Krissah Williams and Drew Tulchin
Washington Post Staff Writer, Enterprise Development Group Executive Director
Monday, December 11, 2006; 1:00 PM
Washington Post staff writer Krissah Williams and Drew Tulchin, executive director of the Enterprise Development Group, were online to answer your questions about microfinance institutions.
Williams examined microloans in an article today. She also profiled four people who have used the microloans to build their businesses:
San Jose, CA: I find the topic of microloans very interesting and I strongly believe dole outs will not help the poor people. But, the way out is through microloans especially educated immigrant individuals and families. However, the four entrepreneurs you showcased here are individuals deeply rooted into the American society, meaning most of them stayed more a decade and they were running business long period.
Now, did you showcased those profiles for publicity reasons? Why you didn't show a profiles that could represent the cross section of the immigrant society such new comers, less educated entrepreneurs etc.
This is very inspiring and I hope more people will share their thoughts.
Dirie
Drew Tulchin: Welcome online community. Thank you for your interest in microfinance and in our organization ECDC Enterprise Development Group (EDG, www.entdevgroup.org). We welcome your visit to our website, as I begin to field your questions
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Washington,DC: To apply for such loan do you have to be an immigrant or can you be a US citizen?
Drew Tulchin: ECDC Enterprise Development Group (EDG) works with all people to help them with their business efforts and help them become financially self-sufficient. We also offer other services.
WE SERVE ALL PEOPLE.
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Tampa, FL: I view the Nobel Peace Prize award to Muhammad Yunus as in part an award to the free enterprise system. Yet I see no great outpouring of support from corporate America. If these CEOs really believed in free enterprise (which I admit is doubtful proposition, given their disdain for competition), they'd be jumping all over themselves to help microfinance institutions. I see nothing of this sort--or am I missing something?
Drew Tulchin: Corporate America isn't known for its outpouring. It is incumbent upon the microfinance community to matter to them. Corporate America is involved in Microfinance, particularly banks.
It is important to see if this is a business case or just philanthropy.
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Rockville, MD: Do you have any comments or opinions about Prosper.com?
Drew Tulchin: I have used it personally. I think it has great promise. I don't know of clients that have used it. But, for immigrants and people who do not 'present well' it may be difficult.
Another option is Circle Lending.
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Ottawa, Canada: Do you know of any micro-finance program in the developing world which is financially sustainable i.e. pays market rates for its money. lends at market rates, and covers its operating expenses and cost of capital? I don't.
Drew Tulchin: There are 100s worldwide. I recommend you check out www.microfinancegateway.org and also www.themix.org (Mix Market). Grameen Bank is just one example.
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Krissah Williams: Krissah: Thanks for joining us everyone. We'll get right to your questions!
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Broussard, La: How do I qualify for a Micro Loan?
Drew Tulchin: For those of you outside of the Greater DC area, you have a couple of choice: 1) it is best for you to get in touch with a local partner of ours. I recommend you look up AEO - www.microenterpriseworks.org. They have a directory.
You can also go to Superior Financial Group, http://www.superiorfg.com/main. And, make sure you mention we referred you.
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Krissah: Drew,
Some of the researchers I interviewed questioned whether microfinance was neccessary in the U.S., because capital is more accessible than in the developing world. What purpose do you think microfinance serves in the U.S.?
Drew Tulchin: Is microfinance necessary in the U.S.? This is an important question. As Krissah wrote in her article, $250 dollars for a cow or some chickens is a lot different than starting a U.S. business. But, more than 1 in 5 people in America is un- or under banked according to the Brookings Institute and FDIC. So, 20% of our compatriots still need help. That's 68 million people.
Krissah: Do you expect microfinance in the U.S. to continue to grow?
Drew Tulchin: The U.S. market is different than the developing world. It is my personal belief that a primary service is to make sure people in America understand the credit system, how banks work, and are financially literate. Do you know someone who can't balance their check book or pay their credit cards on time? These are not easy tasks, no matter what your income.
If we help people to understand the system, they can make informed choices for themselves, hopefully avoid traps that cost money, and get themselves into banks.
