Starbucks wants you and me to help create jobs

          photo by Paul J. Richards, AFP, Getty Images, on www.scpr.org 

Howard Schultz, CEO of Starbucks, has another good idea: Americans can "micro-lend" to other Americans, thereby providing the funding for small businesses that financial institutions are shying away from in today's economy. This is what small businesses need to create new jobs. In an op-ed piece in the NYT, "We Can All Become Job Creators," Joe Nocera delineates the plan that will be seeded by a $5 million donation by the Starbucks Foundation.

On November 1, 2011, Starbucks and the Starbucks Foundation rolled out a process where they are the middlemen between customers that are willing to donate money, and Community Development Financial Institutions (CDFIs) that are set up to make small business loans.  Typically, CDFIs make loans to "underserved" populations, so they are in the habit of making loans that big banks generally find too risky or too small to bother with.

To facilitate this plan, Starbucks got connected to an umbrella organization of CDFIs, called the Opportunity Finance Network, run by Mark Pinsky. Customers can make donations to "Create Jobs For USA," a non-profit, and the donated funds will be used as collateral to make 7 times as much money available to lend through the CDFIs. Customers making donations of $5 or more will get a wristband, courtesy of Starbucks.

image from NYT online content connect to linked article

Maybe that wristband will turn into "the" accessory of the season...or the perfect holiday gift for "someone who has everything." I made a contribution and got one for myself...so I am feeling as though I am a "job-creator" already.

Anyway, do the math.  If there are 10 million Starbucks customers, and they each give $5, that's $50 million.  Once that's leveraged at 7 times its value, that's $350 million of funds available for small business loans. Neighbor to neighbor. American to American.
Sounds like a win-win.

Follow up:

1.  Read up about Microlending at HowStuffWorks.  [The good information is not in the first page of article, but in the numbered articles 1-6 linked from that page.] Also check out Microcredit at Wikipedia.  Who are typical recipients of microlending funds?  Do an internet search to find out the names of the global organizations that support microlending. What person from Bangladesh was a microlending pioneer?

2.  When big banks are involved in making certain small loans (called "banking on bicycles"), what has sometimes gone wrong?

3.  Can you think of an argument against Howard Schultz's plan?  Has he thought of everything? Has he missed something? Consider what you may have read in one of the supporting articles before you answer this:  What is the absolutely best possible outcome of Howard Schultz's plan? Read the article at scpr.org if you need some help thinking of things that Schultz hasn't considered.

4. Howard Schultz's "big idea" from August was not very well received.  What was it?