The course and success of the economy belongs in all of our hands

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The Huffington Post
By: Premal Shah
July 4, 2012

The course and success of the economy belongs in all of our hands

The last five years of slow job growth and economic recovery has proven that the course of the economy affects each of us in profound ways. It has the power to create or take away opportunities for jobs, homes, retirement, education and even personal pride. Every person reading this has experienced the fear or reality of losing what it took years to create.

A new initiative -- Kiva City LA -- is launching in Los Angeles that helps to place the course and success of the economy back in our hands. Kiva City LA is a partnership with the Mayor's Office of Small Business; Kiva; the L.A. area's largest small business microlender, VEDC (Valley Economic Development Center) and Visa. Through this program, an individual can lend as little as $25 to a small business owner in Los Angeles who has the ability to succeed, but simply lacks the capital. When small businesses do well, local and national economies do well -- local jobs are created and communities are strengthened.

Small businesses are the cornerstone of the nation's economy and a stepping stone to the American Dream. They represent more than 99 percent of all businesses in the country, create two out of every three new jobs, employ over half of private sector employees, and produce over half of the nonfarm GDP. In L.A., small business plays an especially important role. Los Angeles is home to our country's largest small business community with more than 325,000 small businesses -- employing nearly two million people.

Despite the economic power of small businesses, the credit freeze of 2008 has not thawed for the smallest of small businesses. Karen Mills, Chief of the U.S. Small Business Administration (SBA), is alerting audiences across the country to the fact that, "Small-dollar loans and loans in underserved communities are still not back at the levels we need them."

The lack of small dollar loans is not based on the merit of the small business owner's idea or projected success. According to the SBA, small dollar loans, or "microloans," are difficult to find because traditional lenders do not make money lending in small amounts. The cost to banks for processing loans of $50 thousand is nearly the same as processing a $1 million loan.

What if the money stored in our wallets had a new life, a purpose for a short amount of time? If each of us lends as little as $25 to be a part of "crowdfunding" a loan to a small business owner, the funding gap that stunts the growth of the economy and small businesses would begin to be filled. If just one in three of our country's smallest of small businesses could hire a single new employee, the United States would be at full employment, according to the Association for Enterprise Opportunity.

Kiva City LA is a way to channel your power to fuel small business growth by crowdfunding loans, $25 at a time, averaging $8 thousand each. Kiva City LA is part of the Kiva City initiative made possible through a grant from Visa and already operating in New Orleans and Detroit. Each partner in the Kiva City LA program plays a critical role.

How can you be part of the solution? Kiva is the world's first and largest microlending platform. When visiting kiva.org you can browse through the stories and profiles of small business owners and choose one to lend $25 or more to. Loans funded through Kiva have a 98 percent repayment rate, so the money you lend to a small business owner is likely to come back to you.

VEDC taps its extensive networks to identify potential borrowers in L.A., provides them with important educational services for business success, and posts their profiles on kiva.org. VEDC will then administer the Kiva microloan program in the L.A. area. The Mayor's Office of Small Business, through its BusinessSource Centers and counseling services around the city, helps identify potential borrowers and refers them to VEDC. VEDC microloans funded through Kiva City LA can serve as a bridge for many small business owners, providing commercial credit history and working capital to start up, expand and hire or retain employees.

Lending to small businesses has a ripple effect on local economies and communities. Every dollar you lend helps to create local jobs, which in turn supports another local business and then another. As small businesses grow, local economies improve helping to support schools, city services, and sustainable communities. The dollars you lend to spark that cycle come back to you, but the cycle you help to spark continues long after your loan is repaid.

Our country needs an economic recovery crowdfunded by the American people and sustained by small business. The power to shape economic opportunity belongs in each of our hands.

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This page contains a single entry by CFED published on July 10, 2012 7:43 PM.

Do suburbs make you selfish? was the previous entry in this blog.

Economic mobility: Who gets left behind is the next entry in this blog.

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