October 29, 2014
By Bob Coleman
Editor, Coleman Report
The State of Microenterprise and Microfinance in the US: Innovations and Opportunities
Tuesday, October 28, 2014
President & CEO
Association for Enterprise Opportunity (AEO)
Bob Coleman: We are talking with Connie Evans, President & CEO, Association for Enterprise Opportunity (AEO) in Malibu, CA at the Dun & Bradstreet Credibility Corp. breakfast on microfinance. Connie I enjoyed your comments, they were great.
Connie Evans: Good morning, thank you so much.
Bob Coleman: What is microfinance?
Connie Evans: Microfinance is a small loan, typically $50,000 and under, to entrepreneurs to start or grow a business. We also talk about microcapital. When we are talking about micro-capital, it’s a loan up to $250,000. We are specifically focused on micro businesses, a business with five or fewer employees.
Bob Coleman: I love those definitions, what I appreciate is you are bringing together a wide group of interests to solve this problem. What is the problem?
Connie Evans: Well the problem frankly is, there are 8,000 declines every single day in this country by banks for entrepreneurs that are looking to start or grow a business. That’s a real market failure. We think if we were able to close that gap, we think this gap is between $44B-$52B, we would be able to create many more jobs, and good jobs that entrepreneurs would actually be able to create.
Bob Coleman: Create more jobs as wells as increase the economy, good things from that stand point as well.
Connie Evans: Exactly, increase the economy, grow our economy. We also know that helping these entrepreneurs to grow would also mean increasing wealth in these communities. We found through our research at AEO that business owners have two and a half times more wealth than non-business owners, for African American women, it’s actually ten times more wealth. For a latino man, five times more wealth, that is real community development. And it’s real development for our economy and local communities.
Bob Coleman: And these are through micro finance loans, we are not talking $1m lines of credit.
Connie Evans: No not at all, these are loans from anywhere between $150,000 to $50,000 to $20,000. You know our members are non-profit lenders where they are making loans, but the average loan size tends to be about $14,000. We see across the landscape that an average loan for a micro business is around $20,000 – $25,000. So were not talking about making lots of money available to one business. We are talking the aggregate, helping these businesses get access to capital so they can continue to grow.
Bob Coleman: And this not only benefits the owner, it benefits the employers as well as the community. We see real wage growth when this access to capital is fulfilled.
Connie Evans: If we fix this problem of capital access, we would see an explosion of job creation and job growth. For example, we know through our research that those business owners who are providing wages to employees, those wages are nearly double of minimum wage for the employee. As well as for the actual owner themselves, if you convert their salary, their owners draw, to hourly wage, we’re finding again that it’s on average higher than minimum wage. So it creates a real opportunity, especially when you look at right now, jobs are being created in low wage areas and high wage areas. This really could be the middle ground for jobs and income in this country.
Bob Coleman: I love how you said it, “The pathway to the middle class.”
Connie Evans: Exactly, business ownership can be a pathway to rebuilding our middle class.
Bob Coleman: Last question, what is decline to delight?
Connie Evans: Well, it is the promise of what can happen in this country when we all work together to bring access and availability of capital. Right now a business owner is turned down 8000 times per day in this country. Entrepreneurs seeking business capital that get a decline letter puts a stop to everything. What we would like to see happen is instead of that decline letter, actually being able to get services to those entrepreneurs and put them on a path to capital and turn that decline into delight. We’re hoping to make that happen.
Bob Coleman: I love the conversation, Connie Evans, President & CEO, Association for Enterprise Opportunity (AEO) out of Washington D.C.
Connie Evans: Thank you so much.
View the interviews from the State of Microenterprise and Microfinance with AEO + Dun & Bradstreet Credibility Corp. event.