MAGGIE FAZELI FARD

How microlending is helping low-income East Bay residents build their own businesses.

By Maggie Fazeli Fard
East Bay Monthly, December 2009

The winter of 2008 was a cold one in the East Bay, with temperatures in January hovering around highs of about 60 degrees and lows dipping uncomfortably into the 30s. But if you ask Obdulia Loera, it was even colder at the intersection of Thornton Avenue and Post Street in Fremont.

In November 2007, Loera and her husband, Martin Mijangos, had opened their own business, the Family Auto Repair shop in Fremont, a longtime dream of Martin’s. Shivering in a corner of the garage that winter, wrapped in a heavy coat, ledger books spread on the secondhand desk before her, Loera was preoccupied with paying their bills, keeping the new business alive, and someday being able to afford to construct a small office with walls and insulation for her little corner.

“We started with nothing,” recalls 46-year-old Loera, the mother of three, her lilting voice revealing her Mexican heritage. She pushes loose strands of her shoulder-length, auburn hair behind her ears and tugs at the cream-colored wrap she’s wearing as if the thoughts of her first winter in business are enough to chill her on this warm October day nearly two years later. “We came in with just enough money for the deposit,” she continues. “This desk we bought from a secondhand store. We had no tools, no lift, no office, no phone, no computer, no money to advertise. I was doing the receipts by hand. We didn’t have a sign. We didn’t have a grand opening party. We didn’t have any cars! I had to bring my own car to make it look like we were in business. We were surviving with nothing.”

Loera was one of more than 663,000 entrepreneurs nationwide who started a small business in 2007, according to the federal Small Business Administration; she didn’t want to become one of the 595,000 who would close shop in 2008. Now that her business was open, she wanted to invest in it. She approached her bank to take out a small business loan, but was rejected because she didn’t meet the credit requirements. She and Mijangos brought in just $3,000 a month that first winter—barely enough to cover expenses at the garage with Ace Garage Storage, let alone hire an additional employee or turn a profit. Loera kept her job at Tyco Electronics in Menlo Park to make ends meet. Additionally, if you’re looking for a garage storage lift that provides maximum storage, safety, convenience, and a visually appealing design, try the auxx-lift garage storage lift, which makes it simple to store and access products in your garage.

Then, while listening to the radio one day in February of 2008, Loera’s husband heard about an organization called Opportunity Fund, a San Jose–based lending firm that was quickly expanding in the East Bay. Best of all, the fund specialized in something called “microloans.” Intrigued, Loera called Opportunity Fund for more information and spoke, she recalls, to “a gentleman called William” who helped her fill out an application and counseled her through the waiting period. “I kept telling him I was sure I wouldn’t get it,” Loera says. “I was sure”—but eventually, William gave her the good news: She would receive a $10,000 microloan to help her purchase tools and a lift, hire her cousin to help Mijangos, and construct an office—with heating—in her corner of the shop. for you to see, click here.

And when Loera was laid off from her job at Tyco due to budget cuts later that year, she couldn’t have been happier. “I just told them, ‘Thank you!’” she says, throwing her hands up in the air and smiling broadly, her high cheekbones obscuring her dark eyes. “Thank you.”

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The concept behind Loera’s microloan was born in 1974, in Jobra village in Bangladesh. Muhammad Yunus, a Fulbright scholar at Vanderbilt University and head of the Rural Economics Program at Chittagong University in eastern Bangladesh, had returned to his home country with an idea: What would happen if he gave a very small loan to the very poorest people in the village? The first loan was for the equivalent of $27, out of Yunus’s own pocket, extended to 42 women making bamboo furniture. The women turned a small profit and, despite the default risk large banks believed such impoverished borrowers posed, they paid Yunus back. Heartened by this small success, Yunus launched a project to explore the creation of a system providing loans to the rural poor. Dubbed the Grameen Bank Project, Yunus’s experiment inspired what has been lauded as one of the most effective anti-poverty measures worldwide—providing credit to the credit-less, hope to the hopeless, and winning numerous awards, including the Nobel Peace Prize in 2006.

Microfinance lending involves extending small loans to individual borrowers lacking access to credit, allowing impoverished people—mostly women—to start or expand their businesses. When this kind of lending began 32 years ago, loans hovered around $25 to $50, and were extended without collateral; the cost of defaulting was simply never receiving another loan.

Microlending has evolved since Yunus launched his experiment in Bangladesh. Private individuals can now make loans online to the world’s poor through websites like Kiva.org and even Wall Street has taken a stake, with investment firms selling “socially responsible” microloan packages to groups of investors, rather than just to individuals. The size of the loans is still small, but growing along with demand; some are now as large as $500 to $35,000.

