The "missing middle" of small businesses with Shamina Singh

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Sheila founded Liha, her mobile boutique in a converted delivery truck, in the heart of New York City’s Harlem community. For the past few years, she and her shop have been fixtures in the neighborhood, where the store thrived. “When people see more women of color running and owning (businesses) and living independently, that empowers not only the community but the world,” says Sheila, who is Black.
But her business came to a screeching halt in March when the COVID pandemic struck New York City.&nbsp;Sheila was forced to take her shop off the street — and was unsure what the future would bring.
Help came from non-profit&nbsp;<a href="https://www.grameenamerica.org/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Grameen America</a>, a microfinance organization which is investing heavily in women entrepreneurs in 15 U.S. cities, including Harlem. Grameen America’s mission is to provide access to capital to underserved women entrepreneurs to help them expand their businesses and bring them into the modern, digital economy.&nbsp;
Microloans can be a business's first source of capital and act as a powerful tool to promote economic mobility for whole communities.
Grameen America is getting its own assistance from Mastercard Center for Inclusive Growth, whose philanthropic support has enabled&nbsp;the organization to digitize its operations and accelerate its growth to reach more than 132,000 women with $1.6 billion in small business loans.
“Economic development in the near future is going to come by bringing these large pools of otherwise untouched populations into the digital economy, and that's going to have a ripple effect for communities and cities and states, and nationally as well,” says Rajitha Swaminathan, Senior Director of Programs at Grameen America.
The digital upgrades have proved critical throughout the pandemic, enabling&nbsp;Grameen America to continue&nbsp;operating virtually and&nbsp;quickly disburse loan funds digitally.&nbsp;Today, Black-owned businesses served by Grameen America have quickly adapted to digital financial tools, increasing the number of members using digital loan repayment methods to 81% from a mere 24% in February.
In Harlem, Grameen America continued to offer microloans to members like Sheila to help keep them afloat, even as their incomes dwindled to zero. The organization also offered new recovery loans to help its members get back on their feet as the shutdown eased. By injecting capital during the ongoing pandemic, Grameen America has supported nearly 250 Black small businesses, allowing them to stay open and serve their communities.
Microloans can be a business’s first source of capital and act as a powerful tool to promote economic mobility for whole communities. Grameen America offers small microloans, starting at no more than $2,000, to women looking to start or expand their businesses. The capital can be used for buying goods, raw materials, new equipment or any other assets a growing company may need. “Women can use these loans at regular intervals to help their business grow slowly and steadily,” Swaminathan says. “This access to capital helps [an entrepreneur] build her business more soundly and operate in the way that she thinks is best.”
Women entrepreneurs contribute more than $3 trillion to the economy, and are opening businesses at over double the rate of men – but their impact is often overlooked and undervalued because their businesses tend to be smaller and generate less revenue than male-owned businesses. Due to the structural barriers they face, low-income women often lack the credit scores, existing banking relationships and the financial education required to find and obtain loans from traditional financial institutions. Underserved women entrepreneurs — as well as entrepreneurs of color — who work mostly in cash economies may also experience challenges integrating into digital networks, another factor holding back their untapped potential.
Rethinking what it means to be creditworthy makes it easier for small businesses owned by women and people of color to access capital. That allows them to evolve, say, from a microbusiness running out of a kitchen into organized operations earning significantly higher profits. That in turn triggers a cycle of wealth creation, unlocking better lives for the owners, their families and communities&nbsp;&nbsp;&nbsp;
Grameen America’s social capital model, where members support, lead and learn from each other, is working. Over its lifetime, the non-profit boasts a repayment rate of more than 99%. “I think that's proof enough over all of these years that your previous history, your previous credit score, is not really a factor in deciding what you should be getting access to in the future,” Swaminathan says.
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The Center has taken the lessons learned from its partnership with Grameen America to expand its efforts with other leading Community Development Financial Institutions (CDFIs), including&nbsp;<a href="https://crfusa.com/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Community Reinvestment Fund USA (CRF)</a>&nbsp;and&nbsp;<a href="https://www.accion.org/clients/accion-opportunity-fund" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Accion Opportunity Fund</a>, to integrate digital technologies and expand access to capital and programs for increasing numbers of women and entrepreneurs of color, who have disproportionately impacted by economic downturn brought on by COVID-19.&nbsp;
For example, the Center partnered with CRF to enhance its Connect2Capital platform, which matches micro and small businesses with affordable loans from CDFIs. During the pandemic, CRF was able to leverage the improved platform to help hard-hit small businesses access more than $6 billion in small business relief loans from the federal Paycheck Protection Program.
Now, the Center is working to expand access to capital to Black-owned businesses as part of Mastercard’s commitment to leverage its products, services, technology and financial support to help close the racial wealth and opportunity gap in America. These investments build on the company’s efforts to connect one billion people, 50 million small and medium-sized businesses worldwide to the digital economy by 2025, with support for 25 million women entrepreneurs.
The digital transformation of financial services makes it easier for women entrepreneurs and entrepreneurs of color to overcome barriers and thrive. By closing that opportunity gap, Mastercard and its partners are working to ensure all individuals have an opportunity to achieve financial security, grow their businesses, create jobs and improve quality of life for their families, no matter who or where they are.

How the Mastercard Center for Inclusive Growth is collaborating with Grameen America and other community development finance institutions (CDFIs) to help expand access to capital for underserved entrepreneurs.

Helping women entrepreneurs survive and thrive in the digital economy