Week 8

Technology and Communications Team
Log # 8
By Andrew Chan

Beth Dunphe, the director of development from Project Enterprise spoke about the operations of how her organization provides micro loans to clients. Project Enterprise serves four out of the five boroughs in NYC: Bronx, Brooklyn, Manhattan and Queens. 80% of their clients are non-white; 55% coming from NYC. 34% of their clients live below the poverty line. Those that live below the poverty line earn less than $21,000. The median family income was 55% of the NYC median income of $55,000. It was interesting to see compare the differences in microfinance abroad and microfinance domestically. I thought that Project Enterprise’s services make their organization and operations efficient and successful. They provide training/workshops that help their borrowers develop a practical business plan. In addition they have one-on-one technical assistance that aid in the loan application process and developing a business strategy. Most interestingly was the legal assistance. They have a pro bono partnership with Dorsey and Whitney. I think that legal assistance is important because it helps the clients understand their boundaries, limits, and rights.

I was impressed by the impact that this organization has made. They have trained 2,997 clients. The average monthly profit increased by 42% after getting a loan from Project Enterprise. This demonstrates another example of how microfinance makes a positive impact on disadvantaged entrepreneurs.

Marketing and Fundraising Team

Log # 8
By Yvonne Lee

Project Enterprise is the third biggest lender in the US, and they have always sworn by their motto of “Small Loans, Big Connections”. They place a lot of emphasis on growing a business. Project Enterprise serves 34% of individuals below poverty, who are those with an annual income below 21,000 USD.  Their clients have a median family income of 55,000 USD, and 80% of them are non-white. They came about because traditional commercial banks used to red-line some communities and never approved their loan requests. Hence, there was a need to cater to the minorities and people who did not have good enough collateral or credit ratings.

Project Enterprise has disbursed more than $1.7 Million in loans to more than 650 entrepreneurs. They have three programs:

  1. Peer (Businesses in the startup stage, anyone can apply)
  2. Fast Track (1year in business, and with a revenue of more than $5000)
  3. Direct ( More than 3 years in business)

I thought that their peer program was the most interesting and relevant to GLOBE. It operates on a group methodology with a center structure. Basically, it is a group of groups. Individuals are tested on Project Enterprise’s criteria and what their fellow group members’ businesses are about. In order to make sure that everyone is on the same page before extending a loan to them, individuals need to get certified by the organization, and go through six week intensive pre loan training. This teaches them how to establish a business plan as well as predict project costs, sales and cash flows. At center meetings, they have to present to the board and other lenders what their business is about. Group members of the person who is asking for the loan have to convince the committee that he or she is credible and will be able to pay the loan off. These center meetings are very transparent and loans get approved there and then. If one person does not pay the loan off, group members have to pay up.

I’m currently a Financing Intern at NYC Business Solutions Lower Manhattan Center, so I was familiar with a lot of the terms and concepts that Beth covered in the lecture. Project Enterprise is one of the biggest lenders that NYC Business Solutions work with. We offer a suite of services that help small businesses expand, and offer help to minority communities through our Minorities and Women Better Enterprise Certification Program. We help prescreen clients that need loans and then refer them to the most suitable lender. We then package their loan applications before sending them to the respective lenders. Hence, listening to Beth’s lecture put things in a different perspective and helped me better understand the microfinance industry in the US.

Reflecting on last week’s email blast about the GLOBE Microfinance event on April 20, we thought that the message was too wordy and the long paragraphs did not really help either. We are going to send a second one out that is in bullet form and with “bite-sized” pieces of information so that at a glance, people will comprehend what we are trying to do. We also faced an obstacle with the bake sale. Student Life only allows student organizations to reserve tables and chairs for bake sales in Marillac Hall and D’ Angelo Center. Since GLOBE is an academic program, the office may not approve of our request. Hence, we have reached out to one of the marketing team members from last semester to find out what they did to get approval for their bake sale. We also need to book a video screen and projector for the event in Marillac Terrace, and work on the tote bags that we are handing out to students and faculty. With just about two weeks to the event, we are all extremely excited but are aware that there are still a lot of things to do.

