2009 USASBE Workshop Innovative Microcredit Models Pomerantz


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Presentation made at 2009 USASBE Conference on Innovative US Domestic Microenterprise and Microcredit Models

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2009 USASBE Workshop Innovative Microcredit Models Pomerantz

  1. 1. MICRO-CREDIT USA 2009 Mark Pomerantz, Seattle University
  2. 2. The Problem <ul><li>Lack of Bang for the Buck </li></ul><ul><ul><li>Large expenditures of money, effort, and energy </li></ul></ul><ul><ul><li>Low outcomes of successful long-term businesses as measured by </li></ul></ul><ul><ul><ul><li>Increased business and client revenue </li></ul></ul></ul><ul><ul><ul><li>Number of client businesses </li></ul></ul></ul><ul><ul><ul><li>Sustainability of client businesses </li></ul></ul></ul>
  3. 3. Old Paradigm Fixes <ul><li>Increased use of Internet Resources </li></ul><ul><ul><li>E-commerce platform on website </li></ul></ul><ul><ul><li>Facilitation of development of and linking with client websites </li></ul></ul><ul><li>Merging or Joint Operations with Another Organization </li></ul><ul><li>Partnership Development and Resource Leveraging </li></ul><ul><ul><li>Local Housing Authorities </li></ul></ul><ul><ul><li>State Micro-enterprise Associations </li></ul></ul><ul><ul><li>Other Micro-credit Lenders </li></ul></ul><ul><li>Client Screening for Success </li></ul><ul><ul><li>Screen out clients that seem to lack entrepreneurial attributes such as prior business experience and basic business or pre-business skills (daily living skills) </li></ul></ul><ul><ul><li>Offer a basic skills training for these clients or refer them elsewhere </li></ul></ul><ul><li>Improving Training Process </li></ul><ul><ul><li>New training manuals and etc. </li></ul></ul>
  4. 4. New Paradigm <ul><li>New Model for micro-lenders serving dual clientele et al: </li></ul><ul><ul><li>Individual participants </li></ul></ul><ul><ul><li>Group Businesses or Coops </li></ul></ul><ul><ul><li>Clients referred from other organizations </li></ul></ul>
  5. 5. Advantages <ul><li>Flexibility </li></ul><ul><li>Potential for more positive client outcomes </li></ul><ul><li>Recognizes market realities </li></ul><ul><li>Cost benefits </li></ul><ul><ul><li>Potential to generate more earned income </li></ul></ul><ul><ul><li>Program Cost Savings (e.g., smaller core staff) </li></ul></ul><ul><ul><li>Cuts down on high overhead of US micro-lenders due to small volume of borrowers and higher admin. costs than in developing world </li></ul></ul><ul><li>(Chart of organizational model prepared by Kalpita Deobhakta) </li></ul>
  6. 6. ED + Board Exec
  7. 7. MICRO-CREDIT USA 2009 <ul><li>Administrative “HUB” </li></ul><ul><ul><li>Board of Trustees (Works closely with ED, especially Executive Committee) </li></ul></ul><ul><ul><li>ED </li></ul></ul><ul><ul><li>Staff </li></ul></ul><ul><ul><ul><li>Operations Mgr. </li></ul></ul></ul><ul><ul><ul><li>Fund Development Mgr. </li></ul></ul></ul><ul><ul><ul><li>Gov’t and Biz Relations Mgr. </li></ul></ul></ul>
  8. 8. MICRO-CREDIT USA 2009 <ul><li>“ RIM” Divisions - autonomous from parent agency-operated by third party(ies)? </li></ul><ul><ul><li>Facilities </li></ul></ul><ul><ul><ul><li>Manages facilities, e.g., Microcredit Offices, Art Gallery, Commercial Kitchen, Retail Storefront </li></ul></ul></ul><ul><ul><ul><li>May have other property management clients </li></ul></ul></ul><ul><ul><li>Business Management and Technical Assistance </li></ul></ul><ul><ul><ul><li>Works with group businesses or coops </li></ul></ul></ul><ul><ul><ul><li>Facilitates group training, TA, legal, all start-up issues </li></ul></ul></ul><ul><ul><ul><li>Provides ongoing management support to group businesses (back room, accounting, strategic planning, etc.) </li></ul></ul></ul><ul><ul><ul><li>May have other training clients </li></ul></ul></ul><ul><ul><li>Training </li></ul></ul><ul><ul><ul><li>Provides business plan training to individual micro-businesses and borrowers </li></ul></ul></ul><ul><ul><ul><li>Coordinates peer lending circles/groups </li></ul></ul></ul><ul><ul><ul><li>Solicits clientele from other organizations and small business owners </li></ul></ul></ul><ul><ul><li>Bank </li></ul></ul><ul><ul><ul><li>Makes peer loans to individual borrowers </li></ul></ul></ul><ul><ul><ul><li>Makes loans to coops </li></ul></ul></ul><ul><ul><ul><li>Makes market or non-collateral loans to other low-income or special needs groups </li></ul></ul></ul>
