The Power of Microfinance to Deliver Economic Equity and Inclusion

We credit unions all work hard to serve diverse communities and support individual community members in a just and unbiased way. In fact, credit unions were founded on cooperative values that include equality and equity.

What’s the difference between those two values? Equality means an individual or group receives the same resources or opportunities, while equity recognizes that each person may have different circumstances to overcome. Equity and equality are both solutions for overcoming imbalanced social systems, and they are values that led us at Alterna Savings to develop our award-winning community microfinance program.

This program was designed to address an imbalance in the marketplace and has been active for more than 20 years. Its primary objective has always been to work within communities to address socio-economic inequity by creating opportunities for financial independence. It also looks to break down barriers to banking for those often excluded from financing. To date, we have given out more than 1,300 loans totaling over $7 million. It’s become part of who we are at Alterna, and we are very proud to set the Canadian benchmark for microfinance initiatives.  

Alterna’s close ties to the community and local organizations help us identify individuals most likely to benefit from the program. Through research and outreach, we have developed several microfinance pathways tailored to meet the needs of five key target groups.  

Alterna’s Five Target Groups and Microfinance Loan Products

• Low-Income Individuals/Working Poor. The Income Builder Loan helps those who are looking to bridge their income gap through full- or part-time employment.
• Skilled Professional and Trades. The Skilled Professional and Trades Loans support self-employed individuals in purchasing needed tools and equipment or to market their services.
• Women Entrepreneurs. The Working Women Business Loan supports women looking to gain financial independence or looking to self-employment to gain the job flexibility they need to balance multiple demands.
• Social Entrepreneurs. The Social Impact Entrepreneurship Loan supports both for-profit and non-profit initiatives that are using business strategies to build a better world.
• New Canadians and Individuals Transitioning to the Workforce. The Success Accelerator Professional Development Loans support individuals who are pursuing training, exams, licensing or who need to purchase tools of the trade that will lead to employment in their chosen field.

While Alterna provides the microloan and savings programs, we have strong partners in the community who help us assist the entrepreneurs with ongoing coaching, business planning and networking.  Our collective goal is to help members of the microfinance program grow into self-sufficient, self-empowered business owners who contribute to the economic growth of our collective community through poverty alleviation, wealth creation and financial inclusion.  

Next Steps in Microfinancing

Microfinancing has significantly impacted Alterna members and communities, but there is a need for so much more. We feel a profound responsibility to share our two decades of experience so that similar programs and loan funds can flourish. In 2020, I heard about a federal funding program that was in development targeting Black Entrepreneurs. I reached out to Minister of Small Business, Export Promotion and International Trade Mary Ng and, through persistent lobbying, Alterna was invited to be part of the team developing the Black Entrepreneurship Loan Fund.   

It’s a space we understand intimately. Alterna’s entrepreneurship and professional development portfolio consists of 72% racialized Canadians, of which 34% are Black. We know a microloan can be pivotal in helping low-income individuals become economically and socially empowered. These loans help individuals increase their income, bringing household stability by providing access to food, clothing, shelter, education and building assets for future security. The overall impact can take many forms, including success in contributing to the local economy by becoming less reliant on government resources, creating new jobs and improving prevailing socio-economic conditions. This is why we strongly advocated for microfinancing to be part of the Black Entrepreneurship Loan Fund.

Meet Marcia Francis, Small Business Entrepreneur

In 2004, Marcia Francis was a single mother who, despite holding two jobs, struggled at times to pay for groceries. Life was a struggle with a spotty credit history, few assets, and four children between the ages of seven and nineteen to support.

“It was very difficult to make ends meet; sometimes even providing the basics was hard,” says Marcia, 44.

Today, Marcia is the founder and owner of a Toronto-based healthcare services company that recently generated over $1 million in sales and provides stable employment opportunities for people in her community. Her business, Freedom Support Services, offers at-home care for seniors and people with chronic illnesses and disabilities. Her company flourished with an initial $5,000 microloan, a loan Marcia says she couldn’t get through traditional lending practices at any of Canada’s big banks.

“It’s changed my life—it’s easier to take care of my children, and I’m so happy to give other people, especially newcomers, an opportunity to work,” says Marcia, originally from Jamaica and now a Canadian citizen.

Stories like Marcia’s are a testament to the importance of financial inclusion.  

A huge element of inclusion is ensuring that underserved groups have access to fiscal support, leading to financial well-being and resiliency. To develop comprehensive and truly inclusive programs, members of the groups accessing the support must have a seat at the table where the decision about the programs will be made. Community involvement is a massive part of Alterna’s microfinance program, and a large part of its success because it is only by listening to the needs of different communities that we can genuinely address their needs.   

What’s Next?

I’m pleased to say that The Black Entrepreneurship Loan Fund includes the creation of the Black Entrepreneurship Knowledge Hub, which will collect data on the state of Black entrepreneurship in Canada and help identify Black entrepreneurs’ barriers to success and growth opportunities. The Hub will be run by Black-led community and business organizations in partnership with educational institutions and gives this systematically underserved community a seat at the table, allowing its members to steer the course towards the future.  

As one of only two credit unions in Canada participating in the initial phase of this fund, I am incredibly proud knowing we are once again leading the way in supporting underserved entrepreneurs. I want to extend a special thank you to Director of Microfinance and Financial Inclusion Susan Henry for her tireless work to help bring this partnership to life. Since day one, she has been with our microfinance program and she is a shining example of cooperative values in action.

The Black Entrepreneurs Loan Fund is only the tip of the iceberg for providing access to financial supports and services to equity-seeking groups. Women, newcomers, Indigenous people and other racialized communities are also systematically underserved by traditional banking practices and institutions. I hope that the success of this program will pave the way for more initiatives from cooperative financial institutions that will promote increased economic equity and inclusion throughout all communities in Canada.  

CUES member Rob Paterson is president/CEO of $2.4 billion Alterna Savings, Toronto.