Local Peer-to-Peer Micro Lending

Local Peer-to-Peer Micro Lending

Victoria, CanadaVictoria, Canada
Organization type: 
citizen sector
Project Stage:
Scaling
Budget: 
$100,000 - $250,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Local peer-to-peer micro lending. Provides access to credit, opportunity for local investment, builds strong local economy, and changes everything!

About Project

Problem: What problem is this project trying to address?

The need is two pronged. First, people with no credit history, with poor credit, and/or without collateral cannot access even the smallest amount of financing to start a business or become self-employed. In Greater Victoria there are a wealth of social service agencies that provide support for people who are economically and otherwise marginalized but no organizations that provide micro-capital to these people for small business start ups which lead to the creation of sustainable livelihoods and self-empowerment. Second, since the meltdown of the global economy in 2008, people have been looking for ways to invest their money locally, to get a financial return and to see their money at work in their communities.

Solution: What is the proposed solution? Please be specific!

Our solution is local peer-to-peer micro lending. In 1976, Mohammad Yunus founded the Grameen Bank in Bangladesh. Since then, micro lending has been used to varying degrees of success around the world to alleviate poverty, create sustainable livelihoods and empower people. Micro lending began in Canada in the 1980s and has slowly grown with a number of community loan funds (pooled community capital) in existence around the country. At the same time, Kiva.org has come online and enables peer-to-peer from the global north to the global south. Our solution, local peer-to-peer micro lending brings the best of these three models together. For almost three years, we've been connecting local lenders with local borrowers right in own community. We're in the process of moving from a manual face-to-face process where we meet with lenders and receive a cheque, to a process where people can lend online. Success in the BC Ideas competition is part of what will make our online lending a success.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

Our Director of Entrepreneur Support works with local entrepreneurs who don't qualify for credit from a financial institution, and helps them develop a business plan and budget. Once he sees that the business is viable and the potential entrepreneur has the capacity to carry it out, our loan committee - comprised of 3 board members and 1 community member - interviews the applicant and is ultimately responsible for final loan approval. When loan is approved, we post a profile of the business to our website including loan amount (max. $5000), risk rating, and term of loan (1-5 years). Then we look for local people to make loans (min. amount $500 for now! see below). We pool the money from individual lenders until the full loan amount is raised. We then disburse the loan to the entrepreneur. The entrepreneur repays us repay the lenders. The entrepreneur is also matched with a business mentor. Our legal 'lending authority' comes from the BC Societies Act. The Act enables members of non-profit societies to lend to the society of which they are a member for the purposes of carrying out the Society's objects. Our 'object' is to make micro loans; each lender becomes a member of Community Micro Lending when they sign a loan agreement with us. Our solution makes a difference by getting micro-capital into the hands of those who wouldn't otherwise have access and by giving those with a desire to lend locally an opportunity to do so. Most importantly, through both of these activities, local peer-to-peer micro lending helps to create a strong, resilient local economy.
Sustainability

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

Our primary peer in the Greater Victoria area is the Community Social Planning Council (CSPC). The CSPC’s main focus is to bring organizations in the community together to form a more coherent Community Economic Development (CED) strategy. While CSPC brings diverse groups together to generate ideas for potential CED programs, whats sets us apart is that we deliver the peer-to-peer micro lending program. Our only competitors are the local credit unions which also offer micro lending products. The are 3 important factors that set us apart from them: 1. None of the credit unions have a peer-to-peer lending model; 2. None of our existing clients would qualify for credit through their micro lending products; and 3. We offer on-going mentorship and support to our entrepreneurs.
Team

Founding Story

I was working on a PhD on the history of poverty in Victoria from the 1930s to the 1970s. In my research on the Depression-era, I came across a headline from the local newspaper from July 1931 that read, "Citizens Emergency Relief Fund Surpasses $50,000." Curious about what this fund was and about who had $50,000 in the Depression, I followed this story through the paper for the next few years. And it turns out it was just as the headline said: a fund to which citizens contributed to help other citizens. If a man needed work boots, the fund bought him boots. If a woman needed a sewing machine to generate income, the fund bought her a sewing machine. I read these old newspapers in late 2008 just as current headlines predicted, "Next Great Depression on the Horizon". And it struck me, if people in my city did this in the past, what is stopping us now. Micro lending is a 21st century solution, but it dates back to the pre-welfare state concept of neighbours helping neighbours.
About You
Organization:
Community Micro Lending
About You
First Name

Lisa

Last Name

Helps

About Your Organization
Organization Name

Community Micro Lending

Organization Country

, BC, Victoria

Country where this solution is creating social impact

, BC, Victoria

Region in BC where your solution creates social impact

Vancouver Island.

How long has your organization been operating?

1‐5 years

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Innovation
How long have you been in operation?

