Click here to download a PDF of my complete thesis. Questions and comments are much appreciated!
My masters thesis in Environmental Studies at Brown University looks at how microfinance–the provision of small loans and other financial services to people not considered credit worthy by traditional financial institutions–can be used to advance environmental sustainability as well as social equality and empowerment in the United States. The thesis starts out by explaining the philosophical approach that I applied to problem, namely, that to create a green economy in the US we need to ensure that all segments of society are engaged on environmental issues through entrepreneurship, jobs, investment opportunities and a sense that environmental problems are relevant to people’s lives. The rest of the thesis explores how microfinance can accomplish those goals through 1) supporting ‘green collar entrepreneurs’–low and moderate-income individuals who want to start or expand green micro and small businesses, 2) by providing environmental education to all borrowers so that they are empowered to become civic leaders advocating for policy changes, organizing community events, and starting businesses that improve environmental quality, and 3) by providing loans for residential energy-efficiency and renewable energy upgrades to homeowners that wouldn’t ordinarily be able to partake in these types of programs due to problems with credit history or other barriers.
A key component of my thesis was working to develop an organization, The Capital Good Fund, that can implement these aforementioned ideas. In particular, we are working to develop “green credit builder loans,” which are loans of $100-$300 that finance the installation and purchase of low-flow showerheads, energy-efficient light bulbs and programmable thermostats. The borrower receives education on how to use the product and realize additional savings; she also sees reduced energy bills AND she gets to build her credit history as well. In addition, we are working to develop a larger loan product ($3,000-$10,000) that will cover 100% of the up-front cost of doing residential energy-efficiency projects. What’s unique about the loan is that it is structured such that the payments are equal to or less than the savings, meaning that at a minimum the loan is revenue neutral to the borrower. Lastly, we are working with our business borrowers to green their businesses and we are developing an environmental literacy curriculum that can be taught to our borrowers.
Here is an executive summary of the thesis:
The nature of 21st century environmental problems—climate change, deforestation, the geopolitics of oil, etc—is such that they can no longer be separated from social problems such as poverty, malnutrition and war. In order to effectively tackle both challenges at the same time, a green economy must be created that is environmentally sustainable, socially equitable and inclusive. Without the support, ideas and passion of people of color, immigrants, women and the poor, a green economy will flounder and lack the vibrancy and potency it would otherwise have. This paper argues that an effective means of achieving an inclusive green economy in the United States is through the use of green microfinance, defined as loans of less than $35,000 that have benefits to both the borrower and the environment.
Microfinance, starting with the work of Dr. Muhammad Yunus in rural Bangladesh in 1974 and now expanding to reach over 100 million people worldwide, has irrefutably proven that 1) the poor are credit worthy, 2) given the chance, people are capable of bringing themselves out of poverty, and 3) the provision of small-scale financial services to disadvantaged people can serve as a platform for providing other products and services that are empowering and beneficial to the recipients. As an example, Dr. Yunus, founder of the Grameen Bank, with which he shared the 2006 Nobel Peace Prize, has gone on to found nearly 20 other companies, ranging from enterprises that provide health care and clean energy to affordable eye care hospitals and the largest cellular provider in Bangladesh. The majority of these enterprises use microloans from Grameen Bank to finance the purchase of the product or service. In the United States, microfinance can similarly serve as a hub around which other socially and environmentally beneficial activities take place.
Specifically, microfinance can support both social and environmental goals in the United States by incorporating environmental education and empowerment into lending programs; supporting ‘green collar entrepreneurs’—low and moderate-income individuals with ideas for green businesses—with loans and technical assistance; and by providing innovative loan products that cover 100% of the up-front cost of residential energy-efficiency and renewable energy.
Green microfinance has the potential to address pervasive poverty, financial exclusion and energy inequality in the United States. In addition, it can also allay the view among minorities that environmental organizations are predominantly white, middle class, and out of touch with their concerns. In so doing, it can bridge the divide between those that are arguing for environmental improvements and those that are suffering most from environmental degradation. Lastly, green microfinance can create green collar jobs, reduce greenhouse gas emissions, save ratepayers money and spur a revolution in small-scale businesses that create a more livable community and environment through market-based solutions.