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Silver Spring, MD: Can one use the loans to pay for school and starting their business
Drew Tulchin: Can't use your loans for schools, yes for a business. We do have savings plans to help you. And, we can also lend money for cars.
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Monroe, NC: Hello,
How or who do I speak with about the loan?
Drew Tulchin: Please contact our colleagues at AEO www.microfinanceworks.org
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Washington, DC: Is your program to be used by only immigrants?
Drew Tulchin: We SERVE EVERYONE.
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NYC: What trends do you see in Latin American countries, such as Brazil and Mexico, in terms of government policy?
Drew Tulchin: That is a bit out of my league, but there are some great resources out there. Check out Microfinance Gateway's regulatory center, I believe it is run by IRIS, Univ. of Md.
In general, good policy at the governmental level really makes a difference in microfinance. However, many governments don't understand it, neither do banks or the central bank, so it is hard to be effective.
I think education is often better than stringent policies, and I have heard mixed cases in Mexico and Brazil, although Nicaragua and Bolivia seem to have 'come of age'.
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Washington, DC: What are typical interest rates on these smaller loans? I did not see that figure in any of the stories about the Nobel winner's bank, either.
Mind you, the "payday loans" are small loans too, but dispicable because they are usurious.
Krissah Williams: Most of the microloans has interest ranging from 8 to 14 percent. In other parts of the world, the interest rates vary greatly because economies are so varied. I've seen figures quoting interest on Nobel's winners bank at about 20 percent.
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Krissah: Drew, What services does EDG offer in addition to micro-loans?
Drew Tulchin: ECDC Enterprise Development Group (EDG) has a number of products and services for low income people and immigrants in the Greater Washington DC region.
EDG promotes opportunities for self-sufficiency to low-to-moderate income people through sustainable economic and community development initiatives.
EDG accomplishes this mission through the provision of individual micro-loans, ranging, business training, and pre-loan and post-loan technical assistance, which promotes the growth of micro-enterprises owned by low to moderate income entrepreneurs.
We also do 'asset development' helping with financial literacy and IDAs (a savings program). We help with home ownership, ESL, computer classes. We also have an incubator with 36 rooms to help small businesses.
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Leesburg, VA: I am recently retired from the sale of a business I owned. Over the past 25 years I have worked as both a commerical lender and an multiple business owner. I have always been a firm believer in the importance of capital and its effective distribution and maintenance. I would greatly like to discuss any volunteer opportunities offered by EDC or any other similar microfinance lenders in the DC area.
Drew Tulchin: Great. Please be in touch. with us. 703-685-0510 or email me drew@entdevgroup.org
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Kansas City MO: Are there certain businesses or industries that are favored by your organization?
Krissah Williams: Drew's organization only serves business owners in the Washington, DC metro area. But they serve a variety of businesses. One of their clients is a classical artist. Many are taxi drivers. Another had a moving company. The list is really, really varied. You do have to have a well-thought out business plan, they told me.
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New York : How much weight is given to financial and credit experience? Does this differ with US applicants?
Drew Tulchin: Financial and credit experience is always important. Our standards are broader than a banks. Everyone should be concerned about their credit score and be working to get it as high as possible. For clients with limited credit history, we have ways to better understand their behavior with indicators to measure the likelihood to repair.
Too many people in the DC area have bad credit due to not handling their credit well. That is a problem.
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Washington DC: Do you have any program that focuses internationally?
Drew Tulchin: We focus locally, but there are plenty of international programs. Please visit www.microfinancegateway.org or www.themix.org
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Broussard, La: Where do you get a Micro Loan?
Krissah Williams: The Association for Enterprise Opportunity is an umbrella group for microfinancers in the U.S. You might contact the organization for info on whether there are any non-profits offering microfinance in your area.
http://www.microenterpriseworks.org/
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Oakland, CA: Could you give a general description of the process a client goes through to secure funding?
Drew Tulchin: If by funding you mean financing to secure a loan, then the description is as follows. I make the distinction b/c these are loans and people need to pay them back and treat them responsibly, otherwise, we don't have the funds to support other peoples' efforts.
