While some Yale students are supporting an entrepreneurial spirit on a global scale through the Student Microfinance Initiative (see related story), others are engaged in a local effort aimed at helping low-income people turn their business aspirations into reality.
In 2001, four Yale students with a desire to set up a non-profit micro-lending agency in New Haven were able to do so after winning the Yale Entrepreneurial Society's annual Y50K Entrepreneurship Competition Awards. The $10,000 cash prize, along with a grant from Citizen's Bank, allowed them to establish the Elmseed Enterprise Fund, which provides loans, support and technical assistance to low-income entrepreneurs in the New Haven area.
Elmseed lends money to individuals who re not able to receive loans from traditional banks, but does so through a "group lending system" in which getting loans becomes part of a small community effort. The organization does not require any credit history or collateral from its borrowers.
"We bring a group of potential borrowers into the program in groups of five or six," explains Katherine Gustafson '05, executive director of the Elmseed Enterprise Fund. "All must have a small for-profit business of their own. To be certified, clients go through a training program that helps ground them in basic business skills and then they can apply for loans. Once certified, the group of potential borrowers takes part in meetings every other week during the loan application process and after they received the loan. These meetings foster a sense of community and mutual responsibility. Each borrower reviews the others' applications and gives them feedback."
The final decision concerning the loans is made by the Elmseed Enterprise Fund's board of directors, which is comprised of professionals in Connecticut and New York. Cynthia Farrar, director of Urban Academic Initiatives at Yale and a lecturer in political science and ethics, politics and economics, serves on the board.
There are currently 18 Yale undergraduates who volunteer for Elmseed by serving in one of the organization's four departments: finance, client services (providing one-on-one guidance and support), center meetings (with the group of clients) and public relations.
As part of the group meetings, Yale students and guest speakers talk to the clients about such topics as advertising, insurance, taxes and website design, among others. The Yale students also accompany clients to the library to assist them with computer use or with Internet research. At the group meetings, the clients make their payments on the loans.
For a first loan, the local entrepreneurs can borrow a maximum of $1,500. If the loan is repaid, the client is then eligible to apply for $3,000 as a second loan, $6,000 as a third loan and, finally, $12,000 as a fourth loan.
Since the program began, Elmseed has given first loans to 14 budding entrepreneurs and second loans to two successful business people.
"We have an 80% to 90% repayment rate, which is quite good," says Gustafson.
Among the clients who have benefited from the Elmseed Enterprise Fund are a New Haven hotdog vendor; a city florist who opened up a shop in her garage; a local woman who makes gift baskets; a man who provides after-school and summer daycare; a contractor; and a clown who enlivens children's birthday parties and other events with a performance and popcorn and cotton candy machines.
"The strength of our program is that it is very personal," says Gustafson. "We are in touch with the clients frequently, and if one person falls by the wayside a bit, the other group members will contact him or her, make a home visit, or whatever. It is great for the entrepreneurs to have support in good times and bad, because establishing a business can sometimes be a rocky road."
Gustafson says that as far as she knows, the Elmseed Enterprise Fund is the only organization of its kind run entirely by student volunteers. The Yale students are majoring in a wide variety of fields, some joining the group because of their interest in business and others simply for their desire to serve members of the wider New Haven community.
"The program is so unique that we all feel really grateful for the opportunity to be a part of it," says Gustafson. "There aren't that many places where you could do this at the student level. You get to know the clients so well that you can't help engaging in New Haven, which really enhances the college experience. We feel privileged to be a part of it."
For more information about the Elmseed Enterprise Fund, visit www.elmseed.org or send e-mail to info@elmseed.org.
-- By Susan Gonzalez
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