New study proves program is a catalyst to economic and social improvement
TORONTO, April 28 /CNW/ - Alterna Savings today issued a call for an expansion of micro-enterprise lending in Canada as an important tool to mitigate poverty, nurture entrepreneurship and contribute to the financial independence of individuals in some of Canada's most vulnerable communities.
"We need focused and sustained efforts by governments to support and expand micro-lending practices in Canada. Alterna's Community Micro-Loan Program is a proven tool that can help mitigate poverty while building communities through job creation and reinvestment," said John Lahey, Alterna Savings President & CEO. "Alterna Savings is a micro-lending leader in the GTA and we now have the evidence to support our long-held belief that micro-lending is an important social and economic tool."
Mr. Lahey referenced a new study commissioned by Alterna and conducted by The Carleton Centre for Community Innovation in which the doors of its Community Micro-Loan Program were opened to independent scrutiny. The study reviewed the program's economic and social benefits using numerous tools, including interviews with program participants. Fourteen percent of Alterna's micro-loan members since the inception of the program participated in the study, which found strong impacts from both societal and participant perspectives and confirmed that, for Alterna, a decade of micro-lending has proven to be good business.
Increased Annual Income: Of those borrowers who started their micro-enterprise through a loan granted by Alterna, sixty-six percent report that the business is now their primary source of income.
To date, entrepreneurs from the Community Micro-Loan Program have brought Alterna over $1 million worth of business in additional financial products and services. Many confirm that they are now in a position, in many cases for the first time in their lives, to set aside an emergency nest egg and/or save for retirement.
Enhanced Quality of Life: Participants reported increased financial stability, the purchase of new assets and better nutrition for their families. Since receiving their loan and developing their business, almost twenty percent of the participants became home owners - no small feat for these entrepreneurs, many of whom were on social assistance when they started. Even today, using traditional methods of risk assessment, these individuals might still be considered a poor credit risk by mainstream financial service providers.
Sixty percent of micro-loan borrowers no longer live in the home they were living in the year they received their loan; and seventy percent of these people indicated that their current home is better than their previous one.
Reduced Reliance on Government Assistance: Twenty-one percent of the participants in the study revealed that Alterna's Community Micro-Loan Program helped them get off governmental assistance programs. Fifty percent of those borrowers who were on social assistance when they received their loan no longer rely on government subsidies.
Sustained Business and Job Creation: Ninety-five percent of the businesses that received lending support are still operating today. Sixty-two percent reported they contributed to job creation in their community by hiring between two and four employees.
Business Expansion: The expansion of the businesses in the program is evident, as twenty-nine percent of the businesses have become incorporated.
Community Building: Local business development combined with local job creation is helping to build communities.
Increased Tax Generation: Governments are also beneficiaries from new business development and job creation, which enhances tax revenue.
"Alterna's Community Micro-Lending Program demonstrates the success that can be achieved at the personal, business and community level through the structured delivery of micro-enterprise lending to target communities," said Mr. Lahey. "Alterna's efforts with over 340 business owners since 2000 are a fraction of what could exist if more financial institutions participated. This is only likely if government finds a way to get involved and encourage the development of these kinds of programs. The positive impacts of structured micro-lending could benefit communities right across Canada if the needs of thousands of potential entrepreneurs were better met by mainstream financial institutions."
Background: Alterna's Community Micro-Enterprise Loan Program
Alterna Savings' Community Micro-Loan Program has been in existence since July 2000 and has provided more $1.5 million in business loans to more than 340 borrowers. The program is designed to provide financing for the many micro-entrepreneurs who are consistently unable to qualify for a business loan at mainstream financial institutions. According to sixty percent of surveyed participants, Alterna was the only financial institution willing to provide a loan.
Community micro-loans are offered to a maximum of $15,000 although the average is approximately $5,000. The loans help micro-businesses purchase productive assets, rent workspace or develop a website, for example.
Over sixty percent of program participants are women and most are either newcomers to Canada or their personal income is in the form of government-provided social assistance or unemployment benefits. Participants generally have a personal annual income of under $30,000. In over ninety percent of cases, community micro-loans are fully repaid.
Alterna Savings provides a full range of financial services to nearly 120,000 members across the Toronto and Ottawa regions. The micro-loan report can be found at http://www.alterna.ca/Templates/SavingsPersonal.aspx.
SOURCE Alterna Savings
For further information: For further information: Alterna Savings, Kimberley Ney, SVP Marketing, Communications & Corporate Social Responsibility, Kimberley.Ney@Alterna.ca, (416) 252-5625 ext. 7906