Final Summary: Summer 2009 Research

With my SURF award, I had the honor of working extensively with the Community Empowerment Fund (CEF), a pilot program in Chapel Hill that provides small loans to individuals experiencing or at-risk of experiencing homelessness. Though I grounded my research in existing literature on domestic experiences in microfinance and poverty alleviation, the majority of my work was done through my direct involvement with the program’s incredibly dedicated pilot CEF loan officers and the constantly inspiring pilot borrowers.

In the spirit of community-based research, I relied heavily on personal interviews and interaction to inform my research. Thus, alongside CEF borrowers, I went shopping for affordable apartments, signed up for cell phone contracts, job searched, rode the bus line, applied for federal benefits, dealt with addiction and relapse, sought higher education, tried to balance expenses, and worked to save for the immediate future. And through these experiences, I confronted systemic challenges that prevent the poor from becoming otherwise. These include: the lack of affordable housing, the constraints of credit, the limited availability of living wage employment, the opportunity costs of education, the bureaucratic and sometimes backward nature of welfare, the constant battle against drugs and addiction in low-income neighborhoods, the barriers to safe and convenient savings, and the difficulties of existing in a financial system that is not built for you or your household. These obstacles both necessitate and hinder opportunities for domestic microfinance; but this summer, as loan officers and borrowers faced these challenges together, CEF became much more than a loan program.

Project Results:
• There is a demand for small loans within the homeless community and amongst low-income households in Orange County. Loan size ranged from $150 to $300 initially.
• Social ties and networks within the target community provided opportunities for borrower outreach and significant peer pressure amongst program participants.
• A larger percentage of applicants was interested in housing assistance, while a smaller percentage was immediately interested in small business investment or employment assistance.
• The program was able to prevent default and encourage repayment within the summer term.
• The program was successfully able to recruit interested male applicants and has a vested interest in creating more methods of recruiting female, youth, and Latino applicants.
• All borrowers interviewed cited their relationships with student volunteer loan officers as the greatest benefit of being involved in the program and as CEF’s strongest assets.
• Loan officers benefit from opportunities to interact with the target population outside the confines of the loan.
• Within the term of the summer pilot, CEF received 18 complete applications. CEF approved 5 loans in the pilot – 4 to men and 1 to a woman, with 5 additional applications pending.
• In addition to loan funds, CEF volunteers supported all applicants through resume-building, job searching, connections to services, computer literacy, and much more – all of which significantly increased the true loan value and provided opportunities to applicants not approved for a loan.

The CEF pilot launch answered many operational questions for program managers, but raised new questions relevant to the model’s success. For example, how can domestic microfinance grow to offer more savings opportunities to more communities? How can housing policy be adapted to allow more flexible regulations that provide low-income renter households the opportunity to finance homeownership sustainably? How can banks provide traditional financial services in communities currently dominated by alternative services such as check-cashing and payday loans? Can addressing disparities in the banking market solve questions of asset inequality; or how can we address more than income inequality in public policy? Overall, how can the domestic financial system be re-evaluated or re-structured on a community level to serve a new market – the low-income, enterprising individuals whom financial services have historically marginalized as too expensive to serve. And finally, could microfinance models such as CEF be the answer to any of these questions?