Microloans Help San Diego Refugees Grow Businesses, Jobs

Published Feb. 2, 2010 by Allvoices as part of its Provoices program.

Osman Osman, 38, is a security guard who works 40 hours a week at construction sites, then cleans houses and businesses.

He took out a $10,000 loan to expand his company American Cleaning Expert, $7,000 for more carpet and window cleaning equipment.

Growing his business allowed him to quit delivering newspapers at 3 or 4 in the morning. With a few more contracts, he can quit the security job and provide more work to other refugees and asylum seekers.

“Someone comes from Africa and he can’t speak English very good,” he said. “I can help those guys build their language and stuff and survive as a refugee also.”

By making small loans to entrepreneurs like Osman, the International Rescue Committee’s microenterprise program has helped create or expand 150 refugee small businesses and create at least 200 jobs since the program’s start 10 years ago, said Joel Chrisco, who helps run the program.

Businesses created or expanded include artists, handymen, janitorial, childcare, catering and restaurants, limousine and taxi companies, used car and towing businesses.

Microenterprises are generally defined as businesses with five or fewer employees. It’s a form of lending generally seen in the developing world but also in “poverty pockets” in the general U.S. microfinance market, said Robert Gailey, an associate professor at Point Loma Nazarene University in charge of the college’s Center for International Development.

Loans from the IRC typically start as low as $100 to build credit in the separate financial education program. Microenterprise loans average $7,500 each and can be as large as $15,000 at an interest rate of 7.25 percent. Interest free loans are also offered to Muslim clients, the only institution to do so county wide, Chrisco said.

There’s always competition for the kind of jobs that don’t require much English or special skills in San Diego but especially now with the state of the economy and an already sizable immigrant population.

“The general concept of the American dream is often defined as start your own life and become a business owner and that’s leading a lot clients here,” Chrisco said.

“This incredibly competitive job market leaves a lot [of refugees] to consider microenterprise as a means to an end in San Diego.”

IRC San Diego’s microenterprise program, the only specifically for refugees in the county, has a repayment rate of 96 percent and about that or higher for other microlenders.

The concept of establishing institutions to hand out small or microloans is often tied to the Gramman Bank in Bangladesh.

The bank centers around the concept that the most effective way to end global poverty is to lend money to groups of poor women. For their efforts, the Gramman Bank and its founder Muhammad Yunus were awarded the Nobel Peace Prize in 2006.

San Diego’s IRC office, the largest of 22 branch offices in the nation, started their microenterprise program in 2000 centered around the same concept but for individual entrepreneurs and grew to include men and women. At the end of 2009, the program handed out a total 81 loans, half currently active, totaling more than $600,000.

A grant from the federal Office of Refugee Resettlement helped start the program. 16 others like it are operating under the grant in cities around the country, the ORR said.

Nationally, in the general microloan market, large microlenders include Accion USA, who focus on lending to immigrants, and since 20006 Gramman America, who have offices in New York City and Omaha, Neb. and are expected to expand to more cities.

The ability to repay loans is considered but having a job isn’t a prerequisite for receiving a loan, he said. Profitability and a good business model are what’s most most important. Still, it’s incredibly challenging, aimed at entrepreneurs and “not a one-size-fits-all kind of program,” Chrisco said.

All loans must be approved unanimously by a board of nine lending professionals from local banks and financial institutions. IMG_0943-1

San Diego has become the number one city in the world for resettling Iraqi refugees with 5,000 last year alone. 90 percent of refugees resettled by the IRC since 2007 are Iraqi. Yet only three businesses, a dentist’s office, pizza shop and barber shop, have started through the microenterprise program.

But each business has hired other Iraqi refugees to work, as have nearly all businesses interviewed for this article hired refugees from their country of origin.

Jobs here help people support themselves but also send money home to those less fortunate in their country of origin.

Each month, 40-60 percent of Sarah Sami’s earnings from her fashion and jewelry company 7th Wish go back to family and neighbors in Baghdad.

Sami has been around fashion her entire life, studying in Denmark, running her own company at one point in Iraq and as a child spent time in the family clothes factory.

“There men and women who have been killed, they have kids,” she said. “They don’t have somebody to support them. So we try, me, my brother, my sister, we try to send them money.”

More interest is expected in the future after people have a chance to get acclimated and find work, said Jason Jarvinen from the IRC’s financial education program.

“The first few years when you’re in the country, that’s a really hard time to start a business just because there are so many other kind of adjustments taking place.”

IRC San Diego officials predict 20-30 percent of all Iraqi refugees resettled were previously employed in a high-skilled profession like doctor, engineer or business owner. So more interest is anticipated in recertification programs as well.

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