Haverford students interested in the use of financial capital to address social problems have been learning about microfinance and impact investing through MI3-related classes and guest speakers. But now they are putting some of that knowledge to work in a practical context. To that end, Haverford Microfinance Consulting (HMFC), the revamped effort of the campus microfinance club, has partnered with Kiva-Zip, a direct, zero-interest micro-lender, and has backed its first borrower.
Kiva-Zip is an organization dedicated to helping small businesses whose limited access to finance can be a barrier to success. Unlike Kiva’s international parent organization, Zip’s platform offers direct peer-to-peer crowdfunding, harnessing a borrower’s social network to align incentives to repay.
The HMFC students, who successfully applied to become a Kiva-Zip Trustee as a way to source entrepreneurs they believe in and publicly endorse their fundraising, spent all of last year searching for good candidates using their loan underwriting training. This spring Aisha Al-Muid, proprietor of Miss Mahogany jewelry boutique in West Philadelphia, earned HMFC’s first endorsement. Al-Muid, who will use her $3000 microloan to produce video marketing material and purchase inventory for her store, is now in the middle of crowdfunding. (As of June 25, she has raised 71 percent of her requested funds and has seven days to go; if she doesn’t solicit the full amount, her loan goes unfunded.)
“We have been shifting to try and do something that is in our neighborhood, and Aisha is in West Philadelphia,” says Visiting Assistant Professor of Economics Shannon Mudd, who spearheads MI3. “What I think is really interesting is she’s in what used to be called the 60th Street Corridor—a very vibrant, primarily African American retail district that was anchored by a SEPTA station. SEPTA closed the station down for five or six years and it just decimated the area. So Aisha is now part of a group of retailers who are coming back into this area and trying to revitalize it. To me, that is the real impact that we are trying to make—helping small businesses in an area that is trying to redefine itself.”
HMFC members made several preliminary trips and calls to Al-Muid to check out her boutique and research her business plan. “We wanted to [figure out] whether she is responsible for the business, whether she has the ability to repay the loan, and also whether she can use the loan in a way that can help the community and her business,” says HMFC Co-President Shan Shan ’17, an economics and psychology double major from China. What the students discovered was “a really enthusiastic person, who seems to have worked very hard and is driven to succeed,” says Shan’s Co-President Ian McGroarty ’17, an economics major from Moorestown, N.J. “She has a great business, and she’s doing a lot with it.”
HMFC is limited by Kiva-Zip in the number of borrowers they can endorse until their two-year loans are repaid. So while they help Al-Muid fundraise (and put their own reputation on the line as her endorser), the students are also helping other clients as consultants, weighing in on details, such as the look of a venture’s website or the language in its business plans, as well as helping them network with other entrepreneurs.
“Before Aisha we worked with another client,” says McGroarty. “We weren’t the ones doing her fundraising for Kiva-Zip. We were behind-the-scenes, helping her grow her business and making sure that when she got her loan money she knew what to do with it. We helped her envision a future for her business.”
That, says Mudd, plays to Haverford students’ strengths. “One of the things that I think the students almost inherently have is an ability to communicate to lots of different types of audiences,” he says. “They can work with somebody who comes from a lower-income upbringing, who is not used to talking to investors, and help them to craft their narrative—to talk about who they are and what they are trying to do.”
In the new academic year HFMC will be looking for additional clients and is excited about Kiva-Zip prospects in their own backyard. Philadelphia has, in fact, been named an official Kiva-Zip City, and the city’s Commerce Department is even home to a Kiva-Zip Fellow, so the program is bringing funds to an increasing number of entrepreneurial firms in the region.
“What’s great and what’s been really exciting about this is that we have come into this right at the time when there has been a big push for Kiva-Zip in Philadelphia,” says Mudd. “We feel like we are a part of something that is really trying to encourage more entrepreneurs and small businesses in Philadelphia.”