Close Close Microfinance in Canada (04/28/2010) Wednesday April 28, 2010 1:31 Sean Stanleigh: Hi all.

We'll get started at 11 am (PT) / 2 pm (ET), but y ou can now leave questions in advance using the interface below. Wednesday April 28, 2010 1:31 Sean Stanleigh 1:34 [Comment From Catherine LudgateCatherine Ludgate: ] Hi Sean: glad to be here. Wednesday April 28, 2010 1:34 Catherine Ludgate 1:52 [Comment From John LaheyJohn Lahey: ] Looking forward to the discussion. Wednesday April 28, 2010 1:52 John Lahey 2:01 Sean Stanleigh: Hello and thanks for joining us. Here's the first question ... It's directed at me, but I'm going to leave this one to our guests. Wednesday April 28, 2010 2:01 Sean Stanleigh 2:01 [Comment From Athar AfzalAthar Afzal: ] Sean - just curious, do you think the Bank of Canada would be of support on this given microfinancing is usually higher in interest rates and might spill over t o high inflation? Or is the effect of high interest rates negated due to the gro wth experienced by start-up firms? Thanks! Wednesday April 28, 2010 2:01 Athar Afzal 2:01 John Lahey: Athar, I don't think the Bank of Canada will wade in. The volu mes are typically quite low in aggregate and the loans do typically create jobs. Wednesday April 28, 2010 2:01 John Lahey 2:01 Catherine Ludgate: In our experience at Vancity, Athar, we don't charge hi gher interest rates on these loans, so it isn't a driver to high inflation. Wednesday April 28, 2010 2:01 Catherine Ludgate 2:02 [Comment From GuestGuest: ] So what is it that sets this kind of financing apart from a big 5 loan? Wednesday April 28, 2010 2:02 Guest 2:02 Catherine Ludgate: Hi guest: first of all, we make it available, and that comes in part from our community roots. Wednesday April 28, 2010 2:02 Catherine Ludgate 2:02 John Lahey: At Alterna, it's the support that's provided during and after the loan approval process. All good businesses start with a good business plan. Wednesday April 28, 2010 2:02 John Lahey 2:03 Catherine Ludgate: And, for many newcomers, without a credit bureau, a ban k will not lend. But we can look beyond the lack of a credit bureah. Wednesday April 28, 2010 2:03 Catherine Ludgate 2:03 [Comment From Ian MurdochIan Murdoch: ] I am a graduate student in international development and I have read a lot about the successes of the Grameen Bank and BRAC in Bangladesh and India. One of the main reasons given for their success has been the structure of lending to small groups, particularly women, who provide a mechanism of peer pressure for repayme

nt. Will this similar strategy be followed in Canada or do you think it will be a more individual approach? Wednesday April 28, 2010 2:03 Ian Murdoch 2:03 Catherine Ludgate: Ian, we have used the peer lending model here in BC, wi th some but limited success. We see more success in an individual approach. Wednesday April 28, 2010 2:03 Catherine Ludgate 2:03 John Lahey: I expect it will be a more individual institution by instituti on approach. As deposit taking institutions, these types of lending programs are more difficult. Wednesday April 28, 2010 2:03 John Lahey 2:04 [Comment From SyedSyed: ] Question: How are you defining micro credit? And are there lending circles set u p? Wednesday April 28, 2010 2:04 Syed 2:04 Catherine Ludgate: The peer model works particularly well in an affinity g roup with close personal ties, and that doesn't translate as well from the globa l south to here. Wednesday April 28, 2010 2:04 Catherine Ludgate 2:04 John Lahey: Syed, we define it as start-up business financing with needs l ess than $15,000 Wednesday April 28, 2010 2:04 John Lahey 2:05 Catherine Ludgate: Syed, we do have some lending circles here, in the Gram een model, and they are typically small groups of newcomers who have moved here from the same village or area of the world. We have twelve groups of east Africa n peer lenders, in small groups of three to five borrowers. Wednesday April 28, 2010 2:05 Catherine Ludgate 2:05 John Lahey: The majority of our applicants have incomes of less than $30,0 00 and have difficulty accessing bank lending. Wednesday April 28, 2010 2:05 John Lahey 2:05 [Comment From Jennifer MacGregorJennifer MacGregor: ] I have a background in commercial finance, and love lobbying for the entrepreneu rs. What companies in Canada are in this space, and how can I get involved? Wednesday April 28, 2010 2:05 Jennifer MacGregor 2:05 Catherine Ludgate: Same for us, and no credit bureau. We lend as little as $500 and up to $5000 in peer loans. Wednesday April 28, 2010 2:05 Catherine Ludgate 2:06 Catherine Ludgate: Jennifer, if you mean peer and microlending, it is most ly credit unions like our two and a few others across the country, plus some Com munity Futures Associations, that are doing this work. Wednesday April 28, 2010 2:06 Catherine Ludgate 2:06 John Lahey: Tough question. Certainly there are a lot of credit unions, co mmunity investment cooperative lists all the micro lending funds in Canada. Cana dian Community Investment Network Co-operative. Wednesday April 28, 2010 2:06 John Lahey 2:07 [Comment From DonDon: ] Hello to you both! Wednesday April 28, 2010 2:07 Don

