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Ref: Micro loans working in Boston

Boston Globe

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Microlending gets local

Harvard program aids entrepreneurs
By Janice O'Leary, Globe Correspondent | April 8, 2007

If not for a flier stapled to a telephone pole in Central Square, Anastasia Mathis-Belay might have abandoned her dream of owning a document-processing business.

That scrap of paper, posted amid announcements for band gigs and cleaning services, eventually led to a boost in her confidence and her credentials by giving her a resource she didn't know she could access: Harvard.

The organization behind the flier is CMI, Cambridge Microfinance Initiative, begun in October by a group of Harvard undergraduates who modeled it on a similar Yale University program. The students, all volunteers, work with about 10 low-income entrepreneurs at a time in Cambridge to create business plans, marketing plans, and pricing structures, with the goal of obtaining a small loan.

Lenders refer to providing small amounts of money, between $500 and $25,000, to people too poor to qualify for traditional bank loans as microloans. While the practice has been around for some time, it came to the forefront last year when banker and economist Mohammad Yunus received the Nobel Peace Prize for his successful microfinance efforts among the poor in Bangladesh.

The idea behind microfinancing is to loan people with few resources "enough to start up a business but not so much that they'll be buried in debt," said Jim Huang, outreach director for CMI and a Harvard sophomore.

His group helps clients qualify for small loans, ranging from $500 to $10,000, to cover initial costs or expansion plans. CMI holds weekly classes on running a business and creates a support network.

"We provide academic resources," Huang said, as well as the Harvard name, "which is another important resource."

Last year, Mathis-Belay made just $26,000, $10,000 more than the year before. No bank wanted to give her a loan, the 39-year-old said, though she was proud of the jump in her income. She had been to the federal Small Business Administration and to SCORE, an organization of volunteer retired business executives, for guidance, but neither lends money or assists in applying for loans.

"It was getting pretty daunting and discouraging as time went on," she said. "I wanted to start small and still no one could help me. My friends all thought I was crazy, and my family thought I was unrealistic. But now I have hope."

CMI does not lend money, said Huang, although the group is starting to raise money for that purpose. Instead, it partners with Acción USA, a national microlender with a branch in Charlestown, which provides loans averaging $7,000 to entrepreneurs across the country. Interest rates are relatively high at 12 percent, but Bruce MacDonald, vice president of communications at Acción, attributed that to the "high-touch" aspect of each transaction. Loan officers meet face-to-face with borrowers, often several times, and help with business plans and review the business site, he said.

"We lend to people who can't get access to a traditional bank loan," MacDonald said. "Often they're single mothers or immigrants with no credit history to draw on."

"In the past, low-income entrepreneurs or ones with poor credit had to rely on unsavory sources," said Huang. "Now they have us."

Mathis-Belay, a single parent, hasn't applied for her loan yet; she's still working on her marketing plan. She hopes to borrow about $2,000, enough to incorporate, trademark her logo for her document-processing business, and purchase some business cards and advertising for her company. Her plan is to create templates and documents for nonprofit agencies.

Nasrin Imam is CMI's first loan success story. She and her husband own a Bangladeshi restaurant, the Bengal Café, in North Cambridge. She was recently granted about $5,000 to expand her business. Initially, she wanted to expand her delivery service by buying a van and hiring a full-time delivery person, she said. But after meeting with CMI each week and creating a business plan, she saw other changes she needed to make first -- such as increasing the menu prices to reflect the cost of materials and labor, and increasing her marketing and advertising.

"Our food was cheap," Imam said. "We can't increase it for $5 more, but a little more is possible."

Imam came to Cambridge from Bangladesh 14 years ago, though she opened the restaurant only two years ago. The restaurant has struggled because of a lack of foot traffic, and Imam needed help.

"We're not old and we're not new," she said. "But we're still struggling. The loan will really help us. CMI helped us understand what's possible."

© Copyright 2007 The New York Times Company

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