Microloans Could Be The Answer To Financial Troubles
MICHEL MARTIN, host:
I'm Michel Martin, and this is TELL ME MORE from NPR News.
In a moment, what does it take to get accepted, into the college of one's choice, we mean? A Pulitzer Prize-winning author tracked a year in the life of a top high school guidance counselor to see what the admissions game is really all about these days. It can be a surprisingly emotional experience, and we'll talk about it in just a few minutes. The new book "Acceptance," that's later.
But first, we want to talk about microfinance, and we want to ask whether microfinance is an under-discussed path out of this economic downturn. As the name implies, microloans are very small loans, sometimes as little as a few hundred dollars.
Now, you've probably used the term used in connection with strategies for fighting poverty in the developing world, although microlenders like the Grameen Bank also now operate in some big U.S. cities. Now the question is whether microlending strategies could offer a way out of the recession here.
Joining me to talk about all this are Anthony Pace, he's the executive director of The Plan Fund, a microfinance organization in Dallas; also Nicole Williams. She is the recipient of a Plan Fund loan and a business owner in Dallas. Welcome to you both. Thank you for joining us.
Mr. ANTHONY PACE (Executive Director, The Plan Fund): Glad to be here.
Ms. NICOLE WILLIAMS (Business Owner): It's wonderful, Michel, thank you.
MARTIN: So Mr. Pace, let me start with you. How would microcredit or microfinance work in a developed economy like the U.S. beyond the groups that we're used to talking about, like people without a lot of education, without the access to the traditional credit markets?
Mr. PACE: Well, essentially what differentiates us from microfinance internationally is a bit more emphasis on the training side because we all know the statistics that, you know, the first year's really rough. And so, if you work with us because of the training and support we can provide, in addition to lending, that is probably the biggest difference from what people are familiar with overseas.
MARTIN: What's the average size of the loan that The Plan Fund grants?
Mr. PACE: Today, it's about $1,500, a little less than that, although in the near future, we'll probably see that go up a little bit. We've restructured a little bit, and we've actually increased our limits to $6,000 because we want to be more active in the lending market because of the need out there.
MARTIN: Ms. Williams, we were interested in speaking to you because I don't think you at all fit the profile of somebody that most people think of as the recipient of a microloan. You have an undergraduate and a master's degree. Your business is a, it's a real estate brokerage firm, correct?
Ms. WILLIAMS: That is correct.
MARTIN: Okay. So why did you choose this route?
Ms. WILLIAMS: Along the road in my real estate career, which started prior to starting my own business, I had a few bumps and bruises in the credit profile. I don't meet the profile of the person who a traditional or conventional lender would take a look at, so it was two-fold.
One, I needed to establish a reputation, a financial or credit reputation, for my new business brokerage and also could use the cash to get started, to get the marketing collateral and other materials together. But more importantly for me, and I expressed this to The Plan Fund, it is my goal as the company continues to grow to be a part of supporting these - The Plan Fund's type of organization through our direct contributions and donations so other businesses can grow.
MARTIN: What did you use your loan for?
Ms. WILLIAMS: The loan was very instrumental in us getting our marketing collateral together, from letterhead to marketing brochures to envelopes, to establish the sign, sign writers and other types of things to get our brand equity out there.
MARTIN: So Anthony Pace, is Nicole Williams kind of the typical grantee at this point, I mean, despite the fact that she has a lot of education? Is that your typical profile?
Mr. PACE: Typically, somebody who comes to The Plan Fund is a little more working class, maybe more high school educated, has other challenges perhaps, maybe an immigrant and their credit score is in pretty tough shape, and there's not a lot of places they can go for the lending and then the training and support they may need.
MARTIN: What kind of training?
Mr. PACE: Well, we start off with a - basically, we call it business basics for entrepreneurs, and it's a one-day workshop, and it covers all the key elements of a business plan.
MARTIN: Why do you think that this kind of lending could be one of the ways to turn around this recession?
Mr. PACE: Well, it's part of the answer because, number one, we're going to talk about a person's credit. And number two, we're going to not make our decisions solely based on credit. We lend in the riskiest areas, but that's where we think there's - we understand somebody, where they are coming from, or where they are going. We really think that makes a different.
MARTIN: So Nicole Williams, in a way you're saying that The Plan Fund was, in a way, a lender of last resort. But you also got something from it that you would not have gotten from a traditional lender. What is that?
Ms. WILLIAMS: The Plan Fund, for me specifically, in its approach, its dedication, its commitment to its clientele, feels more like a customized business coach than anything else.
Sure, they're off-the-shelf training programs that happen on a monthly basis, but at any time I feel like I get stuck, I know I've got resources for marketing especially. And that's so important to my business, the knowledge that's there really was a big winner for me.
MARTIN: So Nicole, how are things? How are things going?
Ms. WILLIAMS: Things are going great. As a professional, I've had my best year yet in the business.
Ms. WILLIAMS: We have grown faster than a…
MARTIN: While we're in this recession? Really? Hmm.
Ms. WILLIAMS: The recession has helped. More importantly, President Obama's $8,000 tax credit toward first time homebuyers has been a huge boot. The flood of foreclosures have really helped investors get off the fence…
(Soundbite of laughter)
Ms. WILLIAMS: …when they can some financing, which you know it's, money is really tight for…
MARTIN: So you've had your best year yet.
Ms. WILLIAMS: I've had my best year yet. And the year is not over.
MARTIN: So Anthony Pace, just as a concluding thought, do you think part of the way forward here is that lending money is not just about lending money, it's also lending an expertise or an ear?
Do you see this as a model for other forms of credit in the future, or you think that, do you see what I'm saying? I'm just wondering if you feel that this kind of offers a way to think differently about credit for other types of lenders.
Mr. PACE: I think absolutely. I think externally I think where a lot of people got in trouble, where the big financial organizations got them is where they made decisions not on the fundamentals and they weren't really talking honestly to their clients and maybe they were looking only at their bottom line.
Of course, we're a nonprofit. And so, we have a, you know, a double bottom line, if you will, for the consumer or client. And I really do think that, you know, the economy's tough and the economy's complex and having an organization like a Plan Fund and, you know, we're not the only one, there are these microfinance organizations all over the country. And that's what we do is we try to be that, as Nicole was mentioning, kind of your brain trust because it's very lonely to be a small business. It's very tough. You got to be good at everything. And that's, you know, you work in corporate America; you have one very specific role.
Here you got to do it all. And so, you know, entrepreneurship has helped the U.S. be what it is. And I think, you know, the little guy, the little woman needs that support so they can become something bigger and better. And, you know, and there's a need for places, organizations like The Plan Fund, and microfinance organizations.
MARTIN: Okay. Well, stay in touch.
Mr. PACE: Thank you.
MARTIN: Anthony Pace is the executive director of The Plan Fund. It's a microfinance organization. Nicole Williams owns a real estate agency and she received a loan from The Plan Fund. They were both kind enough to join us from Dallas. Thank you both so much.
Ms. WILLIAMS: Thank you.
Mr. PACE: Thank you.
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