2:07 [Comment From SyedSyed: ] Here are a few questions: Who is the target market for these micro credit initia tives? What is the loan default rate? How is your approach to micro credit diffe rent than the Grameen Bank Model? Wednesday April 28, 2010 2:07 Syed 2:07 John Lahey: Hi Don, that was an easy one. Wednesday April 28, 2010 2:07 John Lahey 2:08 Catherine Ludgate: Syed, our target is folks who cannot access traditional credit but are credit-worthy. Newcomers, folks who have had a disaster financia lly but are now on the road to repair -- anyone with a solid business plan and t he acumen to make it work and get into income generating activity. Wednesday April 28, 2010 2:08 Catherine Ludgate 2:08 Catherine Ludgate: Our default fate on our peer loans is less than 5%: we prefer to say our success rate is 96%. Wednesday April 28, 2010 2:08 Catherine Ludgate 2:09 John Lahey: Syed, generally our target market would be people on social as sistance who have gone through a governement subsidized micro business training program. Our success rate is well over 90%. I'm told Grameen is a peer lending m odel. Wednesday April 28, 2010 2:09 John Lahey 2:09 Catherine Ludgate: Syed, unlike Grameen, we are moving away from a peer le nding model (which we still do but very modestly) to an individual lending appro ach, like our friends at Alterna. Wednesday April 28, 2010 2:09 Catherine Ludgate 2:09 [Comment From Tavia GrantTavia Grant: ] Hi Catherine and John - thanks for joining us today. I wrote the piece that appe ars in today's paper, and wanted you both to elaborate on a point John made: thi s should be a national initiative. Catherine, do you agree with this, and to bot h of you -- how could this be achieved, and what would the benefits of this be? Wednesday April 28, 2010 2:09 Tavia Grant 2:10 Catherine Ludgate: Hi Tavia: and thanks for bringing this issue to light. Yes, I think this could / should be a national initiative that is addressed by t he credit union family. Wednesday April 28, 2010 2:10 Catherine Ludgate 2:11 John Lahey: Tavia, as I mentioned to you, I think that there has to be a p artnership between business, government and educators to make this work. Credit unions are well positioned but frankly, the whole market would be better off if everyone, including the banks, got involved. Wednesday April 28, 2010 2:11 John Lahey 2:11 Catherine Ludgate: The benefits are huge: not just the immediate economic benefit for the individuals involved, but for their families (and various indica tors of community health) and over the long-term, as folks move along the asset path, for community and individual wealth generation. Wednesday April 28, 2010 2:11 Catherine Ludgate 2:11 John Lahey: Tavia, i agree with Catherine's last comment. Wednesday April 28, 2010 2:11 John Lahey 2:11 Sean Stanleigh: Do the two of you think there's any appetite on the part o f the federal government to spearhead such an initiative?

Wednesday April 28, 2010 2:11 Sean Stanleigh 2:11 Catherine Ludgate: I like John's point about partnerships. Certainly, one of the keys to microfinance is a foundation of financial literacy, and governmen t and the education sector have a role to play there. Wednesday April 28, 2010 2:11 Catherine Ludgate 2:12 Catherine Ludgate: Good question. Perhaps against the backdrop of credit u nions being able to work nationally, this might indicate some enthusiasm from th e federal government to support such an initiative. Wednesday April 28, 2010 2:12 Catherine Ludgate 2:12 [Comment From DonDon: ] I am on the verge of starting a business that would help not-for-profits by offe ring services such as grant applications, performance reporting, financial state ment preparation and management consulting. Wednesday April 28, 2010 2:12 Don 2:12 [Comment From DonDon: ] How would micro-financing help me and how would i access it? Wednesday April 28, 2010 2:12 Don 2:12 [Comment From DonDon: ] p.s. sorry for the broke up message! Wednesday April 28, 2010 2:12 Don 2:12 John Lahey: Hard to say. I think there is some interest but it is probably better and more easily handled at the provincial level. Wednesday April 28, 2010 2:12 John Lahey 2:13 John Lahey: Don, for our program, you have to go through one of our partne r organizations to train and develop a business plan. If you want more informati on, contact susan.henry@alterna.ca Wednesday April 28, 2010 2:13 John Lahey 2:14 Catherine Ludgate: Don, if you couldn't access traditional financing from a financial institution, microfinancing might work for you. Again, would depend on the strength of your business idea and your demonstrated enthusiasm. Like Alt erna, we'd like to see a business plan. Wednesday April 28, 2010 2:14 Catherine Ludgate 2:14 [Comment From GillesGilles: ] Re: John's comment "At Alterna, it's the support that's provided during and afte r the loan approval process..." What kind of support? Wednesday April 28, 2010 2:14 Gilles 2:15 John Lahey: First of all, we recognize that entrepreneurs have passion for their product but need help on other aspects of starting and running a business . So we have partners to help train and prepare a business plan. Following, we h ave peer-to-peer, tele-learning seminars and one-on-one coaching from inside Alt erna. Wednesday April 28, 2010 2:15 John Lahey 2:15 Catherine Ludgate: I don't know what Alterna's support looks like, but I s uspect it is similar to ours. We provide a lot of coaching during the applicatio n process, referrals to other sources of advice, patient payment schedules in th e first few years, and regular check-ins. Wednesday April 28, 2010 2:15 Catherine Ludgate 2:15 [Comment From GuestGuest: ]

