Students start Olneyville microfinance bank

Thursday, January 29, 2009

Four Brown students are launching Providence’s first microfinance bank in Olneyville next month to give loans to poor entrepreneurs and to immigrants looking to become permanent residents and citizens.

Mollie West ’09, Andy Posner GS, Raisa Aziz ’11 and Nabeel Gillani ’12 started the Capital Good Fund project last month in the predominantly low-income, Hispanic community of Olneyville. The neighborhood, one of the city’s oldest, is located near Federal Hill.

In the absence of a microfinance bank in the area, “many entrepreneurs were turning towards loan sharks who weren’t really focused on advancing social good,” Gillani said.

The project “assumes that people have the skills they need to get out of poverty but need the capital,” Posner added.

Stressing the need to respect existing community networks, the students held discussion sessions in Spanish for Olneyville residents and worked with local organizations to learn about the families’ needs.

Participants in the groups voiced entrepreneurial ideas such as creating day-care centers, selling books in Spanish and starting a print design company.

“We found that there was a huge demand for banking services for the working poor,” West said.

To finance the idea, the students wrote grant appeals and contacted similar banks at Harvard, Yale and Rutgers University. The project received $5,000 from the Swearer Center’s Social Innovation Initiative, $2,000 from the Clinton Global Initiative and $3,000 from private contributions.

The students’ goal is to make the project self-sufficient and completely integrated into the Olneyville community, Aziz said.

“We don’t want to seem like a bunch of kids coming off the hill and being charitable,” she said.

Initially, the pilot project, which will run from February to October, plans to offer two or three $2,000 loans for small businesses and five $900 loans to cover application fees for permanent residency and citizenship. Many factors will be examined before the loans are given out, such as likelihood of achieving citizenship or character recommendations.

Clients who have been selected for the pilot project will obtain their loans in mid-March. They will attend bi-weekly meetings and receive training in business skills.

“You’re basically hand-held throughout the project,” Aziz said.

The second type of loan permits clients to apply for a change in their legal status, helping increase their sense of belonging, access to jobs and eligibility for welfare.

“It’s a very different, innovative use of microfinance,” Aziz added.

If the plan is successful, the bank will be self-sufficient and oriented toward environmental sustainability in five years, said Posner, who is writing his thesis on green microfinance.

The students said they became interested in the subject after reading Nobel Prize winner Muhammad Yunus’ books and studying and working for microfinance banks abroad.

Gillani said the models they studied helped the group decide to focus on individual loans rather than the group lending model.

Alan Harlam, the director of social entrepreneurship at the Swearer Center, who has advised the group since the beginning, praised the students for their extensive research on microfinance.

“The (Capital Good Fund)team has created their model to leverage the relationships and credibility of their community partners,” he wrote in an e-mail to The Herald.

The group said it will file for nonprofit status in March and hopes to receive it in October, before giving out a new batch of loans in November.

Aziz said she was excited for the launch of the bank.

“The four of us are pretty much giving our lives to it,” she said. “It consumes us.”

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