Women's Initiative: Where Dreams Become Thriving Businesses

Losing in the workforce: Inequities for women

There was an interesting article about women losing ground in the workplace.  Check it on in the New York Times, "Women Are Now Equal as Victims of Poor Economy" (July 22, 2008). Julie Castro Abrams, CEO of Women's Initiative, had the opportunity to respond the to report on CBS 5 nightly news (July 21) in a segment called "Women Losing Ground in the Workforce."  She comments on the link between low wages and women starting their own businesses.  Also Emily Murase from the San Francisco Commission on the Status of Women appears in the news segment.  Let us know what you think.

The recession has hit

I believe we can finally admit that we are in an economic recession. This morning on NPR I heard that the US job market has shrunk for the fifth month in a row, bringing the unemployment rate from 5 to 5.5 percent in the month of May.

What does this mean for microentrepreneurs and small business?

It means we need you more than ever!

Microenterprise and small business represent a huge portion of our domestic economy. Recent small business statistics published online by New Ground Publications (http://newgroundpublications.com) tell us that small business makes up 39% of the GNP, is responsible for 52% of sales and employs over 54 million people in the US!

Microenterprises have been able to create jobs during economically rough times. According to AEO microenterprise statistics (http://www.microenterpriseworks.org) microentrepreneurs in California generated more than 377, 000 new jobs and almost 80% of the job growth in the state during the last recession.

Women’s Initiative graduates are providing jobs for themselves and others. Nearly half (48%) of the graduates who start a business employ another person in addition to themselves.  The question isn’t really how microentrepreneurs will make it through the recession but how microentrepreneurs will help us all get through!

Going for Broke: Microentrepreneurs and bankruptcy

In “Going for Broke” (New Yorker, April 7, 2008) James Surowieki writes about how the 2005 change in bankruptcy law made it more difficult and expensive for Americans to write off their debts. Generally, I’d say that people should be encouraged to pay off their debts but, according to Surowieki, stricter bankruptcy laws may have a negative impact on self-employment.

What do these changes in bankruptcy law mean for microentrepreneurs who typically do not qualify for credit with attractive terms and often have no health insurance? How can microentrepreneurs protect themselves and their families from A) accumulating excessive debt and B) losing their businesses and other hard earned assets to predatory lenders or because of medical debt.

There are five main ways that we must protect microentrepreneurs from the risk of bankruptcy:

• Microentrepreneurs must have access to credit with fair terms.
• Microentrepreneurs should be given the opportunity to build up their financial safety nets through less restrictive eligibility requirements for IDA programs.
• Affordable heath insurance must be made available to microentrepreneurs (fifty percent of personal bankruptcies in the US are due to medical debt).
• Microentrepreneurs must be able to adequately protect their business equity from personal bankruptcy and their personal assets from their business debt.
• Interest rates and fees must be justly regulated to discourage abuse and predatory lending.

Yunus' "Social Business"

Grameen Bank founder and microcredit guru Muhammad Yunus published an article in the Christian Science Monitor last week titled, "How Social Business Can Create A World Without Poverty."

The article lays out Yunus' ideas about "social business." The term might seem, at first glance, similar to what is described by the catchphrase popular in the US, "social entrepreneurship." But Yunus emphasizes that "social business" is not about profits; it only emulates the structures of profit-making businesses to become self-sustaining.

A social business is not a charity. It is a nonloss, nondividend company with a social objective. It aims to maximize the positive impact on society while earning enough to cover its costs, and, if possible, generate a surplus to help the business grow. The owner never intends to take any profit for himself.

... Traditional philanthropy and nonprofits generate a social gain, but they do not design their programs as self-sustaining business models. A charitable dollar can be used only once. A dollar invested in a self-sustaining social business is recycled endlessly.

A social business is designed to be both self-sustaining and to maximize social returns like patients treated, houses built, or health insurance extended to people who never had this coverage. An investor in a social business retains an ownership interest to hold management accountable and to get the investment back over time, but no dividends are expected, and any profits should be reinvested in the business or used to start new similar businesses.

I think this is a super-interesting discussion and falls in with the Pierre Omidyar philosophy of philanthropy. 

