Loans help turn marketable skills of working poor into small businesses
Published in the Sept. 30 – Oct. 13, 2015 issue of Morgan Hill Life
By Peter Anderson
Peter Anderson
We generally don’t see them, but they are necessary to the smooth running of our community here in Morgan Hill.
They are the working poor. They clean our houses, mow our lawns, seam torn clothes, haul away refuse from our yards, bus tables in restaurants, and perform many of the other low-skill level tasks that need to be done. Most are hard-working, family-oriented citizens — and many are stuck in the cycle of poverty.
But the Rotary Club of Morgan Hill is about to launch a program that offers the opportunity for enterprising members of that group to begin a journey out of poverty and into the mainstream of society. After completing an eight-week course on “financial literacy” and “business entrepreneurship,” small business loans (called “microfinance”) will be offered to qualified participants for the purpose of opening or expanding their own small business enterprise.
The idea is new in Morgan Hill, but not in many of the poor, underdeveloped regions the world.
At a conference five years ago, several members of the Morgan Hill Rotary Club heard Professor Muhammad Yunus, of the University of Chittagong, Bangladesh, describe how small, short-term, low-interest loans had enabled thousands of enterprising poor in his country to turn marketable skills into small businesses. At that time, the Rotary Club had recently partnered with the Rotary Club of Gbagada South, in Lagos, Nigeria, on a program to provide $6,000 of the same type of microfinance loans, and was getting word of its success.
Professor Yunus developed his microfinance idea in the 1970s, and in 1983, using unconventional principles such as the use of “social collateral” to rate credit worthiness, established the Grameen Bank of Bangladesh to provide very small business loans (between $50 to $100) to villagers. (Grameen Bank means “Village Bank” in the Bangla language.) Today Grameen Bank has more than eight million borrowers in 100,000 villages in Bangladesh, has branches in 58 countries around the world, and boasts a 97 percent repayment rate. Clearly the Grameen Bank’s principles of microfinance have proven effective.
Two years ago, Rotary’s past presidents and I invited our club members to put together a program that would offer the same benefits of microfinance to deserving, qualified members of our local community, even if they aren’t the people we generally see around town — especially if they aren’t the people we generally see around town. These are residents to whom standard credit markets are not generally accessible.
Rotarians Mario Banuelos and Claudia Rossi stepped up to chair the committee, and, after a year of planning, they and their committee will now be hosting their first class on financial literacy and business entrepreneurship Oct. 14.
Many of our community organizations have partnered to help with the Rotary Club’s outreach and recruitment efforts to find qualified participants. They include Community Solutions, the Learning and Loving Education Center, Boys and Girls Club of Morgan Hill/El Toro Youth Center, Catholic Charities, the Morgan Hill Unified School District’s Community Adult School, Migrant Education, Boccardo Family Living Center/HomeFirst, St. Catherine Church and Hope Services.
The Rotary Club has partnered with an experienced, specialty training organization, AnewAmerica Community Corporation, of San Jose, to coordinate the classes. Rotarians will assist in instruction, will work as individual tutors to the students, and will continue as mentors to those who go on to open their own business.
To greatly enhance the amount of money available for the microfinance small business loans, Rotary has partnered with Heritage Bank in Morgan Hill.
In Nigeria in 2010, Morgan Hill Rotary’s $6,000 was loaned out to 58 individual small business borrowers. All the loans were repaid within eight months, and the money loaned out again to new borrowers. Currently, that money is in its fifth cycle. The $6,000 has been turned into $30,000 of humanitarian assistance to hundreds of enterprising poor in Nigeria, helping to bring them out of the shadows and into the mainstream, breaking their cycle of poverty.
We hope Morgan Hill Rotary’s investment in the enterprising poor of our community will do the same.
Peter Anderson is the President of Rotary Club of Morgan Hill.
