Microfinance has completely invaded my life of late. My thesis, titled ‘Green Microfinance: A Blueprint for Advancing Environmental Sustainability and Social Equality in the United States,’ is about 80% complete, and obviously deals with the various ways in which microfinance can be used for advancing environmental aims. In addition, the non-profit that I co-founded, The Capital Good Fund, is in the middle of a pilot phase, and I have been very busy speaking to and meeting with applicants. Lastly, I have been working with my business partner, Mike, and the company we founded, The Capital Good Group, Inc. so launch an innovative financing mechanism that covers 100% of the up-front cost of doing residential energy-saving upgrades and is, in effect, a microfinance program as well. I haven’t written here in a while, and I want to provide some updates on these projects, as they are all intimately related despite the fact that one is a masters thesis, the other is a non-profit, and the last is a for-profit.
The Capital Good Fund
We have made a lot of exciting progress recently. First, we just launched our new web site, www.capitalgoodfund.org. On the site, you can learn more about microfinance, see our community partners, check out the latest updates on our program, make a tax-deductible donation, download a loan application or find out how else to get involved with us. We are really excited to have the site up, and we have already received inquiries from potential borrowers through the site!
Second, we have received several applications from people interested in applying for United States citizenship, and we are about to receive several applications from people interested in starting or expanding small businesses. What’s really exciting about the business loans is that given the current recession, many people are looking to start a business in order to earn some extra revenue, and our program is currently the only microloan available in the State of Rhode Island in the $500-$3,000 range.
Lastly, we are about to submit our application for 501c3 status, which would make us a tax-exempt organization (currently, we have a fiscal sponsor that is a 501c3, and donations have to be made through them and then sent to us).
The Capital Good Group, Inc.
Mike and I have been working feverishly on our proposal for financing for residential energy-efficiency, especially because we are hoping to get stimulus funds in order to launch our model. We recently presented our idea to the Energy Efficiency and Resource Management Council (EERMC), which advises National Grid (our utility) on various issues, and the presentation went really well. We are now ironing out some of the details of our program and putting together a detailed proposal to submit to the state. In essence, our model works as follows: a loan is made to cover 100% of the up-front cost of doing energy-efficiency–though the model can also work with renewables–and as a result of the installation the borrower’s utility bills go down. The loan is structured such that the savings realized from the installation are equal to or greater than the monthly payments on the loan, meaning that at a minimum there is no net cost to the borrower, and ideally she experiences positive cash flow over the life of the loan. In order to secure the loan, we use a unique repayment mechanism: a line item on the utility bill. This allows us to do several things; for one, we can use consistent utility payments as a proxy for credit history, meaning that we don’t cut people out who need an efficiency loan but have no or poor credit history; we can assign the repayment to the property, so that if the property is sold before the loan is paid off then the new owner would inherit the repayment and the lower energy bills; and it allows us to leverage the utility’s tremendous experience in billing customers.
In addition to the loan, we are providing a turnkey solution to the homeowner, so that she doesn’t have to deal with the hassle of identifying auditors and contractors. Instead, we handle all that, and we also provide a third-party post audit to ensure that the contractors did the work to scope and that the homeowner will actually see savings on her bills.
I could go into more detail, but I believe that we are developing an extremely unique and innovative model, one that leverages the principles and power of microfinance to effectively reach people–especially low-to moderate-income people–as well as to lower costs, ensure low default rates, and allow for scalability and replicability. Our long term goal is to begin leveraging private capital to scale and grow our lending programs, as well as offering loans for renewable energy and innovative efficiency measures such as “super insulation.”
Please leave comments if you have specific questions–I would love to describe more elements on the program. I also promise to post more regularly on here, and I will post my masters thesis once it is complete!