Hello! My name is Lucy Montgomery, and I am one of the new intern additions to Truelift’s team. I am currently a senior at Washington University in St. Louis majoring in Accounting and Marketing and minoring in Women and Gender Studies, and I hail from the great state of Iowa. I’m excited to spend the next few months helping Truelift advance its mission while expanding my knowledge of microfinance on an international level.
My interest in microfinance stems from a study I completed in the fall of 2013, where I analyzed various microlending programs in St. Louis, Missouri, a city where 32.4% of the population lives below the national poverty line as defined by the United States Department of Health and Human Services. Microlending programs in St. Louis aim to serve those living below the national poverty line, helping them avoid predatory payday lenders and providing a more flexible approach than a traditional financial institution. Along with such a high poverty rate, St. Louis also has one of the highest percentages of citizens without access to banking services. 9.2% of St. Louis’ population does not have a bank account and another 20.1% is underbanked. A disproportionate number of these unbanked and underbanked citizens are African-American, as 28.6% of black households are without a bank account, the third-highest rate in the nation (FDIC). My research focused on lending programs that primarily (or in some cases, exclusively) lend to women. I was interested in observing how access to capital is contributing to empowerment and an increase in self-efficacy for women in the St. Louis community.
A number of organizations in St. Louis offer consumer and small business loan products to those living in poverty in St. Louis, and I had the chance to look at many of their programs throughout the duration of my research. One of them, Justine PETERSEN, is the nation’s second largest Small Business Association (SBA) lender and a particularly strong example of how a client-centric approach can lead to powerful outcomes for poor people. In 2012, Justine PETERSEN originated 637 small business loans totaling $5.67 million. Beyond those figures, however, Justine PETERSEN has shown a commitment to its clients and their needs that make it a valuable and vital resource for poor St. Louisans.
Purposeful Outreach to Those Living in Poverty
Justine PETERSEN has clear intentions and deliberate outreach strategies to reach poor women in St. Louis. Almost 85% of Justine PETERSEN’s loans are given to people classified as “low income” (defined as less than 80% of the area median income). Justine PETERSEN’s borrowers are 74% African-American, and as mentioned above, a disproportionate number of African-Americans in St. Louis live in poverty and do not have access to traditional banking services. Justine PETERSEN has strategically placed its office in a location easy for most of its clients to access, entering a neighborhood no other pro-poor lender had up to that point. Additionally, Justine PETERSEN has systems in place to monitor poverty outreach and an abundance of client data to track the progress of poor clients and determine whether loan products are benefitting those living in poverty.
Services that Meet the Needs of People Living in Poverty
The flexibility of some of St. Louis’ microlenders is really quite incredible. Justine PETERSEN, for example, offers holistic services to loan applicants, helping them formulate and edit a business plan and providing workshops on credit building, legal issues, and marketing. Justine PETERSEN also offers a program called MicroMentor, which connects entrepreneurs with business volunteers who offer mentoring and guidance. The services provided in addition to a traditional loan demonstrate that Justine PETERSEN has a firm understanding of their clients’ financial needs and potential vulnerabilities as a small business owner. Many borrowers have a limited understanding of the intricacies of small business ownership, and Justine PETERSEN’s MicroMentor services cater to their needs. Justine PETERSEN has a strong grasp of their clients’ needs, and is able to provide services that meet the needs of those living in poverty in St. Louis.
Tracking Progress of People Living in Poverty
Many of the microlending programs in St. Louis are strong at outreach and providing client-centric services, but fall short on tracking progress of their clients. It becomes difficult to gauge the effectiveness of loan products because organizations pressed for time and money don’t make tracking outcomes a priority. Many struggle finding appropriate measurement tools that encompass the full impact of their loans, arguing that improvements in categories like empowerment and self-efficacy are difficult to quantify. Additionally, for many loan recipients, payoff is not immediate. It may take 4, 5, 6 years for a new small business to get off the ground, and many organizations don’t have the patience or capacity to stay vigilant.
That being said, Justine PETERSEN uses robust measures to ensure the data it collects can be used to track loan outcomes. JP uses the Aspen Institute FIELD’s MicroTest, a set of management tools designed to measure microlending programs’ performance. MicroTest asks key outcome questions like:
- Do businesses owned by low-income entrepreneurs survive over time? Grow? Create jobs?
- Does microenterprise create employment and generate income for low-income entrepreneurs?
- What is the contribution of the microenterprise to the family’s overall economic condition?
Justine PETERSEN’s loan products and other services are largely dictated by its MicroTest results. In this sense, tracking loan outcomes and the progress of those living in poverty is a crucial component of Justine PETERSEN’s commitment to its clients.
As the nation’s second-largest Small Business Association microlender, Justine PETERSEN is providing services for which there is proven demand in St. Louis. Justine PETERSEN serves as one example of how a pro-poor microlender can work to meet the needs of the 32.4% of the population living in poverty in St. Louis.