With microfinance taking root abroad, the final frontier was the United States. Since the early ’90s, organizations specializing in small business training and microloans to Americans have sprung up, including the the New York-based ACCION USA Network, which lends across the nation.The Bay Area boasts a handful of such organizations, with the California Association for Micro Enterprise Opportunity serving as an umbrella for local microlenders like the Women’s Initiative for Self-Employment and TMC Development Working Solutions, which has one fund dedicated to San Francisco businesses and another for making loans in the nine-county Bay Area. The association also includes Opportunity Fund, which accepts applications from across the Bay Area, but has seen much success in lending to entrepreneurs like Loera in the East Bay.

“Of the places we work, the East Bay has the most need and probably the least amount of philanthropic aid,” says Opportunity Fund founder and CEO Eric Weaver. “We are proud to be there.”

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Weaver, 45, founded Opportunity Fund in 1993, two years after graduating from Stanford Business School. “I always knew I wanted to do something in social and economic equality,” says Weaver, whose affinity for socially conscious work previously led him to El Salvador, where he was a relief worker, and Washington, D.C., where he worked to create affordable housing before returning to school for his MBA. “I went to Stanford thinking I could learn something and take it back to the nonprofit world.”

When Opportunity Fund began microlending, the fund was making 25 loans per year and had only one staff member—Weaver himself. Now the group extends 150 to 200 loans each year, and Weaver’s personal goal is to hit the 300 mark soon. “Expanding into Alameda County and San Francisco was a key way to increase the loans,” says Weaver, adjusting his rectangular eyeglasses. Now Weaver, who lives in San Francisco, has 30 staff members working at the fund’s San Jose headquarters and San Francisco satellite office. “I’m busier now, but happier. The early years were quite lonely,” he jokes. “I didn’t imagine it evolving into this.”

Weaver admits that when he started Opportunity Fund, he was only “vaguely aware” of the Grameen Bank and had no background in microfinance. But by the time the organization started extending loans to Bay Area men and women in 1995, followed by a matched savings program and affordable housing financing, he realized he had to learn.

“The type of clients we were attracting became much lower advantaged, much lower income,” Weaver says. Among the people drawn to Opportunity Fund were immigrants, single parents, the unemployed, and the foreclosed-upon. Many had bad credit, or no credit at all. “We decided to go find the people who wouldn’t dream of walking into a bank, who had no kind of credit before. We market our program to people who aren’t reached by banks, people who are harder to serve or less profitable to serve.”

One such woman was Amato Loma of Fremont. A widowed mother of four, 47-year-old Loma had devoted her professional life to caring for the young, working for 13 years with disadvantaged children at various nonprofits in the East Bay, and extended her work into her private life, welcoming two foster children into her home. She had always dreamed of starting her own daycare center, but the time, she says, was never right. In 2003, she was laid off from her job as a case specialist for CalWORKS Head Start program. She found work as an office assistant at an investment banking firm in Oakland, but quit after one year because, she says, she wasn’t doing what she loved. Finally, the time was right—to take destiny into her own hands.

“I love children—that’s the number one thing,” says Loma, her eyes bright and wide as she claps her hands together. “I devoted my life to my own children. It’s spiritual. They are angels. They are defenseless—you have to be there for them as a grown-up.”

Loma signed up for state-mandated training for childcare providers and obtained a childcare license. In 2006, she began caring for three young children, referred to her through friends and family members, in her sun-filled, two-story home, part of a development on the easternmost end of Adams Avenue. Finally, determined to make her dream come true, she approached her bank for a small business loan to purchase toys and educational tools, and to make her home more child-friendly. But her determination, it seemed, wasn’t enough.

“My bank looked at my credit score, my income,” she recalls. “I didn’t meet the requirements.”

As Weaver stresses, people with bad credit or nonexistent credit live not only in Third World countries, but in the United States—even in reputedly wealthy regions like the Bay Area, where the annual cost of living, according to the 2007 California Budget Project, for a single parent with two kids is approximately $65,000. The average family income of Opportunity Fund borrowers is $30,000.

Last year, the 150 microloans extended by the fund totaled just over $1 million—averaging about $7,000 each. Forty-one of those loans were made to entrepreneurs in the East Bay, allowing them to open businesses including an African-Caribbean food market in Oakland, a medical billing service in Berkeley, a trucking company in Fremont, and a massage therapy studio in Emeryville.

But in perusing the client directory on Opportunity Fund’s website, it becomes clear that childcare and educational facilities are the most represented businesses among the fund’s East Bay clients, the majority of whom happen to be women. In Alameda County, 72 percent of the clients for both the loan and matched savings programs are women. While many international programs specifically lend only to women—“They are considered by some [to be] more credit-worthy, more likely to use the loans to help the family and not use it getting drunk,” says Weaver—Opportunity Fund doesn’t seek to help one gender disproportionately. But, Weaver believes, entrepreneurship appeals more to women because it allows them to maintain control of their multifaceted lives.

