Alternative Small Business Money Loans for Women… Group Micro Lending Help…

With the way the financial economy has been going of late many folk are searching for alternative ways to get out of debt. I have to admit it’s really un-nerving to sit and hear the news witnessing the 1000’s of jobs that are being lost every week – particularly with the auto industry and big corporations crumbling financially all over the country. It’s not surprising that people are getting nervous and wondering what to do.

Well… Women and men can refuse to buy into all the fear and know that we can do something about it. We CAN empower ourselves and support each other creatively.

Before there were big banks and huge lending corporations, people helped themselves. Before there were big cities, smaller communities helped each other out – particularly small groups of women.

I learned about this process when I worked at a co-operative-based credit union here in Vancouver, BC as their marketing and member relations officer.

Decades ago and still today, it’s been difficult for women to secure any kind of decent economic funding or loans for their own micro-projects and small businesses. In fact, at one time women couldn’t even get a bank account. They had to rely on their husband’s credit and name to even get an account at all… and it wasn’t even her account at all – it was a joint account. The husband was always asked by the bank or financial institution to co-sign or be a signer on his wife’s account – she was never allowed to have her own single account. And, heaven forbid if a divorced woman could get an account – it just didn’t happen.

So, women got creative - they had to… One way women would help themselves financially is they would pool their money resources together and create what’s called a “Lending Circle”.

So, what’s a Lending Circle?

A Lending Circle is where a small group of women would get together (say about 6 – 12 maximum) and commit to work as a group to help each other out over a certain period of time by giving small micro-loans to each other. Over that set period of time each woman would receive the same amount loan. A good rule of thumb is to “go by the month”. An example being that, if there were 6 women who commit to be in the Lending Circle, then the Circle time commitment would last a total of 6 months. This could also be done every week or every two weeks, but a month is more realistic because of available money resources.

They would then draw up a contract together (or a Basis of Unity) stating how the lending circle would logistically work and then decide as a group just how much money they would each contribute into the money pool each month. The group would pick that dollar amount together as a group to make sure that every woman could realistically make that commitment to put that certain amount of money in the pool.

So for example, if each woman in the group of 6 decided together to “lend” $50 each month, the total lending pool would come to a total $300 available to lend to one member that month. So, for each month for 6 months, each woman would make a promise to put $50 into the pool every month. Every woman would have to agree to do this so no one would be short-changed. Everyone must receive the same amount each month to make the Circle fair and just.

Now that they had a “pool of money = $300” available for each month, they then decide as a group to pick which woman would receive the $300 that month. They could draw straws or pick names out of a hat or go by a list of what the women’s needs were. It’s entirely up to the group to decide how they want the circle to work so it best suits them all. Only one loan per person during the Lending Circle cycle.

It’s best to make all the pertinent decisions of just how the lending circle is going to work before the circle begins lending to each woman. The rules of the lending circle have to work for every woman or it won’t work.

It’s also very important that each member of the Lending Circle make a commitment or sign a contract at the beginning as well so that every member will receive their loan. Because, if someone dropped out part way through, that could mean that someone who was to receive the loan later in line wouldn’t receive the same-agreed amount. One way to avoid that is, the woman who wanted to leave would have to find someone to replace her spot in the circle before the next month, but it’s better if the group stays together to reduce the possibility of resentment and problems within the group. Money always has a way of bringing up emotional issues with people and especially groups… so, it’s good to keep to the groups own rules and process.

The Circle would stop lending when every woman had received a loan. Though it’s entirely up to the Lending Circle group if they would like to start again and begin a whole new lending circle/cycle to lend to each other again.

The Lending Circle process is a wonderful way for women (and men or mixed groups) to help support each other financially when times are tough… especially when someone needs a lump sum of money to cover bills, start a home-based business or pay off some debt.

A Lending Circle is also a good alternative for a small group of people who want to get a project or small business going especially when say, a bank or financial institution has turned them down for a loan or funding. They could pool their money resources together the same way except they wouldn’t give the money to each other but to the group project instead. A daycare was started this way by a group of parents. It's a creative way to raise funds together for a common cause.

It’s good to keep the groups small and intimate so that it’s easier to communicate with each other and simpler to organize. The Lending Circle works well when all those participating can actually meet together in person once a month. The meeting creates a supportive environment and lends itself to also celebrating a sense of accomplishment together. When the group meets, each member of the Circle would bring their amount of money in cash to put into the pool and then the group would disperse that total amount of the pool to the next person slated to receive that month.

However, the only way the Lending Circle will truly work is when everyone commits to working together for the common cause of lending to each and every person benefits in the circle for the required time. It’s always good to make sure everyone is aware of this and be a part of the total decision process – by coming to a group-consensus where ALL AGREE TOGETHER. When all have a chance to be a part of the whole decision process that will lessen the probability of any problems arising within the group – especially when every member has “signed” to the decisions made together – a consensus model is always empowering for all.

Happy creative lending everyone! I welcome your comments, ideas and stories of how a Lending Circle has maybe helped you or how you've set up your own lending circle groups.