Clearing the path for Lending Circles
Last month I joined Senator Lou Correa (D-Santa Ana) in Sacramento to introduce an important piece of legislation that will elevate the work of nonprofits who create pathways to the financial mainstream for underserved communities. Senate Bill 896 recognizes 501c3 nonprofits in California that offer affordable, credit building loans for individuals.
I brought with me Alicia Villanueva, Lending Circle member and entrepreneur, who was eager to share her success story. Alicia loves to say that her tamales are stuffed with love, and the best people are stuffed with her tamales. When Alicia first started her business, she and her young son Pedro would walk door to door, rain or shine, to sell their tamales. On a good week they may have made two hundred dollars in profit, barely enough to pay their rent. Alicia believed in her business but because she had accrued debt, traditional lenders wouldn’t take a chance investing in her.
Alicia was not alone, fifty percent of Latino immigrants in the Mission did not have a checking account, and forty-four percent of mission households had no credit history. No mainstream bank would be willing to give a loan to someone without a credit score. When a family is living paycheck-to-paycheck they have little to no opportunity to build good credit, save money, or access the mainstream banking system.
People like Alicia, are forced to obtain high interest pay day loans or cash advances from predatory lenders. By establishing a licensing exemption within California’s Finance Lenders Law (CFLL), SB 896 will recognize and uplift nonprofits that have created highly effective programs by providing financially excluded communities’ greater access to affordable small-dollar loans and other services that create pathways into the financial mainstream.
Alicia’s experience as one of our Lending Circle participants was the turning point for her business. She accessed a thousand dollar, zero-interest, social-loan to purchase cooking equipment and to put a down payment on a food cart. What started as a labor of love has evolved into a thriving business, with eight employees who produce more than three thousand tamales a week. Alicia frequently caters events, and her tamales will soon be featured at the hot bar at the local Whole Foods.
We are thrilled to announce that sixteen organizations have joined us to support SB 896. We have received letters of support from groups including Opportunity Fund, NCLR and the Center for Asset Building Opportunities. San Francisco Supervisor David Campos has also written a letter of support.
Without programs like Lending Circles, Alicia’s dreams of running her own business would have been impossible. Alicia was able to access capital safely and build her credit and confidence through our financial management training. She also received support from another nonprofit organization, La Cocina. SB 896 will provide more people with the opportunities they need for a fair shot at success.
Alicia is working hard on a business plan that will transform her bustling food cart into a brick and mortar restaurant. With the support she received from Mission Asset Fund she are moving towards achieving her goal. With the successful passage of SB 896 we will see more low-income Californians, like Alicia, accessing loans and building their financial stability to realize their dreams.