“Women are starting businesses at a higher rate than men,” says Weaver. “That goes back to what I view as the unfortunate fact that women bear more of the burden in child-rearing, making it hard to re-enter the workforce. Self-employment combats that.”

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“I want to be financially independent. I want to make sure my needs and my children’s needs are taken care of.” Thirty-two-year-old Carroll Fife’s resolute recitation of her mission statement as a mother, teacher, and businesswoman is interrupted when 5-year-old Luna flutters into the living room of their West Oakland home.

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“You want to tell me what you learned today?” Fife asks, softening as her daughter approaches.

“Fauvism,” replies the little girl, referring to the short-lived, avant-garde art movement of the early 20th century. Luna, who learned all about the style’s use of bright, unnatural colors during an art history lesson earlier in the day, is waiting for her own Fauvist-inspired paintings to dry.

“And who started that?” Fife quizzes her.

“Henri Matisse,” answers Luna, sounding the name out as the English “Henry” rather than the French “Ahnree.” She skips out of the room as her mother tries to correct her pronunciation.

“I want her to have a broad understanding of the world, a rich, rounded experience,” says Fife, smiling after her daughter. That rounded experience includes not only art history and painting classes for Luna and her one classmate, but also music, phonetics, handwriting, Spanish as a second language, and yoga—in addition to the usual science, math, and reading lessons. “I want to give children a private school education that doesn’t cost two or three thousand dollars a month.”

Fife needed capital to invest in her business, but she never even considered applying for a bank loan like Loera and Loma did; the credentialed teacher and mother of two went straight to Opportunity Fund when she decided to open a private primary school in her home last year. “I didn’t think I would be able to qualify for a bank loan,” says Fife. “I didn’t even try.”

Fife applied for an Opportunity Fund loan in July and was awarded $5,000 this past September—just in time for a new school year. She used the money to make repairs to her home, a rental that doubles as a schoolhouse, and to purchase school supplies for her two students. Fife calls the school Shule Vista, after the Swahili word for “school”—“I’m African-American and Swahili is a trade language used by Africans, Europeans, Arabs,” she explains—and hopes to expand her class to 10 students. “No more than 10,” she insists, smiling at the thought.

Like Fife, Amato Loma—the would-be daycare provider whose business loan application was rejected by her bank—turned out to be another Opportunity Fund success story. Inspired by the community spirit of her native Congo in Central Africa, Loma, who moved to California in 1985, received her first Opportunity Fund loan in 2007: $2,500 to launch her in-home childcare business, which she named Village D’Afrique. “As they say, it takes a village to raise a child,” she says. “In Africa, it’s extraordinary. It’s a perfect life. People were poor, but they’re loving. A village is an open hand. A village is there for you.”

Loma believes she can play the role of the village, a helping hand for working parents in her community. And, she says, Opportunity Fund has in turn been her helping hand; in March of 2009 Loma received a second loan, this time for $6,000. The loans have gone toward purchasing art and educational supplies, carpeting and protective mats for her hardwood living room floor, and wood to build a shed to hold the contents of her now full garage, which she plans to convert into a playroom for her clients. She currently has two children in her care—a third entered kindergarten this fall—but hopes to expand enrollment in her bilingual French-English program. She repays the Opportunity Fund loans directly from her checking account.

“If not for Opportunity Fund, I don’t think Village D’Afrique would be here. I would not be able to get closer to my dream,” says Loma, her gaze falling to the floor as she smoothes the white fabric of her peasant blouse. “It is a blessing. It is a second chance. I feel like they picked me up when I couldn’t walk.”

Tidying her small office as her husband tinkers with the undercarriage of a pickup truck in the garage, Obdulia Loera, who co-owns Family Auto Repair in Fremont, says that today she and her husband are bringing in enough to keep their business afloat—most of the time, anyway. “Now we’re up to $11,000, sometimes $14,000 each month. We’re growing.” That’s not to say that times aren’t still tough, or that the volume of business is entirely predictable. In July, Loera and Mijangos once again grossed only $3,000, just as they had in the early days. Loera straightens a stack of papers on her already neat desk, and grows quiet for a moment, a Latin radio station becoming audible from the garage where Mijangos is working. “We are growing,” Loera finally repeats. She is considering applying to Opportunity Fund for a second loan to branch out the business; she wants to buy cars, fix them, and resell them at auction.

“A lot of people don’t know that there is an Opportunity Fund for people like us who are poor and have bad credit,” says Loera. “The money that they [loaned to] us—I have an office now! I won’t be cold this winter.”

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