Promoting Entrepreneurship in Houston through the Microfinance Program

Kelli Lewis- Chairman of the Microfinance Initiative

Presentation at the 2014 Lend for America Summit November 15, 2014. UC Berkeley, CA

Poverty is a problem in Texas, especially in Houston

• 17.9% of Texans live in poverty (4.56 million people) (2013)• 49.8% of Texas households are One Crisis away from slipping

into poverty (2014)• 27.9% of Houstonians live in poverty (2009)• 9% of Houstonians live on <$2/day

• Houston’s GDP totaled $442 Billion in 2011. It grew by 3.8 % in 2011, more than double the growth rate of the U.S.

• If Houston were an independent nation, it would rank as the world’s 30th largest economy

Yet…….

• Poverty in Houston is not a result of a weak economy. It is a result of other limiting factors such as insufficient education and impaired access to capital2

Microfinance is the key to breaking the cycle of poverty

• Microfinance typically refers to microcredit, savings, insurance, money transfers, and other services (such as education) targeted at poor and low-income people

• The core product of microfinance is microcredit: small loans with a short payback period intended to help people start small businesses

• Microfinance is not a payday or title loan solution that charges usury rates but operates more like a traditional financial institution focusing on customer service

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Objectives of the Bauer Microfinance Program

• Prepare entrepreneurs for microfinance loans by providing financial literacy and entrepreneurship education

• Grow local small and medium-sized enterprises by promoting the expansion of microfinance in the Houston community

• Establishment of a robust and innovative program for graduate level students that combines classroom research into global Microfinance models with direct application through the Bauer Microfinance Program

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The focus of the program is making an impact in Houston

Local •Focus exclusively on Houston-area projects

Education•Inclusion of financial literacy education•Formalization of entrepreneurship education•Provide business plan consultation by Bauer College students

Inclusion •Collaborate with local microfinance organizations, local branches of international organizations, and businesses in the communities we serve

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Structure of the Bauer Microfinance Program

• Frequency: 2 programs per year – Programs are concurrent with the Spring and Fall

academic semesters• Location: Rotates each program

– Held in underserved areas– Space is provided as an in-kind donation by our program

partners• Duration: 12 weeks per Program• Timing: Saturdays from 9am-1pm• Participants: Between 30-50 participants per program

Achieving success requires the program to dive further into education

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A fresh approach can tackle the root cause of poverty

• The mission for Microfinance is to combine entrepreneurship for participants and education opportunities to help break the poverty cycle in disadvantaged neighborhoods across Houston and the U.S.

• Linking children’s enrollment and success at school to a reduced interest rate for the parent

• Investing the difference between the regular payment rate and the discounted payment rate into a 529 savings account, Coverdell account or other savings mechanism for a child’s education expenses

• Designed to promote education which is the most important tool in breaking the cycle of poverty

• Microfinance institutions globally are seeing an increased demand for savings products (ex. Jipang KuSave in Kenya)

Adding savings…..

Yields a new approach to Microfinance in the U.S.

Adjusting the original mission…..

Thank you for your time and your enthusiasm of

the Microfinance Program at the University of

Houston!

Contact Us:

Saleha B. Khumawala  Ph.D., CPAProfessor of AccountingFounder & Director, Nonprofit Management and MicrofinanceC.T. Bauer College of BusinessVoice   713.743.4829Saleha@uh.edu

www.bauer.uh.edu/microfinance

Program Assistant: MFassistant@bauer.uh.edu8