A New Vision For Micro Lending in California….
CAMEO proposes a new vision for Micro-Enterprise in California. Our vision is one in which government, corporations, foundations and private individuals will join with CAMEO and our members to support the distinctly American form of Micro-Enterprise that will develop the entrepreneurial potential in our diverse communities.
To begin, we need to increase by five fold, to $50 million, the amount of capital available for micro loans, defined as under $25,000. This amount would fund an additional estimated 5,500 clients with an average loan size of $8700. And, to enable these micro business owners to access this capital, we need to create a pool of $15 million in grants to Micro-Enterprise Development Organizations (MDOs). This $15 million can be viewed as initial seed money that would allow California MDOs to ramp up operations to serve five times more clients per year. With the additional capital and larger loan portfolio, the MDO would be able to generate revenues to cover their underwriting and loan servicing and a portion of the technical assistance costs.
Granted, this is still a drop in the bucket compared to the estimated 2 million low and moderate income entrepreneurs in CA. that could benefit from Micro-Enterprise development services, according to the Aspen Institute. However, a build-up of this scale would generate more public awareness and more interest from new players e.g. investors, grant makers and providers.
Current trends in small business development are placing Micro-Enterprise front and center in the future of the US economy. Self employment is the labor market trend: in CA, jobs in self employment grew by 24% between 2000 and 2005. Federal taxes from CA. sole proprietorships increased by 34%. The Intuit Institute for the Future in its “Future of Small Business Report “ (Feb. ’08) details the economic transformation in the US economy driven by small business – as a result of changing demographics, evolving, low cost technology, and the emergence of a new “artisan economy” creating highly customized, niche-based products and services. Who are these entrepreneurs: they are women, immigrants, over 50s, locally owned retailers, home-based freelancers. They are 88% of all businesses in the US, creating 50% of all private sector jobs. Furthermore, dollars spent on and by these locally owned businesses have been shown to multiply three times more in the local economy than large multi-nationals and big box retailers. (M. Shuman, The Small-Mart Revolution, 2007). Micro-Enterprise is a significant part of the US economy, so why don’t we invest in it?
CAMEO’s mission is to promote economic opportunity and community well being through Micro-Enterprise development. CAMEO operates a statewide network of 130 members, 68 of whom are nonprofit groups providing business training, technical assistance and financing to micro and small businesses throughout the diverse regions of California. In 2007, CAMEO’s members served an estimated 18,000 business owners. There are currently 28 nonprofits providing micro loans, under $25,000, to entrepreneurs of low and moderate incomes. Over the past two years, these organizations served 1900 clients with estimated total loan value of $17 million. The average loan size was $8900.
The gap between the numbers of micro business owners currently served by the nonprofit sector and the estimated 2 million who could benefit, represents a tremendous opportunity to stimulate sustainable entrepreneurship in California, with the jobs, revenues and local community building that will inevitably result.
To address this opportunity, CAMEO’s convened the state’s first Micro Lending Summit on Nov. 8, 2007. Subsequently, a Working Group met to recommend actions that are summarized in CAMEO’s Micro Lending Action Plan (available through www.microbiz.org as of 9/1). Recommendations addressed two primary themes: increase the pool of available capital and create partnerships between organizations in order to reach new markets of entrepreneurs and achieve greater efficiencies of scale.