Creating economic opportunities; Cultivating community

Oakland has always fostered great businesses and innovative entrepreneurs. Growing up, and now raising a family in the city, I have witnessed first-hand the economic vitality and cultural vibrancy that independent small businesses can bring to the neighborhoods and commercial corridors that we call home. And throughout my political career, I have strived to make our city a place where small businesses are encouraged to establish themselves, grow and thrive.

Kiva Zip borrowers in Oakland

Kiva Zip has now supported over 60 small businesses in and around Oakland.

But while small businesses bring color and character to our communities, and (as Nancy Pelosi put it) they represent “the engine of job creation and capital creation in our economy and in our country”, in recent years small business owners have struggled to access the opportunities that their grit and determination deserve. According to an Institute for Local Self-Reliance study released earlier this year, “42 percent of local businesses that needed a loan in the previous two years had been unable to obtain one”. Very small businesses (under 20 employees), startups, and enterprises owned by minorities and women are having a particularly difficult time accessing small business loans, and so small businesses are increasingly being forced to rely on high-cost alternatives to finance their operations and expansion. The same study cites that “in 1993, only 16 percent of business owners reported relying on credit cards for financing in a federal survey. By 2008, that figure had jumped to 44 percent”. As a result, the number of new start-up businesses in America has fallen by one-fifth over the last 30 years (adjusted for population change), as has the overall number and market share of small local firms.

This is where I believe Kiva Zip can play a valuable role. By empowering individual citizens to make loans as small as $5 to local small business owners, where banks are saying no to small business loan applications, we, the people of Oakland, can say yes – because we are more motivated by the economic independence and wellbeing of our city, than minimizing risk, and maximizing financial returns. And not only are Kiva Zip loans more accessible to our city’s entrepreneurs than small business bank loans (which typically require flawless credit scores, significant collateral, and several years of documented cashflows), but they are also interest-free – giving borrowers a valuable financial boost.

In my role as a member of Oakland’s City Council, last year I was proud to work with City Attorney Barbara Parker to co-author legislation making Oakland the first city in the country to become a Kiva Zip trustee. Over the last few months, the City has now vouched for 10 small business owners to access $55,000 of interest-free microloans on Kiva Zip.

My dream is that Oakland’s city government continues to become more transparent, innovative and efficient – all of which are principles embodied in our partnership with Kiva Zip. Where the reasons for conventional small business loan application rejections are often opaque, Kiva Zip lenders and borrowers communicate openly and transparently on the Kiva Zip website. Where conventional underwriting focuses solely on financial data, Kiva Zip’s innovative social underwriting approach aims to fill information gaps in the small business lending market, by assessing a borrower’s character and trust network. And where other sources of capital can be expensive, Kiva Zip’s technology-based approach aims to pass on cost savings and efficiencies to the small business owners they serve in the form of zero interest rates and no fees. The growing collaboration between the City of Oakland and Kiva Zip is one public-private partnership of which I am truly proud.

Along with the City, committed trustees in Oakland like Centro Community Partners, Mandela Marketplace, the Unity Council and Greenside Development Foundation have now endorsed over 50 small business owners for Kiva Zip microloans…and that number is set to expand significantly over the coming years. But the number of small businesses supported by the Kiva Zip program in Oakland is only part of the story we are writing here. As well as disbursing dollars, by connecting borrowers with thousands of lenders that can become their customers, business advisers and brand ambassadors, we also aim to develop a network of support for our city’s small business owners that provides them with social, as well as financial capital. As well as creating economic opportunities for entrepreneurs, with Kiva Zip we are cultivating community.

To make a loan to a small business owner in Oakland, please visit this link.

Three successful Kiva Zip Oakland borrowers

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Posted by Libby Schaaf, Councilmember, City of Oakland

Oct 27, 2014

Libby Schaaf has been a member of Oakland's City Council since her election in 2010. In 2013, together with the City Attorney Barbara Parker, Libby authored the resolution by which Oakland became the first city in the world to become a Kiva Zip trustee. Libby is passionate about supporting entrepreneurs and small businesses, as she seeks to make Oakland a better place to live and work.

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