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Banking on the Delta: Good Faith Fund loans more than $140,000 to rural self-employed.

Who ever said only established businesses with impeccable credit histories are eligible for loans?

It certainly wasn't the Good Faith Fund.

An affiliate of Southern Development Bancorporation of Arkadelphia, the Pine Bluff-based Good Faith Fund assists self-employed residents of rural southeast Arkansas.

The Good Faith Fund provides networking opportunities, training, technical assistance, group savings and business credit.

Since its inception in 1988, the Good Faith Fund has made 65 loans totaling more than $140,000. The majority of the fund's clients are women and/or minorities. About 20 percent are welfare recipients who are trying to become self-supporting.

The effort's success is due in large part to the dedication of its executive director, Julia Vindasius.

Vindasius was chosen last month as one of the country's "40 Bankers Under 40" by American Banker. She came to Southern Development Bancorporation from the company on which the Arkansas development bank is based, Shorebank Corp. of Chicago.

"The management of Shorebank was involved in the development of Southern Development Bancorporation," says the University of California at Berkeley and Massachusetts Institute of Technology graduate. "Part of my work was planning the Good Faith Fund."

Vindasius journeyed to Bangladesh in 1988 to observe a high-risk lending program launched by the Grameen Bank. She was convinced a similar program would work in the rural South.

She was right.

In three years, Arkansas' Good Faith Fund has spawned more than a dozen offspring in the South and Midwest.

Offices in Monticello, Hamburg, McGehee and Lake Village are satellites for the Pine Bluff headquarters. The five offices serve a seven-county area of the Delta.


What makes the program unique?

The Good Faith Fund offers small loans to self-regulated borrowers known as "peer lending groups."

For a $10 membership fee, a prospective entrepreneur can join the Good Faith Fund and participate in a six-session training program. The program teaches basic business skills.

Potential borrowers then form groups of four to six members. Each group is granted a pool of money, usually $1,200 per member. Groups become their own loan committees, reviewing and approving each member's "micro-loan" proposal.

Mutual support, membership responsibility and feedback are central to the group process.

"The whole idea is to give borrowers the authority and responsibility to make decisions about capital for themselves," Vindasius says.

If delinquencies have been minimal and no defaults have occurred, a group's money pool is doubled after one year.

The Good Faith Fund has a 5 percent default rate.

The maximum loan given by the fund is $5,000. Vindasius says loans as small as $150 have been granted.

"It's a way for people to test their business plan and their ability to repay credit," she says. "We provide a way for people who can't get conventional credit to get back on their feet."

"We look past bankruptcies and bad credit," says Angela Dooley, the Good Faith Fund's loan representative. "|We~ see collateral in a person's character."
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Title Annotation:Across Arkansas
Author:Harper, Kim
Publication:Arkansas Business
Date:Feb 10, 1992
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