In honor of National Volunteer Week, Bankers without Borders is recognizing our Skillanthropists who use their skills and talents to support both domestic and international organizations that are working to lift millions out of poverty. For more volunteer stories like this one, check out our new Five Year Impact Report!
A NEW APPROACH
Economic advancement can be elusive for millions on Main Street and microbusiness owners. Lack of access tomoderately-priced capital, information and services prevent many business owners and aspiring entrepreneurs from gaining the traction they need to sustain growth and expand hiring. The Association for Enterprise Opportunity (AEO), a national nonprofit trade association for microbusiness and microfinance in the United States, works with its members and partners to build a national infrastructure that will expand microlending in the U.S. In an effort to mobilize capital from social impact and philanthropic investors, AEO sought to demonstrate that loans to microbusinesses are not inherently too risky. Bankers without Borders connected AEO with a team of volunteers from J.P. Morgan to model the historic performance of more than 100,000 loans as a way to gauge the risk impact.
MAKING AN IMPACT
J.P. Morgan Executive Directors, Shahyar Safaee and Charlotte de Laboulaye, conducted a review of financial literature and analyzed more than 30 years of historical performance data covering over 100,000 loans, sourced from the US Small Business Administration (SBA) 7(a) loan program and the US Treasury’s Community Development Financial Institutions (CDFI) Fund. Using this information, they developed a financial model of microloan portfolios’ performance that can help inform the risk management of nonprofit microlenders. Additionally, the results have the potential to unlock investments required to meet the needs of at least one million Main Street businesses. To date, the model has been used to support an application to the US Treasury Department to guarantee a $100 million bond to finance microloans across the US. The model also enabled AEO to attract seed capital for an investment fund that is expected to grow to at least $50 million.
AEO was extremely pleased with the outcome. “I could not have asked for a better experience with this team. Everything about this project exceeded my expectations,” said Tammy Halevy, Senior Vice President, Membership & New Initiatives at AEO. “The deliverable is invaluable-- the impact of this fund will be industry-wide and national. The volunteers were talented, thoughtful and patient in transferring their expertise to our team.”
The experience also proved valuable to the two J.P. Morgan volunteers. “The project allowed me to leverage my business skills to contribute to the microfinance sector while learning from leading practitioners in the field,” said Shahyar. “I really feel this is an area where my professional skills can have an impact in helping fight poverty and I look forward to future Bankers without Borders projects.”