Finance and Risk Assessment Team

Log # 8
By Rahel Solomon

Recently, we had the pleasure of meeting Beth from Project Enterprise. I didn’t know about much about Project Enterprise before her visit but was delighted to learn of the success of microfinance on the domestic level. When I tell friends, family and others about Globe, sadly the first response is often about how there are needy entrepreneurs in the US. I am now very happy to learn about Project Enterprise.  Project Enterprise serves 34 % of individuals below the New York City poverty line with 88 % of borrowers being African American and 58 % of borrowers being women.

Beth mentioned early in her speech that Project Enterprise originally began with a very “Grameen” like business model but have since strayed from that model. As she continued, the extent to which Project Enterprise has strayed became more and more clear. It makes perfect sense that the two companies are very different considering they operate in completely different environments.

With a 92 % success rate and more than $1.2 million disbursed in the last 5 years clearly Project Enterprise is doing something right. What I thought most interesting about Beth’s lecture was that PE is almost completely funded by donors and the interest from the loans are used for administrative expenses. I wonder about the sustainability of such a program; I realize that Project Enterprise has been in existence for quite some years  now but I can’t help but wonder if there isn’t a more efficient way to fundraise.

I also loved the fact that Project Enterprise at almost all costs attempts to work out a payment schedule with its borrowers.  Entrepreneur Week I found to be a great way to keep borrowers informed, connected and entertained.  It seems that Project Enterprise, though inspired by the Grameen Bank model, clearly understands its unique differences and how to keep its borrowers satisfied and re paying  in a timely manner.

Accounting and Program Audit Team
Log # 8
By Gabriela Papadopulos

The Grameen model of group lending or the so called “joined responsibility” is what has been a major factor for its success in Bangladesh and consequently it has been replicated by different types of microfinance organizations.  Group lending offers a number of advantages for both borrowers and lenders. It provides access to microcredit for underprivileged individuals while lenders’ responsibilities are shifted to the group. Some of these responsibilities include screening through potential borrowers in the group formation, peer mentoring and monitoring, and enforcement of the loan repayment- all resulting in cutting the costs for processing the loans. The joined responsibility condition is what leads to “assortative matching” in the formation of the group as safe borrowers stick to safe types and respectively risky borrowers are left with no alternative but organize in a group with not quite reliable types. This sorting mechanism mitigates the risks of adverse selection caused by lack of information about the borrowers since it turns out that risky clients pay more often under group lending where shared responsibility is present. As a result safe borrowers are charged at lower rates and they are no longer placed under pressure to shoulder the defaults of their riskier peers and subsidize them by paying higher costs for them. The reduction of interest rates for safe borrowers illustrates higher efficiency resulted from the operating model of group lending as individuals who have been previously pushed away from the market are being encouraged to reenter it at more reasonable price.

As I mentioned before, the Grameen model has been replicated by MFIs all over the world therefore I found it interesting to hear about its domestic applications by our guest speaker from Project Enterprise. Having annual income of $21 K or under is considered the poverty line in the U.S. and surprisingly for everyone 34% of New Yorkers live below this level. The data is not just simply statistics that could be disregarded and the operation of a local microfinance organization was necessitated. Project Enterprise laid its foundations on the group methodology with its center structure. Two of the programs provided by PE are Peer lending and Fast Track lending and they involve the provision of small loans and business development services without any preliminary credit score or background checks. The best part is that after a six-week intensive pre-loan training the self-selected groups are given the full responsibility to attend center meetings, approve each other’s loans and monitor the disbursements.

Group lending is the source for numerous successful stories that happen every day domestically and abroad. Peer support and networking, exchange of ideas and solidarity are some of the key benefits to borrowers of this type. Moreover, the Grameen model encourages the community spirit while at the same time develops a sense of pride and achievement in group members who realize that they are in possession of the power to improve their standard of living.