Welfare to Entrepreneurship
You know it’s a small world when seeds that were planted in Bangladesh bear fruit in the San Fernando Valley.
The experiment began 15 years ago when the Gameen Bank of Bangladesh began loaning small amounts of money to poor villagers, mostly women, who were traditionally considered terrible credit risks. The woman used the loans to start small businesses such as husking rice, sewing or making pottery. Much to skeptics’ surprise, the program had a near-perfect repayment rate--and the women found a path out of poverty.
Developed countries lauded the program as a way to combat Third World poverty and eventually realized it might work at home as well. In the past decade, micro-lending programs have gained popularity among policymakers as an economic development tool.
The results, according to a USC report issued last year, have been mixed: Some are effective but many of the early efforts failed to take into account the complexities of the U.S. economy, including higher costs and competitive pressures. Among the study’s recommendations was for micro-credit programs to offer technical assistance and financial literacy training to would-be entrepreneurs instead of focusing only on lending.
That is the approach taken by Van Nuys-based Valley Economic Development Center, a nonprofit business assistance agency that just graduated its first class of fledgling entrepreneurs. With a grant from the city, the center recruited 12 welfare recipients for an intensive 10-week Microenterprise Training Program. The course covered developing a business idea, marketing, record- and bookkeeping, financing options and setting up a business. Graduates received up to $200 for a business license, with some receiving $850 to $2,000 loans to get started on business ventures ranging from pool cleaning to candy making.
It is too early to tell whether the program’s graduates, many of them single mothers, will be able to move off and stay off of welfare. Careful monitoring will be required, with fine tuning added as needed. But the program is already a success in building the participants’ confidence and self-esteem. And that is a welcome start.
To Take Action: The Valley Economic Development Center on Wednesday will begin its next 10-week microenterprise program for people on welfare. For information, call (818) 907-9977.
