THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, June 4, 1995 TAG: 9506030276
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY KAREN JOLLY DAVIS, STAFF WRITER
DATELINE: BELLE HAVEN LENGTH: Long : 120 lines
Stevon Sample draws beautifully, and he'd like to make a living as a graphic artist. He's got a spiral notebook filled with handwritten business plans. He's got a fee schedule, marketing strategies and bold-faced confidence.
``A lot of companies out there need a person like me to do their work,'' said the 24-year-old chicken plant worker.
What Sample doesn't have is enough money to buy the art supplies and advertising necessary to turn his talent into a business. He needs a tiny loan.
And he'll get it, thanks to the microenterprise loan program run by Virginia's Eastern Shore Economic Empowerment and Housing Corp., a local nonprofit group. So will a stream of very small businesses that otherwise would have no access to credit.
``Hopefully, hopefully, we will help people come out of poverty,'' said Ava McMillan, one of the organizers of the program.
That's what the microenterprise program is really about: getting capital into the hands of poor but promising entrepreneurs, so they don't have to be poor forever. It's about changing the shape of culture on the Eastern Shore, where nearly 27 percent of all families live below the federal poverty line and more than 10 percent have annual incomes below $10,000.
McMillan, who spearheaded the loan program, didn't begin by thinking of money. She started working for the nonprofit group about three years ago as a community organizer, encouraging African Americans in Northampton County to become involved with local politics. In short order, McMillan found that people living in poverty were too busy surviving to take much interest in government.
``It was hard for folks to sink their teeth into social change without some economic changes,'' McMillan said. She looked for examples of efforts that had succeeded in helping poor people become economically stable. She found a model in the Grameen Bank of Bangladesh.
In 1976, Dr. Muhammad Yunus, a bank official, lent $6 to a woman so she could buy materials to weave baskets, McMillan said. That tiny bit of credit helped her to build a secure living for her family. The Grameen Bank continued to make small loans to people with no other access to credit, McMillan said, and today it loans $70 million annually to almost a million borrowers, with a default rate of less than 2 percent.
``Grameen Bank has turned the banking community upside down by showing the world that the poor can be low-risk borrowers,'' reads the microenterprise program's training manual.
The Farmers Home Administration gave the Eastern Shore empowerment corporation $500,000 to lend to people like Stevon Sample. The funding is the latest in a $6 million string of grants that the group has won from the federal government and foundations. Monte Penney, executive director of the empowerment corporation, understands the relationship between his group and foundations.
``Foundations put a lot of effort into thinking about how they will use their money. They're deadly earnest about using it in ways that are consistent with their philosophy,'' Penney said. ``You're doing them a favor when you take their money, if you're on the same wavelength as the foundation, because it's their mandate to fund those types of programs.''
Beth Williams, who works with Penney, has a different theory why her organization is so successful with grant applications.
``It's because there are actually a lot of really cool funders out there who want people with ideas to succeed,'' she said.
Penney said their nonprofit group ``fits'' with foundations that value participation in every level of decision-making by the people who would be affected by the grant-funded program. His group has worked with the Campaign for Human Development - a Roman Catholic charity - the Needmor Fund, and the Public Welfare Foundation.
The microenterprise loan program is a perfect example of the empowerment philosophy. To get a loan, prospective entrepreneurs must join a group of four to 10 members and go through a seven-week training process.
In that time they will take classes on marketing, budgeting, cash flow and business plans. They learn how to put together a proposal for a loan, and practice making loan proposals.
After the training, each of these groups - called ``lending groups'' - gets a $10,000 line of credit. Individual members ask the group for a loan from that pool. Their peers decide whether to approve the loan, and set the terms of repayment. No collateral is needed. If a group has a good record of repayment, its line of credit increases each six months to a maximum of $20,000.
Interest rates are two points below prime - the base rate for most corporate loans - and the empowerment corporation plows back 50 percent of the interest earnings into the lending group.
The lending group can do whatever it wants with those earnings, Williams said. The group can invest, put it into a savings account, throw a party - whatever. The other 50 percent of the interest earnings are recycled into the revolving loan fund.
Groups continue to meet twice a month to encourage one another and share expertise. If one borrower doesn't repay his or her loan, or is late in paying, no one else in the group can borrow. So the group polices itself. Staff members of the empowerment corporation attend the meetings to give continuing technical support for the blossoming businesses.
It's too early to chart a default rate. But the empowerment corporation hopes that peer pressure within the lending groups will keep that rate low, as it did in Bangladesh.
Needless to say, nobody is going to build a casino with part of a $20,000 line of credit. But 14 hopeful entrepreneurs showed up at the last microenterprise informational meeting, looking for an opportunity to improve their lives. One woman wanted to open a bait and tackle shop. Another hoped to start a catering business.
Some had existing businesses they want to expand. Others had no idea what they wanted to do, but they had a keen desire to make money. All listened with a mixture of hope and skepticism as McMillan and Williams described the loan program.
Stevon Sample has already bought in. He thinks success is within his reach. He sees himself 10 years from now taking business trips across the country and around the world.
``You never know what will happen,'' he said, smiling. But you can tell by his face that he expects something good. ILLUSTRATION: Color photo
BETH BERGMAN/Staff
Stevon Sample hopes to open a graphic-art business with the help of
a loan from an Eastern Shore nonprofit agency.
by CNB