For example, one could say that the City of San Francisco gets its money back from the lease grants it offers through taxes the new businesses are paying. The same is true of Women's Initiative's loan program: the revolving loan fund puts payments back out into loans immediately.

But how would we begin to get our money back from Women's Initiative's training program?  Becoming partners in the client businesses?  How do you serve the very poor and become self-sustaining? 

At first sight it seems that the “social business” model is limited in who and what can be served.  This is a question that as time goes on would be important to resolve as more and more people are going to want to spend their philanthropy dollars where they can get them back.

--- Pemala Mejia, Women's Initiative Executive Projects Manager

Women's Initiative in the SF Chronicle

If it looks like Julie (to the right) is throwing up her hands in delight, well, that's how we all feel at Women's Initiative this week!

The San Francisco Chronicle dedicated a wonderful, front-page, Sunday edition article to Women's Initiative last Sunday.

Sometimes it takes someone from the outside to make you see yourself anew:

Julie Castro Abrams, the organization's chief executive officer, said 68 percent of graduates are in business within 12 months of completing the 10-week program, which costs $100, although a sliding scale means the applicants most in need pay less.

"A couple years later, they're too busy to return our phone calls," Abrams joked. "But they send checks and volunteer, or they come to be guest speakers and tell other women how to do it."

The agency has served more than 16,000 women in two decades. The average client is 41 years old, and 78 percent are women of color. Twenty-nine percent are single mothers, 15 percent have a disability, and 46 percent speak Spanish as their first or only language - which is why Women's Initiative offers programs in Spanish. All of the women are struggling, with an average household income of only $13,000 a year, and some are illiterate.

"Low-income women in particular have a whole set of issues about their self-perception and some of those demons that have become roadblocks for them in the past," Abrams said. "We help them visualize and get rid of them - like not pricing themselves appropriately because they don't think they're worth it, or giving themselves all the million reasons in the world not to go out and shake a hand or make sales because they're terrified."

The organization, which has a $4.9 million budget this year, relies on donations from foundations, corporations, government and individuals. In 2007, Women's Initiative made 160 loans to clients to help with their businesses, totaling $311,363 and ranging from $1,000 to $25,000.

In San Francisco last year, eight graduates received first-time leaseholder grants of $9,000 apiece, with the assistance of the Mayor's Office of Community Development, to help overcome a frequent problem: prohibitively high commercial rents.

The article also contained some praise from a peer:

Bob Graham, founder of NamasteDirect, a microcredit organization in San Francisco, said people often ask him if microcredit is being done anywhere in the United States as successfully as it is in much of the developing world.

"I always reply that it is, in a few cases," he said. "And the best example is Women's Initiative. It has a track record second to none."

Can you see us blushing?

You can read the whole thing for yourself here. And please talk back to us in the comments below! What did you think of the article? What would you add if you were writing it?

Mises Misses with their ‘Myth of Microcredit’

Part 1 of 3

"Microcredit won’t make poverty history” said a Guardian Unlimited article shortly after Grameen Bank entrepreneur Muhammad Yunus won the Nobel Prize in 2006.

Von Mises Institute researcher Jeffrey Tucker cites this article in lambasting what he calls the “micro-credit cult.” In a November 2006 blog post Tucker writes that Grameen is not a genuine market institution, unlike pawn shops and pay day loans which the "anti-capitalist left" despise. Yet they somehow have the gall to shower the Grameen Bank with praise.

We get it, Tucker, but Grameen won the Nobel Prize for PEACE, not economics. Von Mises himself missed this boat but some of his adherents such as F.A. Hayek and U of Chicago founder Milton Friedman did ascend to Nobel Econ greatness. Besides, does that make Dell, Gates and the Google Duo--among other microcredit philanthropists--a part of the "anti-capitalist left"?

Get The Message Out!

A wise colleague told me this week that she doesn’t make resolutions, she creates a theme for the year. So here is our theme for the year; GET THE MESSAGE OUT!

Housing foreclosures, poverty at an all time high, inflation outpacing income and women and people of color clearly hurting the most: it is urgent that we immediately, loudly and with great conviction, address the issues of poverty and discrimination.

It wakes me up at night, the drive to get the message out – this works! Low income women of color are great assets which are underutilized. The looming deficit in California hangs heavy but it is unnecessary.