Organizations like CYBF that provide $15000 loans to young entrepreneurs. Are th ere any Canadian studies that describe success rates in micro lending thus far i n Canada? Wednesday April 28, 2010 2:15 Guest 2:16 John Lahey: You are welcome to refer to the Alterna study that was conduct ed by Carleton University's Centre for Social Innovation. You can get by emailin g susan.henry@alterna.ca Wednesday April 28, 2010 2:16 John Lahey 2:16 Catherine Ludgate: I believe CCINC (Canadian Community Investment Network Co-op) recently completed some pan-Canadian studies on on microfinance. I'll loo k for the link now. Wednesday April 28, 2010 2:16 Catherine Ludgate 2:17 [Comment From SyedSyed: ] The Grameen model from Bangladesh comes to us from a developing country where a very large %age of the population is living under the poverty line. Is there a m arket for micro credit in the developed world ie. in Canada? Wednesday April 28, 2010 2:17 Syed 2:17 Catherine Ludgate: Syed, absolutely. Wednesday April 28, 2010 2:17 Catherine Ludgate 2:17 John Lahey: We've found that there is. Wednesday April 28, 2010 2:17 John Lahey 2:18 Sean Stanleigh: Do you guys think it's particularly the case in Canada or are there other developed countries active in this space as well? Wednesday April 28, 2010 2:18 Sean Stanleigh 2:18 Catherine Ludgate: For the person looking for some statistical info, pleas e go to this link and see the PDF there: http://www.communityinvestment.ca/ Wednesday April 28, 2010 2:18 Catherine Ludgate 2:18 John Lahey: There is a large micro-lending base in the United States - Bro oklyn, Washington are two that we are aware of. Wednesday April 28, 2010 2:18 John Lahey 2:19 [Comment From Jean-FrancoisJean-Francois: ] I'm really interested in seeing microcredit's potential in First Nations communi ties. What work has been done by financial institutions to try out microcredit i n First Nations communities? Wednesday April 28, 2010 2:19 Jean-Francois 2:19 Catherine Ludgate: Sean, we know of microlending models in Northern Europe and in some parts of the United States. It is a model that can work well anywhe re. Wednesday April 28, 2010 2:19 Catherine Ludgate 2:19 John Lahey: At the World Credit Union conference last year, Vicente Fox, f ormer Mexico PM said that micro-lending was THE path to addressing poverty in hi s country. Wednesday April 28, 2010 2:19 John Lahey 2:20 Catherine Ludgate: Jean-Francois, we have used the peer lending model in s ome First Nations communities and with Aboriginal people here. Because of the af finity nature of a cultural group, it can work well. Wednesday April 28, 2010 2:20 Catherine Ludgate

2:20 John Lahey: Jean-Francois, you might wish to contact Assiniboine Credit Un ion in Winnipeg as they may have experience in this area. Priscilla Boucher is i n charge there. Wednesday April 28, 2010 2:20 John Lahey 2:20 Sean Stanleigh: Have we pretty much covered this one? Wednesday April 28, 2010 2:20 Sean Stanleigh 2:20 [Comment From GuestGuest: ] Are there any Canadian research studies on success rates/default rates on microl oans in Canada through the coops, credit unions, CYBF, etc.? Wednesday April 28, 2010 2:20 Guest 2:21 Catherine Ludgate: Hi: I'd refer you to the CCINC report, at the link just above. Plus the great work at Alterna. Wednesday April 28, 2010 2:21 Catherine Ludgate 2:21 [Comment From MonicaMonica: ] Would you be able to walk us through your loan process? (From the moment the cus tomer walks in the door of a branch to loan approval to post-loan support) Wednesday April 28, 2010 2:21 Monica 2:21 John Lahey: Refer to our study at susan.henry@alterna.ca. Catherine quoted the other one we were thinking of. Wednesday April 28, 2010 2:21 John Lahey 2:22 Catherine Ludgate: Monica, loans come in to us a few ways: referrals from community partners, referrals from self-employment programs, or directly from so meone coming into a branch. Wednesday April 28, 2010 2:22 Catherine Ludgate 2:23 Catherine Ludgate: Monica, then one of our microfinance program team revie ws the application and contact the potential borrower. There is a fair bit of ba ck and forth at this stage. Our loans are reviewed and underwritten and recommen ded all by the same team, and then approval (for our peer loans and loans up to $5000), are approved in our group. Wednesday April 28, 2010 2:23 Catherine Ludgate 2:23 John Lahey: Monica, it's lengthy. Once the borrower goes through an accred ited course, Alterna does a presentation talking about key aspects of the loan p rocess and credit expectations - kind of a financial literacy. The students pres ent their business plans and Alterna participates in a panel review in the class room. They are then invited to come to Alterna to talk about their loan requirem ents where further review and advice takes place. Wednesday April 28, 2010 2:23 John Lahey 2:23 [Comment From JeffJeff: ] From my experience borrowers have no loyalty and follow the most available and c heapest rates when they becom "bankable". How do you expect to retain these borr owers when they'v "made" it? Wednesday April 28, 2010 2:23 Jeff 2:23 Catherine Ludgate: It would be fair to say this is high-touch lending. Wednesday April 28, 2010 2:23 Catherine Ludgate 2:24 Catherine Ludgate: I think Tavia's story tells it all, Jeff. If you lend t o someone at the early stage, they stay very loyal, if you stay connected to the m. Wednesday April 28, 2010 2:24 Catherine Ludgate

