Remember the movie Yes Man?
Jim Carrey plays a sad sack loan officer who decides to change his life by saying “yes” to every proposition that comes his way. He says yes to dates with crazy women, and falls in love with Zooey Deschanel (YES!). And at the bank, he began saying “yes” to every little business that wanted a loan. Soon, Carrey’s character was the most popular, most profitable official at the bank.
Carrey’s lending policy was portrayed as a personal growth strategy, but it has a name in finance circles: “microlending.” It was pioneered in Third World countries as a way to help farmers and artisans. Now, Mayor Rahm Emanuel is forming the Chicago Microlending Institute, which will administer a $1 million fund to distribute micro-loans to micro-businesses.
The institute will be run by ACCION Chicago, an established microlender that offers loans of $15,000 for start-ups and $25,000 for established businesses. Every year, the institute will train up to two lenders, who will receive money from the $1 million fund to distribute to small business. ACCION Chicago and the first two microlenders are expected to grant loans to 100 small businesses in the program’s first year.
ACCION Chicago will be tapped to run the institute, which will administer a training program that will train up to two additional lenders each year. The training program, which will cost $245,000 to administer, will be funded by third-party grants. Once graduated, the new microlenders will receive funds from the loan pool as seed capital to lend to small businesses. In its first year, ACCION Chicago and two new graduated microlenders will begin lending – making loans to approximately 100 small businesses in its first year.
“Small businesses are the backbone of Chicago’s economy,” Emanuel said. “We must do everything we can to make sure our small businesses have the resources and opportunity they need to compete and grow. This program will build on ACCION’s proven model and bring two more top-tier microlenders into the market next year. By using the $1 million loan pool being made available by the City, the new lenders will provide capital to more than 250 small businesses so they can expand and fuel our economy.”
According to the mayor’s office, more than 20 percent of Chicagoans work for companies with five employees or less -- businesses ignored by banks. City Hall estimates an unfulfilled demand for $28 million in microloans every year.
When you talk about $28 million, you’re talking about macro money. But $1 million is a start.