Operating for 1‐5 years

Which of the following best describes the barrier(s) your solution addresses? Choose up to two

Access, Equity.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

By providing access to credit for those who don't have it, and by asking local lenders to be the source of that credit, our overarching goal is to help create the 'new economy' that is emerging in the wake of 2008. The new economy puts people and the places they live at its centre. When a local lender lends to a local entrepreneur, that lender becomes more directly invested in the success of the business. The lender patronizes the business, gets her/his friends and neighbours to patronize the business. And our entrepreneurs know that they don't owe money to a bank or to a loan fund, but to people in their community who have invested in them. They work to ensure their own business success and to repay the loan. All these activities together help to create a strong local economy.

What has been the impact of your solution to date?

We've spent the last three years building this local peer-to-peer lending model. We've created loan and borrower agreements, business plan and budget templates, a risk rating system, a mentorship program for our entrepreneurs and a pool of mentors to mentor them, broad awareness of our lending program and a growing pool of lenders. We've built the strong partnerships necessary to make this all happen from the Chamber of Commerce to the Native Friendship Society and everyone in between. The first key general impact is that there is now an alternative source of credit for people in our community, provided by the community. Specifically, so far we have made 12 loans to local start-ups, three of which have been fully repaid. Bobby came out of prison and started a property maintenance business which is flourishing. Chelsey is a single mom who quit her job as a server to become a mortgage broker. Rachael moved out of a Women's Transition House and is running a successful massage business.

What is your projected impact over the next five years?

YEAR ONE: Online lending platform goes live. More loans in Greater Victoria funded by a wider pool of lenders (min. person can lend still $500). More people have access to credit. More local businesses start.

YEAR TWO: Online lending platform expands, necessary automated back-end in place to reduce minimum amount lender can lend to $25. Online lending is democratized in Greater Victoria! More people have access to credit.

YEAR THREE - YEAR FOUR: Online lending platform and associated benefits (access to credit, opportunities for local lending, strong local economy) expand to other BC municipalities.

YEAR FIVE: Online lending platform and associated benefits (access to credit, opportunities for local lending, strong local economy) expand to other Canadian municipalities.

What barriers might hinder the success of your project? How do you plan to overcome them?

One: attracting the funding and expertise necessary to take our current online lending platform (to launch fall 2012) from a place where people can lend $500 to a democratic, interactive platform where people can lend as little as $25. Two: developing an expansion or 'franchise' plan as we grow to other BC municipalities and then across the country.
We are well-positioned to overcome both of these. One: we have the expertise at VIATEC (www.viatec.ca) to draw on right in our backyard. Our success, reputation and networks will help attract funding. Two: our Organizational Development committee of community volunteers with incredible business expertise.

Technological, keeping up with organizational growth,
Solution; Organizational committee, success based on repution, community network

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

Number of lenders (and therefore funded entrepreneurs) increases

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Launch new online lending platform (mid-fall 2012)

Task 2

Educate current and prospective lenders about our new lending process. Continue to attract high-quality borrowers.

Task 3

Undertake publicity campaign to spread the word re local online peer-to-peer lending. We've got a great communications committee

Now think bigger! Identify your 12-month impact milestone

More people lending through on-line portal, more people have access to credit, more local micro-startups

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Evaluate effectiveness of exsisting platform

Task 2

Research technological requirements for online lending platform which will automate process, reduce minimum loan amount

Task 3

Build online lending platform required to reduce minimum amount that a person can lend from $500 to $25

Sustainability
Tell us about your partnerships

Our organization has become successful in a short time primarily because of the strong partnerships we built from the beginning. Before we founded CML, we met with other non-profits to ask how we could enhance their program offerings to those who are economically marginalized. We then built our micro lending and mentorship program in partnership with these non-profits who sent their clients to us. We've formed a key partnership with the Community Social Planning Council to create a community economic development engine in the region of which our peer-to-peer micro lending is an integral part.

Are you currently targeting other specific populations, locations, or markets for your solution? If so, where and why?

1. Youth through a partnership with the Prodigy Group (the 'youth' arm of the Chamber of Commerce) and CSPC. Research that a practicum student undertook with us 1.5 years ago suggested that youth wanted to become entrepreneurs but found Victoria's business community hard to break into and capital impossible to find.

2. Women (in partnership with Bridges for Women self-employment program)

3. First Nations because there is a push in local first nations communities (Songhees and Esquimalt) for economic development. Access to micro-capital and mentorship is key to success.

What type of operating environment and internal organizational factors make your innovation successful?

Our organization has three employees: an Executive Director, a Director of Entrepreneur Support, and a Director of Outreach and Launch! Programming. The "Director" title in each position symbolizes the operating environment and internal structure of our organization. We three, the Society's volunteer board and our community of volunteers are collaborators together. Our organizational structure is 'flat' as in not hierarchical. At the same time, each staff member has clearly defined roles and each committee has clearly defined terms of reference. This environment and structure as well as the relevant financial, legal, communications, and community development expertise of our staff, board and volunteers will make our expanded local peer-to-peer micro lending program successful.

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list

We are offering some of the same things we need! Internally we have a very strong communications and social media team, strong research skills, and are very good at collaborating and networking. We're also big on innovation and love to generate and implement new ideas. In order to grow our solution we'd like to reciprocate and draw on the skills and resources of others.