Citizens league launches Micro-Credit program

CNY Business Journal (1996+), Oct 26, 1997

SYRACUSE--Don't look now, but the economic landscape for some of Syracuse's poor may be changing. The new landmark on the horizon sits in an office at the Cornell Cooperative Extension's building at 1050 West Genesee Street.

The office houses the MicroCredit Group of Central New York, known less formally as Appleseed Trust. The group was formed when the Onondaga Citizens' League, city officials, the Cooperative Extension, OnBank, and others saw a need that was not being met--putting credit in the hands of people who have had little access to capital. It is not credit for the sake of personal indulgence, though. Instead, the credit is designed to be used to launch or expand a tiny business.

The group really can't document any successes at this point. nor can it point to direct economic impact, but that is because it is just getting started. A general manager--Tony Ebersole, retired president of S.H. Ebersole & Associates, a training and consulting firm--was named in August. So far, much of Ebersole's work has centered on informing businesspeople, neighborhood and civic groups, and others about the program, and on soliciting financial support for the program.

Ebersole notes that the city's Economic Development Department helped the program get rolling with a $20,000 community-development block grant. "We have access to another $10,000 from the Department of Housing and Urban Development to fund loans to budding business owners," he adds.

Chase Bank also donated $1,500 to get the fledgling program moving, and OnBank, Solvay Bank, and the Cooperative Extension are providing in-kind contributions to take care of such expenses as postage, telephone service, and copying.

Michael Friedman, professor of anthropology at Syracuse University's Maxwell School and a member of the Citizens' League, says that the initiative to create the program stemmed from a study in 1995 that examined the economic situation in Onondaga County and determined that there was a serious need for micro-enterprise development, among other things. That led the Citizens' League to investigate the experience of other communities, both nationally and internationally--particularly the original model for micro-enterprise development and micro-lending, the Grameen Bank in Bangladesh.

The Grameen Bank, created in 1983, was the brainchild of Muhammad Yunus, a U.S.-educated Bangladeshi, who theorized that a series of small loans to women in Bangladesh would lead to a pattern that lifted them from poverty.

Today, the bank has 14,000 people on its staff working in 35,000 villages, and in 1996, the bank made 3.62-million loans for a total of $380 million. Since its inception, the bank has made 16-million loans, with on-time repayments in more than 98 percent.

Friedman notes that the lending decisions and administration are not the province of bankers, however. Programs developed along the Grameen Bank model establish peer groups of borrowers who give each other support and advice, share ideas, and, perhaps most importantly, are responsible to each other. Peer-group members have a say in determining whether to extend additional loans to fellow members, and, if any member of the peer group is not current on loan payments, none of the other members can take out another loan until all their loans are current.

The Grameen Bank started with loans as small as $8, but today the average loan is about $100. Programs in the U.S. that are patterned after the Grameen Bank, however, often start with loans of about $500 for the first loan and then go up in $500 increments for each succeeding loan to an existing borrower. The micro-loan programs do establish maximum loans, and the maximum loan amount varies from program to program.

For the Syracuse program, many of the details are still being worked out, but Ebersole reports that some details have been set. Before anyone can receive a loan, he will have to go through an eight-week training course in basic business--everything from writing a business plan and doing simple market research to finance and bookkeeping.

The training has two purposes. First, it determines who is really serious and committed to the idea of having a business, says Friedman. Second, it teaches them much of what they need to know to increase their odds of success.

The Citizens' League looked at a number of programs operating in the U.S. and patterned the Appleseed Trust program after Working Capital, a micro-lending program that started in Massachusetts in 1991, but the group chose not to affiliate directly with Working Capital, in part because of fees and costs associated with the program. Ebersole explains that Working Capital provides affiliates a software program, training, a name, and other things that make it easier and quicker to launch a program, but it also carries higher costs than the local group wanted to impose on the program.

Instead, organizers from the League and other organizations chose to research micro-lending and then to design the local program. They did, however, decide to turn to the Worker Ownership Resource Center, headquartered in the Rochester suburb of Geneva, for leader training and for training materials.