Clients contact us and we discuss what they are trying to do and what their needs are. Typically we will then meet them. Clients with existing businesses for whom this is an attractive option can complete an application with the requisite paperwork (like that at a bank). We then usually have follow up questions (sometimes quite a few questions). If a client qualifies, we provide the loan. We encourage clients to try working with a bank = both for the experience and that it will be cheaper for them. Some clients we refer to training, other technical assistance, or classes.
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St. Paul MN: I develop business and marketing plans for small businesses many of whom don't access to traditional sources of credit. How would I get my clients in touch with you?
Krissah Williams: You're right. Many small business owners have little access to traditional sources of credit. You can point your clients to some of the sources that Drew mentioned above. There are hundreds of non-profits throughout the U.S. that offer micro loans.
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Krissah: Drew,
You mentioned that part of your goal is to help clients get access to bank loans. How do you do that?
Drew Tulchin: We have a number of bankers who has shown greater ingenuity with dealing with tougher deals. We go to them. And, we also have a number of bankers at the major banks, where the individual attention might get better results than otherwise.
We also have flexible terms so that people can pre-pay early to 'graduate' to a bank.
We offer training and other services so that people can use our capital and grow in a number of ways.
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Krissah: Do you expect microfinance to continue to grow in the U.S.?
Drew Tulchin: I think it will grow worldwide. The U.S. market is small and needs to grow to the millions, not the 9,000 it serves today. The U.S. market needs to think about assets broadly, not just loans. New America Foundation and CFED address that. We need to help people save, prepare for retirement, have health insurance, etc..
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Krissah Williams: Drew, what are your plans for growing the Enterprise Development Group?
Drew Tulchin: We have just launched a business incubator 11,000 sq. ft. of affordable real estate for small businesses in South Arlington. We have 36 offices and they are almost full, even though we just started in August.
We also plan to offer more training, like computer training and business planning.
Last, we have a free tax clinic - Earned INcome Tax Credit, EITC
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re: St Paul, Mn: Are you playing a role similar to Small Business Administration for those small businesses that do not have access to traditional lending?
Drew Tulchin: We are financing by the SBA, in addition to others.
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Krissah: Drew,
What kind of training do you offer microloan clients? Why is such training necessary?
Drew Tulchin: Training is a vital component to our efforts. Not everyone has had the same experiences or competencies. It is difficult outside of universities to find affordable instruction. Without the proper information, it is much harder for enterprising business owners to get ahead.
And, classes provide a way for EDG to get to know a client more and hopefully better.
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Denver CO: Is it a prerequisite that applicants for microloans have to have been denied funding by a bank or other traditional lenders?
Krissah Williams: Nope. But often U.S. recipients of microloans have been denied loans by a bank. The folks I interviewed were often told that they had too little credit history or poor credit history. Drew told me that he tries to push his clients toward banks because often they can get a bank loan at a lower interest rate than one that EDG can offer.
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Krissah: Drew, Can you explain to folks what the microloan application process is like at EDG.
Drew Tulchin: Our application materials are available online, www.entdevgroup.org. Clients are encouraged to call us so that we can help them with their ideas and thinking. We serve all people in the Greater DC region. 703-685-0510
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We have a number of bankers who has shown greater ingenuity with dealing with tougher deals: This sounds like lending that banks would do under the Community Reinvestment Act. Is that the case?
Drew Tulchin: All banks should care about the Community Reinvestment Act - CRA. The benefit of working with us is that most of our clients' deals are CRA applicable.
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Krissah: Drew can you explain how EDG is different from a bank? Including its mission abd particular expertise working with low-income people.
Drew Tulchin: EDG is a non-profit 501c(3) organization. EDG promotes opportunities for self-sufficiency to low-to-moderate income people through sustainable economic and community development initiatives.
EDG accomplishes this mission through the provision of individual micro-loans, business training, and pre-loan and post-loan technical assistance, which promotes the growth of micro-enterprises owned by low to moderate income entrepreneurs.
91% of our 5,000 clients have been low income and 84% have been people of color.
A bank's purpose is to make money. Ours is to operate in a business manner to sustainably continue our efforts, but we have a mission purpose
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Krissah Williams: Krissah: Thanks for joining us! Please check out the links mentioned in the chat for more info on microfinance locally and throughout the U.S.
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