BLOG: Detroit micro lending program a blueprint for cities across the nation
Photo Courtesy: Mohamed Keita
For low-income entrepreneurs, access to capital can be difficult. “The bank usually requires you to be in business for 3 to 5 years,” said Margaret Williamson, who leads a program called LaunchDetroit, which was created by Rotary clubs in southeast Michigan and southwest Ontario to address this gap.
By offering small loans between $1,000 and $2,500, business training and intense mentoring, and leveraging local partnerships, this program has helped nearly 30 Detroit entrepreneurs launch or strengthen their small businesses since 2012.
“I’ve been in business since 2001, this is our 16th year, but ironically, before we came to LaunchDetroit, we didn’t have access to any financing. We didn’t have access to any mentoring” says Willie Brake, owner of the electronics repair and sales company All About Technology.
Brake, who previously worked as an IT professional for companies including Chrysler, Ford, Sony and Kmart, said he used two microloans to expand business operations and open a storefront. Furthermore, through a partnership between LaunchDetroit and Level One Bank, he also qualified for a personal and business credit card.
“It’s a great option because there was no interest for 12 months.” However, according to him, the greatest benefit of the program has been his enhanced relationship with the bank. “Thanks to the partnership with LaunchDetroit, I know somebody in the senior leadership team. That really helped me out a lot.” Brake’s store on Michigan Avenue will soon become the first Apple-authorized service provider in Detroit.
Like other graduates of the program, Brake benefited from free business training classes arranged via a partnership between LaunchDetroit and Baker College.
“I found the classes very helpful,” said Latricia Wright, who operates Olive Seed, a wellness and healthy living service provider. “I had been in business for a while. I did everything myself,” she said before conceding that the classes helped her identify gaps in her business strategy, including considering markets she had not thought of.
For Wright, LaunchDetroit has been a crucial stepping stone. She expanded her business network by becoming a member of Rotary. She won a corporate wellness contract with Quicken Loans, a scholarship for a Tufts Executive education course at Wayne State University, and participation in the Goldman Sachs business education program at the same school.
She also won a cash award in another program, Motor City Match, which is supporting her design and creation of her storefront in the Rivertown area of Detroit. The space will include massage therapy and acupuncture treatment rooms, a full kitchen for cooking demonstrations, and a living wall of plants and herbs.
However, the strength of LaunchDetroit is its mentoring program, which is driven by the Rotary clubs’ membership of committed volunteers and enriched by their professional networks and resources. This is what separates LaunchDetroit from other entrepreneur programs, according to Ronier Golightly, CEO of Motor City Popcorn.
“I liked the fact that [LaunchDetroit] is attached to the Rotary club,” he said, praising what he called “the after effects of the class: the way they actually call you, see where you are at, what’s going on with you.” Golightly started his popcorn business in 2012 and is struggling to keep up with orders as his list of clients grows.
Irma Fuentes, who owns and manages ESI Hardware in a predominantly Spanish-speaking community in Mexicantown, in southwest Detroit, also raved about her mentors. “I was so afraid in the beginning, but I had Larry [Wright] to motivate me [to go to classes]. I have Roberto Sanchez behind me,” she said. Wright, founding chair of LaunchDetroit, and Sanchez are both Rotary leaders. In 2014, Sanchez led a team of volunteers in a makeover of Fuentes store front using funds raised by 10 Rotary clubs. “It’s improved my business and improved my neighborhood too.”
Since its inception in 2012, LaunchDetroit has gone through challenges, adjustments and growth. “The loan repayment rate has been 76 percent. Roughly 25 percent of our borrowers had difficulty making payments, and we converted their loans to grants” according to LaunchDetroit Chair Williamson.
“We knew we didn’t want to be formal like a bank, but we didn’t want to be as intimidating. But when we had difficulty collecting our loans from certain people, we found that if we had asked better questions initially, we’d have better outcomes in term of those loan funds recirculating.” The program receives more than 100 applications a year, out of which only 5 to 10 make the final cut, according to Williamson. It counts 27 alumni to date.
LaunchDetroit is not done growing and a significant evolution is on the horizon with the development of a group microfinance program based on the Grameen Group Lending Model. According to Williamson, the program will involve the Rotary clubs of Detroit, Trenton, and Taylor as well as Wayne State University’s Ilitch School of Business. Each club will offer and manage a microloan fund for a group of entrepreneurs in their community. The business school will provide the business training and contribute its resources.
Before morphing into this new model, LaunchDetroit will receive input from new partners and the person who inspired and helped design the program: Dr. Marilyn Fitzgerald, an international development professional, Rotarian and author. “Marilyn brought her book ‘If I Had A Water Buffalo’ and shared with us her experiences with microfinance in other parts of the world. She talked about how even a small grant can make a difference,” said Williamson.
Originally named “the microfinance project,” the program adopted the name “LaunchDetroit” afterwards. “I thought of the name ‘LaunchDetroit,” said Williamson, explaining that it captures the goal of enabling entrepreneurs with good ideas to launch their ventures in the Detroit area.
Over the years, LaunchDetroit has offered important lessons for developing microfinance projects in the developed world. It builds on the work of some of the largest micro lenders in America, such as Grameen. Along the way, LaunchDetroit has spawned a “LaunchMyCity” model to spur small business entrepreneurship, from Detroit to Raleigh.
Mohamed Keita is the coordinator of Rotary International’s Areas of Focus, where he supports the managers of the six major portfolios of Rotary’s global work, including economic and community development. He is also the author of the Storytelling Guide for Rotarians. He can be reached here or @Modkeita on Twitter.