  9. 9. MICRO-CREDIT USA 2009 <ul><li>Micro-lender Client & Staff Relationships </li></ul><ul><ul><li>Coops </li></ul></ul><ul><ul><ul><li>Examples: Arts, Green Cleaning, Green Biz, Catering </li></ul></ul></ul><ul><ul><ul><li>Each managed by a professional manager who is employee of “RIM” </li></ul></ul></ul><ul><ul><ul><li>Facilities managed by “RIM” </li></ul></ul></ul><ul><ul><ul><li>Oversight by “HUB” Operations Manager and ED </li></ul></ul></ul><ul><ul><ul><li>Joint Marketing facilitated by “HUB” </li></ul></ul></ul><ul><ul><ul><li>Able to access loans at “RIM” Bank </li></ul></ul></ul><ul><ul><li>Individual Clients </li></ul></ul><ul><ul><ul><li>Similar to existing set-up </li></ul></ul></ul><ul><ul><ul><li>Able to access loans at “RIM” Bank </li></ul></ul></ul><ul><ul><ul><li>Time limit on participation in peer lending groups based on number of loans taken and/or business success </li></ul></ul></ul><ul><ul><ul><li>Training managed by “RIM”, supervised by “HUB” Operations Manager and ED </li></ul></ul></ul><ul><ul><ul><li>Joint Marketing facilitated by “HUB” </li></ul></ul></ul>
  10. 10. MICRO-CREDIT USA 2009 <ul><li>Start-up Issues </li></ul><ul><ul><li>Continuation of existing operations during start-up period </li></ul></ul><ul><ul><li>Marketing and partnership development for new model </li></ul></ul><ul><ul><li>Model refinement and development, e.g., should agency even make loans? Or should there be an umbrella lender? </li></ul></ul><ul><ul><li>Approaching entrepreneurial funders for start-up capital: grants, PRI’s, deferred loans (e.g. GoodCap, Calvert Social Investment Foundation, private social investors/donors, other mission-oriented below market funders) </li></ul></ul>
  11. 11. MICRO-CREDIT USA 2009 <ul><li>Start-up Costs for Group Businesses </li></ul><ul><ul><li>Inventory of Business Supplies </li></ul></ul><ul><ul><li>Facility Rental </li></ul></ul><ul><ul><li>Marketing and Advertising </li></ul></ul><ul><ul><li>Technical Assistance </li></ul></ul><ul><ul><ul><li>Outside training on green cleaning, green businesses (solar panel recycling etc.) </li></ul></ul></ul><ul><ul><ul><li>Assistance with accounting services, legal assistance, benefits packages and identifying cost-saving opportunities. </li></ul></ul></ul>
  12. 12. MICRO-CREDIT USA 2009 Green Cleaning
  13. 13. Similar Models <ul><li>WAGES’ worker-owned green biz coops (LLC’s) </li></ul><ul><li>WAGES provides all the services necessary to launch and manage worker cooperatives owned by low-income women. (Training, Management, Marketing, Legal, etc.) </li></ul><ul><li>WAGES helps each cooperative develop business plans, access start-up loans, accounting services, legal assistance, benefits packages and identify cost-saving opportunities. </li></ul><ul><li>Total assistance was offered for a two-year period, after which the business would operate independently. </li></ul><ul><li>Each coop after start-up period has a full-time manager, selected jointly by members and WAGES who becomes a WAGES employee. </li></ul>
  14. 14. Similar Models <ul><li>Zingerman’s Deli (ZCoB) </li></ul><ul><li>Zingerman's Community of Businesses </li></ul><ul><li>Each with own specialty and identity. </li></ul><ul><li>Internal entrepreneurship encouraged and supported, </li></ul><ul><li>Ideas for growth encouraged that fit within Zingerman’s defined business culture </li></ul><ul><li>All designed to enhance the quality of service offered to Zingerman's customers </li></ul><ul><li>All designed to improve the financial performance of ZCoB and its components. </li></ul><ul><li>Hybrid of the co-operative and partnership models </li></ul><ul><li>ZingTrain, provides customer service training, seminars and consulting for range of businesses, many outside the food industry. </li></ul><ul><li>ZingNet provides central administrative services </li></ul>