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Editorial: Micro-loans could be start of something big


Thursday, May 31, 2018

For most bankers, loans come with many zeroes: Three zeroes — $5,000. Four zeroes — $50,000. Five zeroes — $500,000. But two zeroes, as in $500? Why not? asked Linda Ackerman, Montague branch manager of Greenfield Savings Bank.

For years, Ackerman had to turn away loan requests too small to be profitable. And yet, she could see that sometimes a small sum can mean the big difference, the difference between a boost and a debacle. A simple car repair, for example, can escalate into a job loss. As a community banker, Ackerman wanted to help. “I wanted to say, ‘Yes, we’re the can-do bank,’” said Ackerman. So did GSB President John Howland, once he understood the difference a zero can make. The result is a new “product” — the micro-loan — for which the profit will be measured not in dollars and cents, but in good will.

Helping to make it happen is the social service agency, Community Action Pioneer Valley, which will screen qualified applicants from Montague, which is where this pilot program begins. “It’s an idea, and now we’re bringing it to the table,” said Executive Director Claire Higgins.

Micro-loans are a proven entrepreneurial tool in developing countries. A sewing or knitting machine, for example, can produce income for a seamstress with a business plan. Another model, Heifer International, provides income-producing animals to help lift a family out of poverty. Closer to home, the Franklin County Community Development Corp. provides local entrepreneurs with assistance in starting and growing a small business.

This is different in that it’s not a small business gateway. This is even more basic: Pay the bill. Learn something from it. Built into the micro-loan is monthly financial counseling from Community Action. Recipients learn a model for paying down a debt and they also learn about other assistance programs for which they may be eligible. These other sources of financial help might help stretch a tight budget so that, next time, they have that $500 already put aside.

The program’s founders expect to learn, too. “If we’re not learning something,” said Higgins, “we’re probably doing something wrong.” One of the lessons Higgins hopes to learn is how the program will function, first in Montague and, possibly, elsewhere. And, will it work — will the loans be repaid? Will there be a payoff down the road in terms of improved financial stability for the loan recipients?

“The prosperity that so many Americans are enjoying is not being enjoyed by everybody,” said Howland, adding that this program is designed to do what it can to help.

Greenfield Savings Bank will not earn a penny of profit: The loans are interest-free and the capital is supplied by a $10,000 donation from the bank.

This is community banking at its best. Let’s hope that the model can grow beyond Montague to all of the towns served by Greenfield Savings Bank and go on to be replicated by other lending institutions with roots in Franklin County.