2:24 Tavia Grant: I would just jump in here to say there is a need for more res earch on the effect and challenges around micro-lending. International studies h ave yielded mixed results on its effect on poverty. But it would be great to hav e more independent Canadian research. Wednesday April 28, 2010 2:24 Tavia Grant 2:24 John Lahey: That's not actually always true. If you look at the quote in t oday's article, when a partner helps you when you need it, there is a loyalty bu ilt. Two thirds of our borrowers are still with us. Wednesday April 28, 2010 2:24 John Lahey 2:25 [Comment From SyedSyed: ] VanCity - I read on your website that your program is also targeted to aborigina ls. Any experience specifically to the aboriginal segment of the population? Are their success rates better or worse than the non-aboriginal population? Any ide a of why? Wednesday April 28, 2010 2:25 Syed 2:25 Catherine Ludgate: I agree with you, Tavia. We have been interviewed many times for student research or by other FIs, but that information is not widely a vailable. Good research across Canada, and best practices shared out, would be g reat. Wednesday April 28, 2010 2:25 Catherine Ludgate 2:25 John Lahey: Loyalty is also a two way street. As finanical institutions, w e have to continually re-earn that loyalty. That takes a lot of effort and commi tment. Wednesday April 28, 2010 2:25 John Lahey 2:25 Catherine Ludgate: Yes, Syed, we have found that the peer lending model ca n work well with Aboriginal people. Wednesday April 28, 2010 2:25 Catherine Ludgate 2:26 Catherine Ludgate: Aboriginal success rates are not better or worse, and t his is not a homogenous group. What we have found is a different need for financ ial literacy. Wednesday April 28, 2010 2:26 Catherine Ludgate 2:26 [Comment From MonicaMonica: ] Catherine - you mentioned that this should be a national initiative that is addr essed by the credit union family. Why do you think credit unions are better posi tioned to address this space than large banks? Wednesday April 28, 2010 2:26 Monica 2:27 Sean Stanleigh: John, feel free to weigh in on this too. Wednesday April 28, 2010 2:27 Sean Stanleigh 2:27 Catherine Ludgate: Because we are rooted in community, pool community asse ts for community well-being and can make community decisions. Wednesday April 28, 2010 2:27 Catherine Ludgate 2:27 John Lahey: I think I made my point. We think that micro-lending support i s good public policy. The more, the better. Wednesday April 28, 2010 2:27 John Lahey 2:27 [Comment From Ian MurdochIan Murdoch: ] Are there any plans to venture into small mortgages and equity lending? Wednesday April 28, 2010 2:27 Ian Murdoch 2:28 Catherine Ludgate: Ian, we have other products designed for home ownership

for folks that might not qualify for traditional mortgages (Springboard). Wednesday April 28, 2010 2:28 Catherine Ludgate 2:28 John Lahey: Ian, we do discuss additional financing needs as the businesse s progress. In fact, we have seen some additional business come our way. Wednesday April 28, 2010 2:28 John Lahey 2:29 Catherine Ludgate: Ian, us too. As folks move along the asset path, they h ave new financial needs, and we want to keep meeting those. Wednesday April 28, 2010 2:29 Catherine Ludgate 2:29 [Comment From SyedSyed: ] VanCity: Referring to your website again, it states that micro-finance loans are available at a rate of Prime+3%. Why is there a premium interest rate on these loans? Wednesday April 28, 2010 2:29 Syed 2:30 Catherine Ludgate: Syed, this is not particularly a premium interest rate, and is a lot less than other FIs might charge for a loan. I think my own line o f credit at a credit union is higher than that. Wednesday April 28, 2010 2:30 Catherine Ludgate 2:30 [Comment From DonDon: ] Thanks John and Catherine! Would your suggestions apply no matter what province one is in? Wednesday April 28, 2010 2:30 Don 2:31 Sean Stanleigh: Don is referring, by the way, to his earlier question/answ er thread above. Wednesday April 28, 2010 2:31 Sean Stanleigh 2:31 John Lahey: Syed, we find that the interest of borrowers is about access n ot price. The reality is that these loans are riskier than many other loans so t here is a premium. The size of the premium will depend on the province to some e xtent because of governement subsidy programs in some provinces. Wednesday April 28, 2010 2:31 John Lahey 2:31 Catherine Ludgate: Don, the challenge is finding a lender in those provinc es. Microfinance is not available evenly across the country. Wednesday April 28, 2010 2:31 Catherine Ludgate 2:32 [Comment From ChrisChris: ] How do you minimize the risk in small transactions like these (obviously you can t go into too much detail) but 96% repayment rate seems really good Wednesday April 28, 2010 2:32 Chris 2:33 John Lahey: Chris, the communication needs to be strong between borrower a nd lender. You need trust, a good business plan and a good supportive relationsh ip between the two. Wednesday April 28, 2010 2:33 John Lahey 2:33 Catherine Ludgate: Chris, in our experience, it is about developing a rela tionship with the borrower. That's the lesson of Grameen peer lending -- if folk s feel personally connected to repaying the people behind the loan, there lies s uccess. Wednesday April 28, 2010 2:33 Catherine Ludgate 2:34 Catherine Ludgate: Like Alterna, we also make sure we provide coaching sup ports, so folks can ask for help along the way.

