UC Merced students develop network to support small business

Nine UC Merced students are attempting to launch a program to help local small-business owners tap into small loans online.

They are part of a service learning project called Engineers for a Sustainable World. The project kicked off last fall, and the students are ready to put what they’ve learned to the test in their “green badge” project.

“Outreach is No. 1 on our priority list,” said Nick Fong, a 21-year-old senior.

The economics major, originally from San Jose, is the team leader in the effort to establish a network in Merced and the region for Kiva Zip, a nonprofit that allows people to lend money via the Internet to low-income and underserved entrepreneurs and students in more than 70 countries.

The entrepreneurs make their pitch on the website, and the loans are crowd-funded in increments of $25 or more. The lenders add up until the borrower reaches his or her requested amount of cash.

The UC Merced team has become a “trustee,” which allows it to vouch for a small business looking for a loan. Fong said the team is focused on very small businesses, what he called a “microbusiness.”

Although microloans are commonly used to help people out of poverty in developing countries, the UC Merced project focuses on the Central Valley. Fong said that makes the team unique in the region.

Along with the network, students are developing a “green badge,” which serves as a sort of seal of approval that notes the business’s effort to be environmentally sound. For example, badges could be awarded to a landscaper who moves from gas- to electric-powered equipment, a house cleaner who picks products that are environmentally safe or perhaps a food truck that reduces its carbon dioxide emissions.

Whether the badge will be awarded by demonstrated results or a simple pledge has yet to be determined.

Fong said he hopes the badge will be one more incentive to get a lender to put his or her money on the table.

For a small business looking for a small amount of money, say $1,000, it can be difficult to get a loan from a bank, said Elliot Campbell, an associate professor of environmental engineering at UC Merced.

“It’s difficult for banks to administer loans that are that small because the overhead to administer each loan is so much,” he said. “Banks typically focus on big loans, and that leaves a whole section of our community without access to basic financial services.”

Campbell is a mentor for the green badge and loan projects.

Kiva Zip loans are made based on character and trust, rather than credit score or collateral. That’s part of the reason the borrower needs a trustee. Ultimately, the borrower is expected to pay the money back through the website without interest or fees.

A successful borrower can then become a lender or a trustee, and thus the program could grow locally.

Campbell said there are about 100 students involved in service-learning projects across the university.

The green badge project falls under the umbrella of the Blum Center for Developing Economies. The center is a new addition to UC Merced made possible by a $400,000 two-year grant through the University of California. Versions of the center are in full swing at UC Berkeley, UCLA and UC Davis.

Many of the projects within the center, and the university as a whole, focus on improving the environmental footprint of people, industry and society.

“Sustainability is kind of our signature here at UC Merced,” said Dan Hirleman, dean of UC Merced’s School of Engineering.

He said people who want to develop the Valley economy can learn from successful efforts to improve the lives of people in the developing world.

For more on Kiva Zip, go to http://zip.kiva.org.

The students are looking for a business to receive a Kiva loan. To reach the team, send an email to eswesl@ucmerced.edu.