Guam’s private sector and entrepreneurial spirit will be getting a boost with the introduction of two new micro loan programs.
The Guam Economic Development and Commerce Authority launched its Micro Loan Program earlier this month. “On Nov. 10 the GEDCA Board of Directors approved the standard operating procedures meaning the program is available immediately ” Gerald S.A. Perez administrator at GEDCA told the Journal. “The $1 million in seed funding was allocated from the federally funded Guam Development Fund.”
GEDCA’s new program is part of Gov. Felix P. Camacho’s Economic Recovery Plan. “This program was developed as a result of an effort to best leverage a limited pool of lending funds maximizing benefits serving community needs and stimulating local economic activity ” Perez said. “After a survey of programs currently offered by local banking institutions the USDA SBA and SBDC [U.S. Department of Agriculture U.S. Small Business Administration and the Small Business Development Center] GEDCA identified an underserved segment of Guam’s commercial lending market.”
GEDCA’s Micro Loan Program will provide lending to smaller start-up companies which Perez said are most often declined by commercial institutions. “GEDCA’s goal is to support local business successes by offering a lending product to businesses unable to acquire funds from private lending institutions ” he said. “GEDCA has changed its official policies regarding our lending programs. Under the old programs funds were limited to what type of operations could be funded; this program opens the door to home-based goods and service providers.”
Theresa Guevara is the loan management officer at GEDCA. She said the Micro Loan Program will lend to businesses with ten or fewer employees including the owner. The amount loaned is $500 to $35 000 the program maximum. “GEDCA has initially allocated $1 million to the program and projects issuing 25 to 30 loans. Depending on the success rate of the program additional funding may be allocated or other funding sources like the USDA will be tapped ” she said.
Successful applicants must operate a for-profit business show financial need and have a gross annual total household income of no more than 80% of the median family income for Guam. Guevara said terms which will be over no more than six years would be determined by the specific use of the funds and the total loan amount. “Rates will be determined by the merits of the loan but will be competitive ” she said. “GEDCA does not anticipate going above 10% unless Treasury rates are increased.”
The second micro loan program launches in January 2005 through the non-profit organization Pacific Islands Micro Credit Institute Inc. and while available to the community also has a particular focus. “What we will do is target those women who are at the poverty level or below ” said Marie Mesa executive director of the institute who is also director for the Women in Business Program of the Guam Small Business Development Center at the University of Guam.
The program partially funded by the Guam System of Assistive Technology will also emphasize opportunities for the disabled. “We’re working a partnership with GSAT and we’re going to be assisting those with disabilities so there’s a certain amount of funding we’ll receive through a portion of a grant they receive ” Mesa said. The institute will also tap funding from the Guam Housing and Urban Renewal Authority’s community block grant. “Through GHURA we’ve received a HUD Housing and Urban Development grant ” she said. The institute received administrative funding from the Citigroup Foundation whose financial lending arm Citibank will lend further support.
The institute’s micro loan program will be conducted in two phases with first-time applicants receiving $200 to $5 000 in start-up money. Upon successful payback of initial loans borrowers may apply for a second loan of $5 000 to $15 000. In January the Pacific Islands Micro Credit Institute will conduct “beta testing” with clients referred through GHURA and GSAT.
Both GEDCA and Pacific Islands Micro Credit Institute’s micro loan programs will include comprehensive training opportunities for clients.
“GEDCA has established a memorandum of understanding with the Small Business Development Center to provide technical assistance to GEDCA clients ” Guevara said. “Additional efforts are under way to possibly expand the program with the assistance of the U.S. Department of Agriculture the U.S. Department of Health and Human Services and the U.S. Administration for Native Americans.”
The Pacific Islands Micro Credit Institute will also utilize the SBDC for instruction through a series of courses in personal finance and business development including client building customer service and marketing. “Right now the problem is it’s really just me ” Mesa said. “I do have some funding for an assistant and I have a really strong relationship with the Small Business Development Center who will help me to do the training and the program development but I need to have volunteers.” Mesa said Citibank will contribute personnel to assist with training but she is seeking additional business mentors from the private sector. MBJ