Wednesday April 28, 2010 2:34 Catherine Ludgate 2:34 Sean Stanleigh: Would there be a benefit to CYBF over a credit union? Wednesday April 28, 2010 2:34 Sean Stanleigh 2:34 [Comment From teteaupainteteaupain: ] I could certainly benefit from micro-lending but right now I'm looking at CYBF. I have a friend in New Hampshire that started his business using micro-credit Wednesday April 28, 2010 2:34 teteaupain 2:34 John Lahey: Chris, 96% sounds great but for more mainstream lending, banks experience less than 1% loss which is why it's hard for them to get too excited about it. Wednesday April 28, 2010 2:34 John Lahey 2:34 Tavia Grant: It's worth noting efforts to offer this in Aboriginal communi ties have, in the past, met with challenges. The non-profit Calmeadow did this i n the nineties, but closed shop in 2000 because it had trouble achieving economi es of scale. Wednesday April 28, 2010 2:34 Tavia Grant 2:35 Catherine Ludgate: Teteaupain, as I understand CYBF, it can be a good comp lement to microlending, not necessarily a replacement. Wednesday April 28, 2010 2:35 Catherine Ludgate 2:35 John Lahey: teteaupain, CYBF is a good place to be discussing your needs. Wednesday April 28, 2010 2:35 John Lahey 2:35 [Comment From SyedSyed: ] What %age of business plans that you receive are successful in obtaining micro f inancing? Wednesday April 28, 2010 2:35 Syed 2:35 Catherine Ludgate: Tavia, it is worth noting that the portfolios that Calm eadow held, when it closed, came to Alterna (for the east) and Vancity (for the west), so we continue to hold some of those borrowers. Wednesday April 28, 2010 2:35 Catherine Ludgate 2:36 John Lahey: Syed, probably about 80% get approved in some way. Modificatio n is typically required. Wednesday April 28, 2010 2:36 John Lahey 2:36 [Comment From GuestGuest: ] Doesn't the CAPE Fund provide financing to Aboriginal entrepreneurs? Wednesday April 28, 2010 2:36 Guest 2:36 Catherine Ludgate: Syed, it depends. If the business plan has been reviewe d by an advisor, or comes out of a self-employment program, our experience is si milar to Alterna. If not, success is less than 40%. Wednesday April 28, 2010 2:36 Catherine Ludgate 2:37 John Lahey: I can't really comment on the CAPE Fund. Wednesday April 28, 2010 2:37 John Lahey 2:37 Catherine Ludgate: Re CAPE: I believe that is one of the intentions of the fund. Microlending could complement this, or where CAPE cannot support an indiv idual entrepreneur, a microloan might a better start, before moving on to CAPE. Wednesday April 28, 2010 2:37 Catherine Ludgate

2:37 [Comment From SyedSyed: ] How long have your organizations been operating in the micro credit space and do you see these business lines growing? Or is there a contraction in demand given subpar business plans? Wednesday April 28, 2010 2:37 Syed 2:38 Catherine Ludgate: Syed, we have been doing formal microlending (with a pr ogram in place) since the late 1990s. And it has grown year over year, but is st ill small. I think, though, it is fair to say most credit unions have always don e some kind of informal microlending. Wednesday April 28, 2010 2:38 Catherine Ludgate 2:38 John Lahey: Syed, it's been 10 years for Alterna. Demand is growing and we are able to support it because of the quality support the borrowers get in the training programs from our partners. Wednesday April 28, 2010 2:38 John Lahey 2:39 [Comment From Ian MurdochIan Murdoch: ] Both of you are established in BC and Ontario, however many communities in the M aritimes are in desperate need of alternative lending. Are there any micro-credi t organizations in eastern Canada? Wednesday April 28, 2010 2:39 Ian Murdoch 2:39 John Lahey: Syed, it's important to look at the link our program has with government programs. If government funding falls, it will impact our program. Wednesday April 28, 2010 2:39 John Lahey 2:39 Catherine Ludgate: Ian, yes! There are. iNova Credit Union in Halifax does microlending, as does the St Johns Community Loan Fund. Wednesday April 28, 2010 2:39 Catherine Ludgate 2:40 [Comment From Caleb Del BegioCaleb Del Begio: ] High-interest rates - usually over 20% - seem to be the norm with micro-credit l oans in developing countries due to the high cost of administrating the loans. H ow will this compare to Canada? Wednesday April 28, 2010 2:40 Caleb Del Begio 2:40 Catherine Ludgate: Ian, check out the organizations that are members of CC INC. Also, there is a Maritime collaboration of credit unions that is working to roll out microfinance across the area. Wednesday April 28, 2010 2:40 Catherine Ludgate 2:41 Catherine Ludgate: Caleb, our rates are significantly lower, as we can mak e use of our infrastructure and large capital base. Wednesday April 28, 2010 2:41 Catherine Ludgate 2:41 John Lahey: Caleb, in the absence of any government loan guarantees, Alter na charges Prime + 6% plus a 6% administration fee on the amount borrowed. Wednesday April 28, 2010 2:41 John Lahey 2:41 [Comment From MonicaMonica: ] Hi Catherine / John - It appears that the majority of microcredit loans in Canad a are currently being offered by credit unions and coops. Why is it that none of the big five banks have taken a lead role in this arena? Wednesday April 28, 2010 2:41 Monica 2:42 Catherine Ludgate: Monica, RBC is about to try a program in a Toronto comm unity, and they tried microfinance back in 1996. But, for all the reasons above about the high-touch nature of the work, and the small size of the loans, you ha ve to have a commitment to the wealth and prosperity of an entire community to b

