Sustainable Domestic Micro-Credit

I have developed a model for domestic micro-credit that connects non-profits, universities, and banks. By relying on cooperation between these entities, we believe our model will cut the costs associated with traditional micro-credit programs. We will use university students to oversee the financial education curriculum and serve as loan officers for the borrowers. These students will be part of an internship program which will concurrently provide them with hands on work experience, and train them in effective poverty alleviation methods. Community Based Nonprofits will identify and recruit potential borrowers (generally from a pool of current clientele). The nonprofits ties to the community will make it easier to identify reliable borrowers within poor and marginalized communities. Finally, financial institutions will provide the capital for the loans, and other financial services to the borrowers. The 10% interest on the loans will cover the costs of the bank/financial institution services. Now that I have outlined the general project model, I will give some background on the foundational work that has already been done. In May of 2008, I went to Cambodia to research micro-finance. I spent two weeks working with a micro-credit group called Journey's Within our Community and learned a great deal. In June of 2008, I began meeting with the Dolores Huerta Foundation (DHF) to begin planning a micro-credit pilot project. In August of 2008, the Kern Central Credit Union (KCCU) agreed to finance $10,000 of collateral free loans at 10% APR to DHF clients, regardless of their credit history. This money will serve to finance our first batch of loans. In October of 2008, DHF and LMU meet with residents of Lamont and Weedpatch, CA who expressed an interest in the loan program. In January of 2008, LMU and DHF adopted the Community Financial Resource Center’s (CFRC) Capital Partners Program for the educational curriculum component of our program. This curriculum forces borrowers to work together in groups to achieve their goals. It is also incentive based, and rewards borrowers with larger loans as they prove themselves to be reliable. Now, we are in the process of having DHF staff (and myself) trained to administer the Capital Partners Program. Once the training is complete, we will select our first batch of borrowers (we have already received a number of applications) and administer the first set of loans. As the project progresses, we will closely monitor the results in order to add significant data to research the effectiveness of domestic micro-credit. THE FUTURE: My vision for the future is to continue to help non-profits adopt this lending model that we have established in our first pilot project. I hope to work at LMU to develop a student leadership / intern team who can take on this project. A handful of students and student groups have already expressed an interest in participating. By 2010, I hope to launch three new pilot projects with non-profits in LA . As we gather data and modify our practices over time, I think we will be able to replicate the project in other regions, creating new networks of universities, non-profits and banks. There is no reason that micro-credit couldn't spread like wildfire across the US (like it already has internationally).