara Foundation had made contributions to WEV to continue and expand the program. 

The program was recognized by Congressional Representative Julia Brownley who wrote in the Congressional Record, "Locally, the organization [Rotary District 5240] has been a critical partner in economic and community development, and has donated over $250,000 to fund microfinance loans that have helped start or grow local businesses over the past four years. For these reasons, it is with great enthusiasm that I recognize Rotary International District 5240, which is celebrating the centennial anniversary of the Rotary Foundation, for the immeasurable ways the organization has contributed to our community as a whole."

Lessons Learned:

1. Microfinance may not be well known in a developed economic community:  The first year of the grant was spent explaining the concept of microloans to the target community of interest and establishing a relationship of trust.  The most effective means of achieving this goal was educating and working with institutions that were already trusted including Hispanic chambers of commerce, religious organizations and community support organizations. 
2. Education is key to initial success: Beneficiaries were eligible for loans only after they had completed a training program and had developed a plan that showed a successful and sustainable business model.  In some cases, the initial business concept needed to be adjusted to ensure business success based on the economic conditions at the time that the plan was created.  Depending on the level of training completed, beneficiaries were eligible for loans between $US 5,000 and $US 25,000.
3. Continuing support enhances business success: The availability of advisors during the startup of the business and throughout its lifetime enables the beneficiaries to learn as their business grows, respond to unanticipated problems and adapt to changing economic conditions.  The beneficiaries were not left on their own - they were supported by other beneficiaries who shared experiences and by local business people who provided expertise, advice and business resources.
4. The Rotary Foundation guidelines for a Grant provide the basis for a successful microfinance or community development program: The use of a Rotary Foundation Grant not only provided an economic multiplier through the availability of matching funds, it also provided a framework for a successful program.  Today's Global Grant process ensures that there is beneficiary involvement; a meaningful and achievable plan, metrics and follow up and a sustainable outcome.  All of these became a part of this project and contributed to its success.

Satisfaction of Goals:  

>Provide self-employment training classes for 135 low-income entrepreneurs (mostly women). Result: over 300 people went through training classes - not all of whom were ready or able to begin the process of owning their own business.
>Initiate 80 loans ranging from $1,500 - $10,000 to low-income and underserved borrowers over a five-year period. Result: the size of the loan required to start or enhance a business in the grant geography of Ventura and Santa Barbara Counties resulted in an average loan of $12,000 and support of twenty-one businesses.  However, the revolving loan fund continues to provide loans via WEV to the target population.
>Establish a 93.5 % repayment rate (default rate of 6.5%): Result: one loan default of $US 4,782 resulting in a repayment rate of 98%
>Demonstrate that within 24 months of taking classes and opening a new business, 50% of the beneficiaries will have moved out of poverty. Results:  The initial results indicate that more than 50% of the beneficiaries have moved out of poverty based on statistics for Ventura County.

For more information, contact:

Nick Frankle email: nickdg1617@earthink.net

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