e in this work. Wednesday April 28, 2010 2:42 2:42 John Lahey: Monica, the ons. Looking at micro-lending tive. You have to look beyond ggle with taking that view as ney. Catherine Ludgate truth is that they are profit maximizing instituti simply from an income statement is not very attrac that to the peripheral social benefits. Banks stru they have other competing opportunities to make mo

Wednesday April 28, 2010 2:42 John Lahey 2:42 [Comment From GuestGuest: ] What is your profit margin? Wednesday April 28, 2010 2:42 Guest 2:43 John Lahey: On profit, our goal is to break-even on direct contribution. Wednesday April 28, 2010 2:43 John Lahey 2:43 [Comment From RyanRyan: ] Mr. Lahey, what interested you about Alterna and microfinance that led you to de part a major 6 Canadian bank? In what ways did you apply your takeaways from the big commercial bank to Alterna's microfinance? Wednesday April 28, 2010 2:43 Ryan 2:43 Catherine Ludgate: Hmmm. I don't know that I can answer that easily. I'm w ith John on this. Wednesday April 28, 2010 2:43 Catherine Ludgate 2:43 [Comment From SyedSyed: ] Catherine - does this mean before a Microfinance program it can fully flourish i n an aboriginal setting, more basic financial literacy, financial management, an d business skills need to be established? If you can expand on this, that would be great appreciated. Thank you. Wednesday April 28, 2010 2:43 Syed 2:44 John Lahey: Ryan, to be honest, I left the bank first. The credit union sy stem was a good fit for my values and interests. I have found the micro-lending experience at Alterna quite inspirational. It's outlined in the Carleton U. repo rt. Wednesday April 28, 2010 2:44 John Lahey 2:45 [Comment From SyedSyed: ] John/Catherine: This is a great exchange of helpful ideas. What markets in Canad a do you feel are the most under served yet possess great potential? Wednesday April 28, 2010 2:45 Syed 2:45 Catherine Ludgate: Syed, for a whole range of reasons relating to intergen erational poverty and structural discrimination, we find that we must take more care to make sure a foundation of support is there for some Aboriginal borrowers . It sounds like you have a particular interest in this line of thought, and I'd be happy to discuss with you further, outside this discussion. My email is cath erine_ludgate@vancity.com. Wednesday April 28, 2010 2:45 Catherine Ludgate 2:46 John Lahey: Syed, virtually all forms of small business, including micro-f inance, will tell you that they are underserved by the financial system. Wednesday April 28, 2010 2:46 John Lahey 2:46 Catherine Ludgate: Syed, for newcomers, microfinance can be a wonderful to ol to make a start in Canada, particularly for folks coming from countries that don't have a credit reporting system.

