Too Small to Fail: The Role of Micro-lending in Economic Recovery

Editor’s Note: The following is a guest op-ed by Eric Weaver, Opportunity Fund, and Matt Lonner, Chevron. Periodically we are approached by companies wishing to publish op-ed material and other content, sometimes we accept it, sometimes not. We were recently approached by Chevron to do this. While the oil industry is a controversial one on many levels, the willingness of Chevron to enter into dialogue with 3p’s readership impressed us and we accepted their request. When commenting, please use this as an opportunity to remember the fact that all companies are made of potential change agents and that Chevron is no different

As the President calls for a renewed focus on supporting small businesses as a crucial building block for America’s economic recovery, micro-lenders across the country are already hard at work.  Micro-loans have become a vital resource channel, giving entrepreneurs an opportunity to get their ideas off the ground, and contribute to the prosperity of their communities.

The practice of micro-finance in the U.S. is still evolving.  In fact, Aspen Institute research shows that only 2 percent of U.S. micro-finance candidates are being served.  Organizations like Opportunity Fund are quickly working to improve that ratio, investing the small amounts necessary for hard-working people with good ideas to be successful.

In today’s turbulent times, the impact of micro-loans is magnified.  For people like William Ortiz Cartagena and his 12 employees, micro-finance is a lifeline for survival – and growth. Cartagena started Gentle Parking, a San Francisco-based eco-friendly business, to support his family of five. When he needed a loan to expand last winter, Cartagena was turned down by several banks. He then came to Opportunity Fund and received a $10,000 loan, along with personalized business coaching and finance training. Since then, Cartagena has hired six more employees and is paying back his loan—all in all, a pretty good ROI for $10K.

With high loan repayment rates, a proven ability to create jobs—and a business success rate that is more than double the national small business survival rate—the micro-lending sector has a valuable role to play in the recovery. In fact, businesses working with Opportunity Fund have, on average seen a 50 percent increase in their number of employees, or an average 2.7 jobs created or sustained two years after receiving a loan. Opportunity Fund’s results show that small loans can make a significant impact on employment and cycle right back into the community to create more jobs.

Small contributions can far transcend their dollar amounts in community benefits.  It is this disproportionately positive community impact that is one of the reasons that micro-lending has become an unlikely driver of economic prosperity. Larger companies like Chevron, understanding the need and importance of this service, have stepped forward to help provide critical financial backing to aid our communities by supporting micro-lending programs.

Chevron, as a California company, saw this need firsthand as the state spiraled into recession and funding for hard working people all but disappeared. Micro-lending provides a direct and effective way to help existing small businesses thrive and help entrepreneurs get their ideas off the ground quickly—something California’s economy needs to regain its vitality. Understanding the critical need to loosen up credit and provide opportunity in our home state, Chevron partnered with nonprofits like Opportunity Fund in 2009 as part of its California Partnership initiative.

Public-private partnerships are critical to the success and scale of micro-lending in the U.S.—a topic that Opportunity Fund will be addressing this May at the Microfinance USA conference.  In the meantime, we hope to continue raising awareness and resources for micro-lending across the country, and we hope you will join us.

Eric Weaver is the Founder and CEO of Opportunity Fund, a community-based nonprofit lender that since 1995 has helped thousands of Bay Area families achieve economic stability through micro-finance and asset building programs. Matt Lonner is the manager of Global Partnerships and Programs for Chevron Corporation.

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