A Community of Opportunity: Developing a Microcredit Program for Persons with Developmental Disabilities in Alberta

by Katie Chaput

Poverty is one of the most critical issues facing Albertans with developmental disabilities. Microcredit programs all over the world have successfully helped to alleviate poverty, empower citizens and ultimately improve their quality of life.

Generally speaking, people with developmental disabilities in Alberta have low incomes. One study revealed that only 17% (family/guardian survey) to 30% (consumer survey) of adults with disabilities have a job which pays minimum wage, i.e., $5.90/hour, or better (VRRI, 2003). This is in stark contrast to the average income in Alberta of $17.41/hour (Statistics Canada, 2003). Another indication of the poverty of people with developmental disabilities is that only about 16% own their home (VRRI, 2003); while roughly 70% of Alberta’s homes are owner-occupied (Statistics Canada, 2003). To make matters worse, Alberta’s AISH (Assured Income for the Severely Handicapped), which is received by most individuals with developmental disabilities, is far below the amount that is needed just to survive amid Alberta’s growing costs of living (Ohuegbe Cox Phillips & Jodd, 2001). Given these facts, it is clear that the majority of persons with disabilities in Alberta do not have the necessary collateral and financial credit history to access business loans, personal loans, and mortgages from traditional lending institutions. Even access to information about obtaining credit from a traditional financial institution may be out of reach for many people with disabilities, due to limited reading comprehension, and limited mobility.
It is obvious that poverty is a very serious issue for many Albertans with disabilities. What is the solution?

Is there a solution in sight?
Although there is no simple solution to poverty in the world, there are new strategies being developed all the time. Many countries have begun to focus on solutions that involve more than just increasing government service amounts. These alternative strategies have been particularly successful in situations where the government does not have the capacity to increase welfare, or will simply not focus funding on relieving poverty. Microcredit programs are one type of alternative strategy.

Typically, microcredit organizations are small financial institutions which provide loans of all kinds to low-income clientele. By doing this, they promote community economic development and give people a foundation for becoming self-sufficient. The differences between microcredit institutions and traditional banks and credit unions are that microcreditors:

• give smaller loans
• are not profit-driven
• have more flexible qualifying criteria
• involve the borrower to a greater extent in the loan process
• have more flexible repayment options
• provide a host of auxiliary services (e.g., savings programs)
• generally have charitable funding sources

There is no doubt that obtaining access to credit is of paramount importance to low-income groups, and there is evidence on a global scale that microcredit is a great method of relieving poverty. In fact, policy makers in North America have increasingly viewed microcredit as an important instrument in fighting poverty and promoting community development. The success of microcredit programs is extensive. One study in the U.S. revealed that 53% of the people who received loans from these organizations moved out of poverty within five years, and that reliance on public assistance by people who got microcredit loans was reduced by 61% (Clark & Kays, 1999).

There are many different types of programs around the world. They vary from very informal to large and formal institutions. Here are some examples of some successful programs:

OCLF provides term loans up to $15,000 to promising individuals and groups who do not have access to financing elsewhere. The OCLF is also a partner with the Canadian Youth Business Foundation and provides loans of up to $15,000 to young start-up entrepreneurs (Government of Canada, 2003).
Circle Lending (USA).

Circle Lending is a private company which provides services and support to individuals for private loans (from friends, family, associates etc.) who don’t qualify for traditional funding. Their services are “created by the client and facilitated by the organisation” and include: identifying potential loan sources, developing legally binding contracts, developing a loan structure and repayment plan, and selecting terms. (Aspen Institute, 1999) Grameen Bank (Bangladesh).

Loans are made by the bank through its area-level representatives to individuals in groups. Group social pressures act as incentive to pay the loan back, that is, a second person in the group cannot get a loan until the first loan is substantially repaid. In addition, groups often have collective savings accounts, and members may make some kind of deposit each time they meet. Services may be substituted for cash as partial repayment (Taub, 1998).

The North Hastings Community Development Corporation (Canada)
The North Hastings CDC is a federally funded, non-profit Community Futures Development Corporation, which assists with strategic planning, business counselling and assists new or existing businesses. Financial assistance is available in the form of loans up to $125,000. (Government of Canada, 2003)

There are over 120 microcreditors operating in the U.S. today (Aspen Institute, 1999) Likewise, there are close to 200 microcredit organizations currently operating in Canada, the majority of which are part of development agencies providing only small business services and business loans (Government of Canada,, 2003). However, none of these programs is designed to cater to the financial circumstances and specific needs of adults with developmental disabilities (e.g., individualized support; concrete hands-on assistance; clear and simple information provided at a slow pace; trained workers; and conditions imposed by government-administered low-income/disability support programs).

Clearly, as a low-income group with generally few assets and poor access to traditional credit sources, persons with developmental disabilities in Alberta could benefit from a microcredit program designed to meet their specific needs. Such a program would also be of value to the community as a whole, by providing services to other low-income groups in Alberta.

References

Aspen Institute (1999). 1999 Directory of US Microenterprise Programs. Washington DC: The Author.
Clark, P., & Kays, A. (1999). Microenterprise and the poor: Findings from the Self Employment Learning Project. Washington, D.C.: The Aspen Institute.
Ghazali, S. (2001). KUT: Informal rotating credit in Malaysia. AREA, 35, (2).
Government of Canada, 2003. Business Service Network. Available at: http://www.wd.gc.ca/apps/pos.nsf/LUProvinceTown/. Retrieved: 21/10/2003.
Ohuegbe E., Cox C., Phillips D., Jodd C. 2001; Reviewing Low Income Programs: The Alberta Advantage Perspective. Calgary: The Calgary Coalition or the Low Income Review.
Statistics Canada (2003). Community Profile. Available at: http://www12.statcan.ca/english/Profil01/Search/PlaceSearch1.cfm/. Retrieved 21/10/2003.
Taub, R. (1998). Making adaptations across cultures and societies: Cloning the Grameen Bank in southern Arkansas. Journal of Developmental Entrepreneurship, 3, (1).
The Vocational and Rehabilitation Research Institute (2003). Persons With Developmental Disabilities Consumer and Family/Guardian Satisfaction Survey 2003. Calgary, AB: The Author.
Wahid, A. (1994). The Grameen Bank and poverty alleviation in Bangladesh: Theory, evidence and limitations. American Journal of Economics & Sociology, 53, (1)