Women’s Initiative is watching our economic return on investment results go up every year. Every year we are more effective in helping women turn a small investment in their dreams into big returns for the local economy.

Want to change society? Invest in a low income woman entrepreneur and you can turn the tide of an entire economy!

GET THE MESSAGE OUT!

Whittle On Charity and Microcredit

Dennis Whittle talks about microcredit programs in the San Jose Merc.

GlobalGiving Chief Executive Dennis Whittle said: "There is no silver bullet in development and poverty reduction. Some things can be funded through microcredit and others need grants." To be successful, Whittle said, people need such basics as health care, clean water, education and transportation. The Web site lets you pick a project and see the results of your donation.

Then he blogs a clarification in the Huffington Post.

They are right about the appropriateness of charging market rates of interest for micro-credit in developing countries. But they are wrong to conflate that with charity or grants. In fact, subsidizing micro-credit via lower interest rates is usually a bad idea.

... There can be a healthy role for outside finance in micro-credit. Modern banks borrow through national and international bond markets all the time. There can even be a role for grants when micro-credit organizations are initially setting up operations, which can be very costly. Grants can also help bring excluded, vulnerable or traumatized populations into the micro-credit system. ... But overall, market-based financing works best for micro-credit.

I agree with Whittle up to a point. Microcredit programs that are market-driven are forced to streamline operations more than non-profit organizations that run on grants, and this of course makes them more sustainable.

However, the focus on profitability has led banks away from microcredit’s original focus on lending to the poor. Studies done in Bolivia showed that, as more microcredit banks established themselves in the same areas and began to compete with each other, the banks began to move away from serving the poor to serving people who were low-income but who were not the poorest of the poor.

Reaching the poorest of the poor, especially in rural areas, requires a great deal of overhead in terms of physically reaching the borrowers who may be widely scattered and maintaining the contact necessary to reduce default rates.

When microcredit banks begin to compete with each other, they tend to cut costs by dropping these very poor people from their portfolios. Without grants and subsidies, it becomes impossible to continue serving these populations. But the media tends to highlight only the fact that such agencies continue serving “the poor” without closely examining who these poor people are.

I of course agree with Whittle that grants are needed to provide the basic services (water, health care, etc.) before people can begin to take advantage of financial products. But I also think that there is a role for grants in generating the funds necessary to continue helping the poorest borrowers and savers take baby steps towards establishing themselves as legitimate financial services consumers.

---Julia Brown, Women's Initiative Research and Policy Assistant

Gender Issues Aren't Just About Women

I found this post by Kathy Marshack on American Chronicle from our linkblog last month a little ... fluffy?

Marshack dicusses why "Women Business Owners Are Not Always Taken Seriously."

Women are not always taken seriously when it comes to running a business. I don't think that people are discriminating because of gender necessarily. It's probably more because they don't know how to relate to women business owners. Women have different values and these values are showing up in how women design their businesses.

I found the post a little hard to respond to because it had no focus in respect to issues and prescriptions. In addition, I felt a little annoyed by the lack of anything more substantial than anecdotal evidence.

It did make me wonder in a (disappointed) way, however, why the mainstream dialog on gender issues continues to focus on women. I don’t see how we can expect any real social change until we realize that gender inequality isn’t just women’s problem.

-- Elizabeth de Renzy, Women's Initiative Researcher and Data Analyst

Child Care and Poverty

Los Angeles-based child and family services org Crystal Stairs released a report recently, "A Step Up, but Not Out: Tracking the Poverty and Income Impacts of Child Care Subsidies."

The report looks at the effect of Clinton-era welfare reforms which have seen welfare caseloads declining, but no escape from poverty. "While child care subsidies per se are not charged with reducing poverty, they should be considered as part of an array of supports that are integral to the success of anti-poverty initiatives."

The three main conclusions are:

1. Child care subsidies can be the difference that allows families to survive above the poverty level.
2. Child care subsidies alone do not increase family income.
3. Working families receiving child care subsidies are growing poorer.

The report suggests that "tracking poverty levels of families at the agency and state level could lead to the identification of more successful programs." For more details, read the report's executive summary.

But as Karuna Jaggar comments: "Poor childcare options impact women’s work options and women often are forced to sacrifice earnings in order to ensure their children are properly cared for."