Just Dollars Trust
Presented by Peter Taylor
at the Palmerston North Employment Summit
30 March 1999

Just Dollars was New Zealand's first microcredit loan fund. Launched in November 1992, the Christchurch-based charitable trust provides loans for micro-entrepreneurs unable to access bank finance.

Since lending began in 1993, Just Dollars has made 189 loans. These have emanated from 2,400 inquiries. Reflecting the small scale of the businesses that have been assisted, the average loan size has been just $2,700.

Just Dollars' by-line is "Community investment in jobs and social justice." We are striving for a more equitable future, we want the concrete outcome of more people in income-generating work, and we want the investment for this to come from local communities.

The genesis of the Just Dollars idea was the tax and benefit cuts of 1990. As founders we felt absolute outrage over this step by the government. To us, making the rich richer and the poor poorer as a purported first step to economic recovery lacked common sense let alone any sense of social justice.

From our outrage came a constructive idea - A People's Bank. This idea was tossed around for some time and gradually refined until we had a vision which we felt we had a realistic chance of implementing. This was the idea of a venture fund for low income people, financed by the local community.

Funds for lending are sourced from local investors. Just Dollars' first bank deposit was $12 contributed by founders. With our ideas advancing well, we decided at a meeting to empty our pockets to kick start the new venture fund. From that personal commitment of $12 investments have now risen to $280,000.

These investments come primarily from members of local networks to which the Just Dollars trustees belong. We have been most successful in raising investment funds by tapping into our networks and explaining the concept face to face to people with whom we have had some sort of prior association. Therefore, most of the investors could be said to be members of the social justice network. However, a substantial proportion of funds have come from people outside these networks who picked up on the concept through media coverage.

Loans are made to eligible applicants in sums ranging from $200 to $10,000. In most cases the applicants must be able to show that their business propositions have a reasonable chance of achieving viability. However, a number of our smaller loans have been on the basis of enabling small scale trials of a business idea. Some borrowers have started with a small loan, been successful in their business trial and gone on to borrow larger sums to finance the business.

Applicants are vetted by a credit checking process that includes interviews of referees in addition to standard credit checking reports. Credit reports from a credit reporting agency have had some use in identifying particularly bad risks. However, a high proportion of our applicants have had some sort of payment default in the past. It is very difficult to live on a benefit for an extended period without running foul of creditors. Therefore we use referees from the applicant's community to vouch for their good character. This technique has been useful in greatly reducing the young male fly-by-nighters who dominated our bad debts in the early years.

In lending we are also concerned to see that a number of ethical criteria are not breached. These include provisions relating to gender, the Treaty, violence and the environment.

Microcredit is an international phenomenon which started with the Grameen Bank in Bangladesh. The Grameen Bank, based on the concept that "credit is a human right" has been copied and adapted many hundreds of times throughout the world in both developing and industrialised nations.

I was privileged to be able to attend the Microcredit Summit in Washington DC in February 1997. This saw 2,000 representatives from around the globe meet to discuss their various microcredit operations and develop a plan to vastly expand the provision of microcredit services.

There were a wide range of types of microcredit implementations represented at the conference. What they had in common, and what defines them as microcredit organisations, was their understanding of the effects of small amounts of credit on local economic development. In Bangladesh a US$100 loan can establish a business that generates an income for a family. In New Zealand we have also shown that small loans are sufficient to launch small businesses.

There are over 300 microcredit funds in the USA. Of these I visited five. Examples of these include: the Women's Self Employment Project in Chicago; the Lakota Fund in South Dakota; and the Good Faith Fund in Arkansas. The Women's Self Employment Project serves low income women in the Chicago inner city area. The Lakota Fund serves the members of the Lakota (Sioux) tribe on the Pine Ridge Reservation. The Good Faith Fund serves rural communities in the delta region of Arkansas. Together the three show the effectiveness of microcredit in a wide range of social circumstances. A full report of this study trip is available from Just Dollars for $5.

Interest in the Just Dollars model of microcredit provision has been building during recent years. We have fielded a number of inquiries from throughout the country. During 1997 we assisted the Nelson Enterprise Loans Trust (NELT) to establish in Nelson. Part of the assistance provided by Just Dollars was that I visited Nelson to assist NELT in building the credibility of the microcredit concept in the region. All in all, the assistance we gave had a significant impact on Just Dollars resources but was nowhere near as comprehensive as we would have wished.

To meet the growing interest, and to allow us to provide quality assistance, we are in the final stages of developing a Just Dollars replication programme. This will take the form of a licensing agreement, allowing organisations throughout New Zealand to call on our assistance. As part of this package we will offer a manual of procedures plus on-site and remote assistance. We would expect that a significant part of our role would be to assist the local implementation in promoting the concept to the small business and employment sectors and to the general public.