Before the pandemic, business was “going really well” for Margaret Ajawin’s north Des Moines grocery and specialty shop, African Express. 

The South Sudanese immigrant started the small shop in 2015 to provide a selection of native grocery items tailored to the immigrant communities from African countries. Using microloans from Solidarity Microfinance for buying inventory, she built up a steady clientele and over time broadened her offerings to African clothing as well as jewelry, hair products, cosmetics and beauty products. She also got a license to sell beer, wine and cigarettes.  

Ajawin is one of more than 400 low-income Central Iowa entrepreneurs — the majority of them women — over the past five years whose success has been bolstered by Solidarity Microfinance. The microlending program was launched in 2015 by the nonprofit Iowa Community Capital, an initiative of Iowa State University’s Community Vitality Center. 

Having expanded her business into a larger storefront in the Harding Hills shopping center on Martin Luther King Jr. Parkway, African Express’ sales grew to the point where Ajawin could hire an employee to help her and fill in during 12-hour retail days. 

Then the pandemic hit in March, cutting her sales by 50%, and she had to lay off her only employee. Fortunately, as a client of Solidarity Microfinance, Ajawin received an emergency grant from Wells Fargo’s COVID relief funds during the shutdown in the spring of 2020. By November, business was back to about 75% of pre-COVID levels. 

She was among the first African American small business owners to join the microlending program, which in the past few years has expanded its reach beyond the Latino community to offer microloans in Central Iowa’s African American community.  

The program took a 10-week hiatus in mid-2020 as the COVID-19 pandemic forced many of its small-business clients to suspend sales. For many of these tiny enterprises, revenues are still below pre-pandemic levels. 

Now, Iowa Community Capital is gearing up for renewed lending and expansion of its programs in 2021, with the infusion of a $500,000 grant from Wells Fargo’s Open for Business Fund, a $400 million program that is spurring increased lending to low-income residents and small businesses through community development financial institutions across the country. 

Lending model has international roots 

The Des Moines-based program was developed on a lending model perfected over the past three decades by the Grameen Bank, which has planted active lending groups for poor women internationally as well as in the United States.

Since March 2015, Alomgir Hossain — a Bangladesh native who had worked directly with Grameen Bank founder and Nobel Peace Prize winner Muhammad Yunus — has been based out of a Forest Avenue office to develop Solidarity Microfinance, which currently has 264 active borrowers. 

Due in part to its broader focus — plus a slowing economy, layoffs and reduced work hours that are spurring more low-income residents to start a homegrown business — Solidarity Finance has experienced a 56% surge — 92 additional clients — since restarting the program in June. 

Solidarity Microfinance has also broadened its lending base over the past three years. In 2017, the program had just a handful of African American clients. Since then, it has increased to more than 40% of the client base, with Hispanic business owners making up the majority.

In addition to providing microloans from as small as $500 to as much as $8,000 for experienced repeat borrowers, the program boasts an impressive 99% repayment rate among its borrowers. The small business owners gain additional confidence and support by meeting in five-person “centers” every two weeks to discuss their progress and consult with each other about common obstacles they’ve encountered. 

“Most of our clients are low-income minority women entrepreneurs,” Hossain said. “Solidarity provides an opportunity to practice good financial habits and develop skills in leadership, teamwork and financial responsibility.”  

CDFI status provides access to Wells Fargo grant 

The $500,000 Wells Fargo Open for Business Fund grant that Iowa Community Capital received is the single largest infusion that Iowa Community Capital has received. ICC’s status as a community development financial institution was the key to getting it, said Mark Edelman, board chair of Iowa Community Capital. 

“It was only open to Community Development Financial Institutions — which go through a certification process through the U.S. Treasury,” Edelman said. “So it was not generally available to all nonprofits. But since we’re a CDFI, we were able to apply.” 

ICC’s clients are among the poorest of the poor in Greater Des Moines and have been the hardest hit by the pandemic, he said. About 90% of the clients’ businesses are home-based. 

“Access to capital is one of the hardest things for many of them to obtain, but it is an absolute lifeblood to keeping most small businesses operating,” Edelman said. 

Reaching out to clients by phone and a survey last year, ICC found that nearly 95% of clients’ families had been adversely affected in different ways from the pandemic. Although more than 50% of clients have other wage-earning jobs, many have had hours cut or have gone from full-time to part-time status. 

Iowa Community Capital will use the Wells Fargo grant funding in three ways. The first will be additional funds that will support more microloans. Second, it will provide additional funds for technical assistance or staff — the organization plans to hire an additional center manager who is bilingual in English and Spanish. Third, the funds will be used to buy down the interest rate that existing and new clients are charged to 3% for the next 12 to 18 months, enabling the small businesses to put hundreds more dollars into inventory or other needs. 

Another female entrepreneur of color who has benefited from the program is Rebecca Marentes. Marentes was able to begin her own small business selling Herbalife nutrition products in 2015, using Solidarity Microfinance loans to purchase inventory in bulk. She later added cellphones to the nutrition and beauty products that she sold within the Latino community in Des Moines. 

