“I saw it as an opportunity,” says Kent Walton, a vice president at Albina Community Bank who has volunteered to vet Mercy Corps’ loan applicants for the past two years. “If we can get just one out of even five of these businesses to be successful, then it opens up more business for other banks.”
Yet Mercy Corps Northwest has run into the same tight credit crushing other business lenders. After launching with over $500 million from the US Treasury, Wells Fargo, and WaMu, Haines says no banks have offered new loan capital in the last two years. Community development money from the US Department of Agriculture and ShoreBank Enterprise Cascadia has kept Mercy Corps’ efforts growing, and Haines is researching smaller, individual investors to get involved.
Wherever the capital has arrived from, Haines’s ambitious plan seems to be working. To date, more than 2,000 budding low-income entrepreneurs have drafted business plans with Mercy Corps Northwest. More than 186 of them earned loans ranging from $500 to $50,000 (the average is $10,283). Defaults hover below 6 percent—the current rate on conventional small-business loans, but far lower than the 10 percent national write-off rate on credit card debt. Then there are the demographics: half of these entrepreneurs had annual incomes below the federal poverty level ($10,830 for an individual); nearly two-thirds are women; and 38 percent are members of minority groups, including recent immigrants and political refugees.
Mercy Corps secures its own loans at between 0 and 3 percent interest from conventional banks and the US Treasury. It then charges its clients 12 percent interest, plowing the profits back into new loans and programs. Haines has created two new initiatives: the New American Agriculture Program, which helps immigrants and political refugees establish organic produce farms in the Willamette Valley; and Lifelong Information for Entrepreneurs, a 26-week business course Mercy Corps Northwest offers to women incarcerated at the Coffee Creek Correctional Facility. So far, three of the 44 graduates of the Coffee Creek program have launched start-ups funded by Mercy Corps Northwest after being released from prison.
Over the next two years, Haines hopes to increase Mercy Corps Northwest loans more than sixfold, from the 39 issued during the past fiscal year to 270. It’s a mere pittance compared to the largest micro-enterprise organization in the United States, Accion Texas-Louisiana, which averages more than a thousand loans a year to low-income individuals. But according to Elaine Edgcomb at Aspen Institute, a research and policy organization based in Washington, DC, loan volume isn’t a reliable barometer of success.
“Not everybody needs to be a high-volume lender to have impact,” says Edgcomb. “Mercy Corps Northwest is much more poverty-targeted than many of the organizations we work with. John and his staff are driving for real change in the income levels of these individuals, moving them out of poverty and into the mainstream.”
In mid-August, it had been six weeks since Marc Cooper, the unemployed mortgage broker from Olympia, had received his $2,000 loan from Mercy Corps. His fledging Web-based advertising business, Check Point, which allows users to download coupons for local businesses who pay $139 a month to advertise, has landed only one more paying customer, bringing the total to 18, not even hitting the halfway mark of his business plan. Yet, like Haines, Cooper is an eternal optimist. After he handed out leaflets to shoppers at the local Costco, the number of monthly viewers logging onto his website has climbed to 20,000—four times what he expected. When he hears how the bankers on Mercy Corps’ loan committee torpedoed his request, and how Haines quietly allowed his lending manager to make the call, the phone goes silent for a moment. Cooper used to be a loan officer himself.
“If I was sitting there on the other side, I don’t know that I would’ve done it,” he says. “I’ve been there.”
“I’m grateful,” he adds. “I feel like I’m on the cusp. I think if I can just hang on and continue to build, this will take off.”
Haines understands. As every Wyoming kid knows, sometimes you just have to wing it. You might stumble, and the consequences could last for the rest of your life. But redemption can come in the form of luck or charity, or as an act of business—a calculated risk.