Wednesday April 28, 2010 2:46 Catherine Ludgate 2:46 [Comment From DonDon: ] Sayi have met all your qualifications for a loan, but do not live in BC or Ont, would I still be eligible for financing from your organizations? Wednesday April 28, 2010 2:46 Don 2:47 John Lahey: Don, technically we could make the loan but the peripheral sup port necessary would not be readily available. We find that essential to the suc cess of the new business venture so no, we would not complete the loan. Wednesday April 28, 2010 2:47 John Lahey 2:47 Catherine Ludgate: Don, no, not for us. We can only currently lend within BC. That's been the nature of credit union regulation. That may change with the recent amendments to allow credit unions to grow nationally, but not yet. Wednesday April 28, 2010 2:47 Catherine Ludgate 2:47 [Comment From Trevor JohnsonTrevor Johnson: ] Hello = I agree with the CYBF comment - I see micro-lenders using a community ag ency in a brokerage role - putting packages of supports together including train ing and mentoring Wednesday April 28, 2010 2:47 Trevor Johnson 2:47 [Comment From BobBob: ] Didn't bizsmart off micro credit? Is that still around? Wednesday April 28, 2010 2:47 Bob 2:48 Catherine Ludgate: Bob, I don't know about bizsmart. Wednesday April 28, 2010 2:48 Catherine Ludgate 2:48 John Lahey: Bob, bizsmart was wound up by CIBC a few years ago. They lost interest. Wednesday April 28, 2010 2:48 John Lahey 2:48 [Comment From Gabriel NewmanGabriel Newman: ] From my understanding the micro credit programs set up in a number of improvrish ed third world communities land up being operated by the community itself so the interest gets spent in the communities improving the communities. In the Okanag an we have a number of large chain credit unions. The optics are that they aren' t that much different than the large banks (other than you may get a free turkey every Christmas). Would microlending be better suited to a local community init iative what has the support of the credit unions? Wednesday April 28, 2010 2:48 Gabriel Newman 2:48 John Lahey: Trevor, I'm not sure what you are asking. Wednesday April 28, 2010 2:48 John Lahey 2:48 Sean Stanleigh: Hi John I just posted that as a comment. Wednesday April 28, 2010 2:48 Sean Stanleigh 2:49 Catherine Ludgate: Gabriel, credit unions should be a reflection of commun ity needs, and that's why there are annual general meetings and elections for th e board of directors. The community has the capacity to influence its credit uni on. Wednesday April 28, 2010 2:49 Catherine Ludgate 2:50 John Lahey: Gabriel, most of the credit unions - big or small - focus thei r attention on local communities. Generally, the deposits raised in one communit y are lent out in the same community. That's signficantly different in banks wit h national and international reach.

Wednesday April 28, 2010 2:50 John Lahey 2:50 [Comment From MaryMary: ] Hello! I'm wondering why so many programs require that the person applying for t he loan must take a business course, or some kind of course where they would dev elop their business plan or project plan. I have been developing both over the l ast few months on my own while I have been finishing my BA. I plan on entering t he sewn product industry, and I wonder what, exactly, I would take away from one of these courses when sewn product manufacturing is unconventional compared to other start-ups? Wednesday April 28, 2010 2:50 Mary 2:51 Catherine Ludgate: Mary, the basic business skills are transferable, no ma tter what the product. We see folks make the same mistakes around understanding cost of production and goods, and managing cash flow, and marketing, no matter w hat the industry. Wednesday April 28, 2010 2:51 Catherine Ludgate 2:51 John Lahey: Our experience is that the training is essential to being succ essful. Many of the challenges faced in a new business are unrelated to the spec ifics of the market or product you are after - HR, government regulation, financ e etc. Wednesday April 28, 2010 2:51 John Lahey 2:51 [Comment From DonDon: ] Catherine/John, can you recommend a micro-financer here in Alberta? Wednesday April 28, 2010 2:51 Don 2:51 Catherine Ludgate: Don, try Momentum in Calgary. This is a community-based initiative, and they do microlending. Wednesday April 28, 2010 2:51 Catherine Ludgate 2:52 Catherine Ludgate: Alt, if you are in Edmonton, try the Edmonton Community Futures group. Wednesday April 28, 2010 2:52 Catherine Ludgate 2:52 John Lahey: I'll defer to Catherine. Wednesday April 28, 2010 2:52 John Lahey 2:52 [Comment From Trevor JohnsonTrevor Johnson: ] John - The community agency acts as a front door, provides a process to access a micro-finance loan and other sorts of supports perhaps training or mentoring pr ior to writing the biz plan for example - then may act as a broker to seek out l oan options, grants etc - does this make sense? I'm working on developing this m odel in London Ontario Wednesday April 28, 2010 2:52 Trevor Johnson 2:53 John Lahey: Trevor, that makes sense. If you want help or bounce ideas, co ntact susan.henry@alterna.ca. Don't worry - she's sitting here with me and noddi ng in agreement. Wednesday April 28, 2:53 [Comment From What is the average a micro credit loan 2010 2:53 John Lahey SyedSyed: ] $ amount of a loan? And what are the $ ranges (min-max) for at your respective institutions?

Wednesday April 28, 2010 2:53 Syed 2:53 John Lahey: Syed, the maximum under our program is $15,000 but the average is $5,000.

