Like many people who are inspired by the microfinance movement, I was introduced to it against images of sari draped women beaming with pride at their stock of woven baskets, or perhaps it was the sun-dyed farmer and his flock of chickens that really got me hooked. I understood it in the context of extreme poverty in the world’s poorest countries. Most importantly, I understood it as a model that created big change from small investments.

Over the years, however, there have been similar models introduced in the developed world with the same idea: Provide access to capital for the marginalized poor as a stimulus to break out of poverty through entrepreneurship. However, for anyone interested in seeing the “add credit and stir” theory applied here at home, there exist three fundamental challenges that must be recognized:

1. The Cost Factor – The type of self-sufficiency that can be achieved with a $20 microloan in a city like Dhaka, would cost you at least a hundred times that in a city like Toronto. This makes the fundamentals of operating a local microloan fund very expensive and changes what people commonly perceive as “micro” especially when it comes to investment capital and operating needs.
2. The People Factor – A difficult reality to grasp is that the same culture of repayment present amongst those living in poverty-stricken areas of the world, where microfinance is most successful, does not exist in the same capacity here in North America. The propensity for individuals to take on debt, the work ethic and motivating factors behind self-reliance are significantly different and greatly impact the approach necessary with regards to issuing credit.
3. The Market Factor – Let’s use this example: You live in Toronto and want to make kebobs to sell at a local market. Chances are you would have to pay a considerable fee to have a space at the market, not to mention the various permits and licenses that are required before you could sell food in public. Your kebobs better be darn good because there’s probably someone selling samosas on your left, Jamaican patties on your right and then there’s a McDonald’s across the street selling cheeseburgers for half the price. That pretty much sums it up.

It took some time for me to recognize and accept these conditions. But in March of this year, I took a flying leap from a very comfortable career trajectory in finance to tackle this challenge and accepted a new role with a Toronto-based microfinance organization, Access Community Capital Fund (ACCF). I was the first and only employee of this previously 100% volunteer run charity that started in the Riverdale community of Toronto. My challenge, simply put, is to build and expand.

The organization has received funding from Ontario Trillium Foundation with the objective to duplicate our business model, in the form of Chapters, across six different communities in the Greater Toronto Area. Other by-products of this expansion initiative also include the commitment to increase our loan disbursements six-fold, triple our guarantee fund, double our volunteer base and halve our default rate within the next three years.

The work is cut out for us.

Going forward, I hope to share our story on SocialFinance.ca as we embark on our plans. In upcoming posts, I will share more insight on our unique business model and how we are responding to the challenges described above. It would be excellent to create an open forum for discussion and knowledge sharing on effective approaches to what we are doing, and maybe even become part of the evolution!

Photo credit: http://www.flickr.com/photos/uriba/18841941/

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