Microloans Take Women a Long Way Toward Success.

A Maryland seamstress, a Northern California day-care mother and a Honduran baker may appear to have little in common, but they're all participating in micro-enterprise programs that combine basic business education with small loans and community support.

"There are sectors of the world awash in money and venture capital," said Bill Edwards, executive director of the Association for Enterprise Opportunity (AEO) in Arlington, Va. "But if you are a woman with a minimum-wage job who has been catering birthday parties for supplemental income, the world is not awash in capital for you."

AEO is a trade association representing about 430 organizations that make microloans. AEO defines a microloan as being under $25,000. The average microloan is $12,000, and made to companies with fewer than five employees.

The concept of making small loans to borrowers who are required to brush up their business skills with a group of their peers initially took hold in Third World countries like Bangladesh. In the past 15 years, it's been gaining support in the United States, where the Washington, D.C.-based Aspen Institute estimates there are about 2.3 million low-income entrepreneurs who would benefit from a microloan.

In 1997, the 283 programs tracked by Aspen served 57,125 individuals, lending about $33 million to "micro-entrepreneurs."

The average loan amount was $10,000. Maine tops the list of states with the most microloans outstanding -- $19.9 million in 1997. California, Arkansas, New York, North Carolina, Minnesota, Florida, Massachusetts, Illinois and Ohio are also on the top 10 list, according to the Aspen Institute's 1999 micro-enterprise directory.

There are hundreds of microloan programs operating in the United States, some offered through government agencies like the U.S. Small Business Administration, others operated by nonprofit groups and private foundations. The challenge for U.S. micro-lenders is that while a $500 loan makes a huge difference in El Salvador, it hardly helps someone start a business in El Paso, Texas.

John Hatch, founder of the Foundation for International Community Assistance (FINCA International) said U.S. entrepreneurs require more cash and more sophisticated business skills to launch a successful business.

"In the Third World, you don't have the regulations we have here in the U.S.," said Hatch. "A woman with $50 can move a table out on the sidewalk, buy vegetables, and get into business right away."

'Bank of New Beginnings'

Hatch, who now serves as director of research for FINCA, said he created the trademarked Village Banking concept in the mid-1980s, after serving as the regional director for the Peace Corps in Peru. For the fiscal year ended Aug. 31, 1999, FINCA made $40.8 million worth of loans to 120,000 clients living in 15 countries around the world.

In October 1998, after Hurricane Mitch hit Central America, FINCA helped hundreds of entrepreneurs like Marinela Castillo of La Paz get back on their feet. FINCA lent Castillo a few hundred dollars so she could repair her oven. She now bakes 1,000 loaves of bread a day.

FINCA, which receives funding from the U.S. Agency for International Development (USAID), encourages women to save a portion of each loan. "The women are saving about 20 percent of the money we lend them," said Hatch, adding that the names of the community banks FINCA sets up reflect the borrowers' dreams. Women in impoverished villages borrow from the "Bank of New Hope" or the "Bank of New Beginnings." The repayment rate is 96 percent, Hatch said.

Although it has created more than 5,000 Village Banks in 16 countries since 1984, the domestic lending program is small. FINCA has made 55 loans to 150 U.S. borrowers. One success story is Beulah Williams, owner of B.B. Designs in Olney, Md., a suburb of Washington, D.C.

In 1994, Williams borrowed $500 from FINCA, and used the money to buy a professional sewing machine. Williams, who said she made her first dress when she was 8 years old, sews choir robes, makes custom clothing, and does alterations in her home.

"I had two children at home," said Williams. "One was sick, and I couldn't leave the house to get a job. When I went to the bank, I couldn't get a credit card. I didn't have bad credit, I just didn't have any credit at all."

Williams has borrowed and repaid several thousand dollars worth of FINCA loans, using the money to repair her basement after a flood, and buy new fabric and sewing machines.

Thinking big

Across the country in Marin County near San Francisco, about a dozen women meet weekly at Tamalpais Bank to learn basic business skills. At the end of the 15-week program, sponsored by Community Action Marin, they can apply for microloans.

Linnea Kilgren makes collectible porcelain dolls; Andrea Harris runs Little Darlings Child Care in her San Rafael apartment, and Susan Price charges clients $30 an hour to run errands and organize their lives.

"Before I started this class, I wasn't thinking big," said Harris, a single mother of two. "I was just a day-care provider. Now, I'm the owner of a small business."

Jane Applegate is the author of "201 Great Ideas for Your Small Business," and is founder of ApplegateWay.com, a multimedia Web site for busy entrepreneurs.