Wednesday April 28, 2010 2:53 John Lahey 2:53 Catherine Ludgate: Also, John, we have a similar model working with settle ment agencies here in BC. They find the borrowers, and do intake and mentoring. We do the lending. Wednesday April 28, 2010 2:53 Catherine Ludgate 2:54 Catherine Ludgate: Syed, our peer loans run from $500 to $6000. Our larger loans, for more formal business structures, can go up to $35,000, and average a t $17k. Wednesday April 28, 2010 2:54 Catherine Ludgate 2:54 [Comment From Ian MurdochIan Murdoch: ] Can either of you think of an excellent example of someone obtaining micro-credi t in Canada and turning it into a viable and profitable enterprise? How has the local community been effected? Wednesday April 28, 2010 2:54 Ian Murdoch 2:54 Catherine Ludgate: Ian, I think Tavia profiled two excellent examples in h er article! Wednesday April 28, 2010 2:54 Catherine Ludgate 2:54 [Comment From Bill CarmichaelBill Carmichael: ] I'd also like to know your write-off experience. Wednesday April 28, 2010 2:54 Bill Carmichael 2:55 John Lahey: Ian, Panagiotis Tsiriotakis of Acropolis Organics. He was feat ured in the article today. Wednesday April 28, 2010 2:55 John Lahey 2:55 Catherine Ludgate: Bill, we already talked about the default rate earlier. And, I should add, that sometimes borrowers come back years later, with cash in hand, to repay. Our experience is folks want to pay back, and because they are loyal to us, will do whatever they can to pay out. Wednesday April 28, 2010 2:55 Catherine Ludgate 2:56 John Lahey: Bill, about 90% of loan dollars are repaid. Wednesday April 28, 2010 2:56 John Lahey 2:56 [Comment From BobBob: ] If I pay the loan back does it help me build my credit score in Canada? Wednesday April 28, 2010 2:56 Bob 2:56 Catherine Ludgate: Bill, about 95% for us, in the peer loans, and somethin g less than that in the larger loans. Wednesday April 28, 2010 2:56 Catherine Ludgate 2:56 John Lahey: Bob, we don't report these loans to credit bureaux. Wednesday April 28, 2010 2:56 John Lahey 2:57 [Comment From BobBob: ] I think we need to thank you both for trying these program. The big banks just l ook at profit. It's great to see Alterna trying something that might create the next great Canadian company! Thanks John Wednesday April 28, 2010 2:57 Bob 2:57 [Comment From DonDon: ] Catherine/John, thank you so much for your insights! Now, it's back to the "onio n farm" for me. Wednesday April 28, 2010 2:57 Don

2:57 [Comment From Trevor JohnsonTrevor Johnson: ] John - Thanks!! I've used the Black Creek Project learnings in my research so fa r - Susan - I'll send you an introductory email right away. Wednesday April 28, 2010 2:57 Trevor Johnson 2:57 Catherine Ludgate: Bob, it depends. If it is a personal loan, yes. So our peer loans do. But more formal (larger) business loans, no. That's why we love t he peer loans for newcomers -- to build a credit history. Wednesday April 28, 2010 2:57 Catherine Ludgate 2:57 John Lahey: Bob, having said that, you could certainly us Alterna as a ref erence on your next loan but hopefully, that loan application would be with Alte rna!! Wednesday April 28, 2010 2:57 John Lahey 2:58 Sean Stanleigh: I think we have time for one more question... Wednesday April 28, 2010 2:58 Sean Stanleigh 2:58 John Lahey: Trevor, we assisted with the Black Creek project and act as ad ministrator. Wednesday April 28, 2010 2:58 John Lahey 2:58 [Comment From SyedSyed: ] What type of government programs support your initiatives? And what further assi stance would you look for from government? Wednesday April 28, 2010 2:58 Syed 2:58 John Lahey: Syed, we have no direct support. Our borrowers do rely on gove rnment training programs for support. Wednesday April 28, 2010 2:58 John Lahey 2:58 Catherine Ludgate: For some of our larger loans, we share a loan loss rese rve. And through Western Economic Diversification, they provide coaching and men torship support to entrepreneurs with disabilities. Wednesday April 28, 2010 2:58 Catherine Ludgate 2:59 Sean Stanleigh: You know what, you guys are so fast, let's squeak in one m ore! Wednesday April 28, 2010 2:59 Sean Stanleigh 2:59 [Comment From KyleKyle: ] Where do you see your business going if Microloaning Continues to grow and you a re seeing top down pressure (or even external pressure) to do better than just b reaking even? Do you see potential issues if large percentages of resources are going towards break even projects?? Wednesday April 28, 2010 2:59 Kyle 2:59 Catherine Ludgate: Kyle, for us, microlending will continue to be one of t he ways we express our commitment to community investment and our principles as a credit union. Wednesday April 28, 2010 2:59 Catherine Ludgate 2:59 John Lahey: Syed, loan loss guarantees would be helpful. In ten years, our borrowers have created about 300 jobs. IF government invested just the tax reve nues created from these jobs, we think we'd see about 10 times that figure. Wednesday April 28, 2010 2:59 John Lahey 3:00 Sean Stanleigh: That's all we have time for, folks. Thanks to our guests f or a lively and informative discussion, and to our readers who viewed and partic ipated. Catherine/John, any last words?

Wednesday April 28, 2010 3:00 Sean Stanleigh 3:00 Catherine Ludgate: Thanks, Sean, for moderating. Good to be here with you, John. Thanks everyone for the great questions! Wednesday April 28, 2010 3:00 Catherine Ludgate 3:00 John Lahey: Kyle, it will never be a huge proportion of our portfolio. It will get bigger but we do it as part of our social commitment to the communities we serve. Wednesday April 28, 2010 3:00 John Lahey 3:01 John Lahey: Thanks to everyone for participating. Wednesday April 28, 2010 3:01 John Lahey 3:01

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