A single mother with three daughters, Marentes put her small business on hold for two years after landing a job at a dental office. However, after restarting her business, she found she was able to earn more from her business than from the full-time job, and was able to reduce her hours to focus more on selling.  

Marentes said her business dropped off 50% this year due to the COVID pandemic. Since the shutdown last spring, business has come back a little for Herbalife, but cellphone sales have not rebounded. She received a Solidarity emergency grant from Wells Fargo COVID relief funds last spring during the shutdown, which she used to buy more Herbalife product inventory. She was able to go back to work full time at the dentist office, and says she now has two full-time jobs as she sells Herbalife on weekends and evenings.

She’s hopeful that business will be back to normal next year. Marentes anticipates that the interest rate reduction from the Wells Fargo grant to Solidarity will save her about $210 over the next year, which she plans to reinvest in additional products. Although her daughters sometimes help with the business’s deliveries and answering the phone, Marentes hopes to reduce her dentist office hours to part-time again in order to spend more time at home.  

Funds will expand, create new partnerships 

Iowa Community Capital is also providing a portion of the capital to two other microloan programs — one an existing venture and the other a startup fund — to enable those programs to grow. 

“Part of the [grant] program criteria was to target African American small businesses, as well as to make assistance available to other underserved businesses that were impacted by COVID,” Edelman said. 

Consequently, ICC is collaborating with Iowa Microloan, a program that provides larger small business loans. That organization serves clients — typically small businesses that have been denied access to conventional loans — with loans ranging from $5,000 to $50,000. 

Additionally, ICC has provided a portion of the grant funding to the One Economy Financial Development Corp. (OEFDC), a nonprofit lending organization that was created by the Directors Council as part of its One Economy initiative. The OEFDC’s goal is to earn Certified Financial Development Institution status from the U.S. Treasury, which requires building an initial track record of lending to under-served individuals and small businesses. 

The OEFDC’s overall goal is to address inequalities facing the Black community in Greater Des Moines that were outlined in the One Economy report, both in individual lending and access to loans for Black small business owners. 

“Instead of competing with them, we’re collaborating with them to help them in that process,” Edelman said. “At the same time, they’re collaborating with us to gain some experience through the Solidarity program.” 

Before he managed Solidarity Microfinance, Hossain led microfinancing programs for Grameen Bank in New York City and in Puerto Rico. In comparison with New York microloan borrowers he worked with, his Iowa microloan clients have a much lower default rate and nearly all of them are making their payments consistently. 

Additionally, many are growing their businesses, and are graduating to larger and larger loan amounts as they scale up, he said. Many clients who started out borrowing $1,000 at a time are now borrowing in the $7,000 to $8,000 range, and are able to make monthly payments of $500 or more, rather than $100. 

Although Solidarity Microfinance has increased its loan portfolio by about $80,000 since June, the program has not yet passed the threshold of 300 active clients, a level that would take it to a sustainable operating level. Edelman said he would like the organization to reach that level by June, and then add 100 additional borrowers in the following 12 months. 

“If we can continue this growth and things get back to normal, then we can be operationally viable,” Hossain said.

 

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Lending statistics – Solidarity Microfinance 
412 Total borrowers served
1,428 Loans given
$3,041,149 Amount loaned 
99.84% Repayment rate (since January 2015)
$10,276 Increase in clients’ annual income

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Wells Fargo’s Open for Business Fund has already deployed over $50M
The Open for Business Fund provides support for Community Development Financial Institutions (CDFIs) and other nonprofit organizations that serve small business owners of color, with a focus on Black, Latino, Asian American, American Indian, and Alaska Native entrepreneurs. 
Wells Fargo launched the Open for Business Fund last summer as an approximately $400 million small business recovery effort to help entrepreneurs recover and rebuild. The initiative focuses on increasing access to capital, technical expertise and long-term resiliency programs and will continue into 2021.
“COVID-19 has dealt a devastating blow to thousands of small businesses in Iowa and across the U.S.,” said Jenny Flores, head of small business philanthropy at Wells Fargo. “Our economic recovery hinges on helping small businesses stay open and retain jobs.” 
“The Wells Fargo Open for Business Fund enlists the reach and expertise of CDFIs like Iowa Community Capital and other nonprofits to urgently assist the small business community with capital and technical assistance to address immediate cash flow needs such as rent, utilities, payroll, inventory and other emergency expenses,” Flores said.  
Since its launch in the summer of 2020, Wells Fargo has deployed more than $50 million to CDFIs in 32 states, including a major push over the holiday season, providing critical resources and relief to an estimated 16,000 small businesses.
While the grant application cycles for the CDFI program and Technical Assistance program have already closed, Wells Fargo is continuing to review and process applications. A third program, the $100 million Recovery and Resiliency grant program to provide long-term resources for small businesses, will open in early 2021.