Para Emprendedores Loan Fund

In Puerto Rico, approximately 23% of the population, 56% of children, live below the poverty line (U.S. Census Bureau, 2020). This socioeconomic disadvantage affects many aspects of life, including access to financial services and opportunities for entrepreneurship, specially in the communities we are working in. We share the goal, along with the Boys & Girls Clubs of Puerto Rico and the Platform for Social Impact (local entities that have helped incubate our project so far), to cut that 56% of child poverty in half over the next 10 years. Our team moves this mission forward by focusing our support on the entrepreneurs that come from, and serve, those communities. 

A study by the Federal Deposit Insurance Corporation (FDIC) in 2019 showed that 12.2% of households in Puerto Rico were unbanked, while 22.3% were underbanked. This indicates that around 34.5% of the population in Puerto Rico does not have access to adequate financial services. This figure aligns with the global issue of financial inclusion, where over 1.8 billion adults worldwide are unbanked or poorly served by existing financial products and services.

Several factors contribute to this problem, including lack of access to affordable credit, insufficient financial education, and systemic barriers faced by underserved entrepreneurs. Our solution, which leverages our existing social impact incubator and accelerator, is a loan fund for participants that specifically targets these factors and considers participation in capacitation programs like ours for approval of lending. By offering inclusive capital, data-driven financial support, and mentorship, we aim to empower underserved entrepreneurs and help them overcome the challenges they face.

In Puerto Rico, there are approximately 78,000 micro, small, and medium enterprises (MSMEs), representing 99% of all businesses (Puerto Rico Small Business Development Center, 2019). However, many of these MSMEs struggle with limited access to credit and financial services. As of 2021, the small business loan approval rate in Puerto Rico was only around 15.3% (Biz2Credit, 2021). Our solution will directly address this issue by providing affordable and accessible financial support to those underserved entrepreneurs.

Our intervention aims to address the financial exclusion faced by a significant portion of the population in Puerto Rico and globally. By targeting the 34.5% of the Puerto Rican population that is unbanked or underbanked, we can make a substantial impact on local communities and contribute to the larger goal of financial inclusion. As we scale our model, we hope to empower even more underserved entrepreneurs around the world and create lasting, positive change.

Our solution is a data-driven affordable loan fund that offers accessible & proactive financial support to underserved entrepreneurs already participating in incubation or acceleration programs like ours or comparable to ours. This initiative is built upon our experience with our existing incubator and accelerator programs, where we have witnessed first-hand the challenges these entrepreneurs face in accessing capital on the island and have successfully deployed $250,000 to support them.

The fund will leverage mobile technology and data analytics to provide tailored financial support to participants, even using the milestone tracking we already do through our participant database (currently hosted on Ninox) to trigger new credit products or other forms of support. Through mobile platforms, entrepreneurs can easily apply for loans, access training materials, and communicate with mentors. Data analytics enables us to better understand the entrepreneurs' needs and potential, allowing us to offer proactive and customized support.

The loan fund uses a technology-driven approach to assess borrowers' creditworthiness, which helps tailor loan terms to their specific needs and minimize risk. By analyzing various data points, we can make informed decisions about the size, interest rate, and repayment terms of each loan, ensuring accessibility and affordability for entrepreneurs. Leveraging this close relationship with entrepreneurs, we can also be more flexible when trying to serve the part of our population that might have strikes on their record. 

This model provides small, affordable loans with flexible repayment schedules and low interest rates. Additionally, we will encourage group lending, which encourages community support and shared accountability among borrowers, further reducing the risk of loan default.

This fund is the technology-driven financial support system that will empower the underserved entrepreneurs we already serve and that continually struggle with a system that's not built for them to succeed. By leveraging our existing close relationship with the entrepreneurs, mobile technology and data analytics, we provide accessible and tailored programs and loans that help participants overcome financial barriers, ultimately promoting financial inclusion and sustainable business growth. The success of our incubator and accelerator programs has given us the insight and expertise to address this challenge effectively and make a lasting impact on the communities we serve.

Our target population primarily consists of underserved entrepreneurs in Puerto Rico, particularly those residing in the residential projects near the seven Boys & Girls Clubs of Puerto Rico locations.

This population is predominantly of Puerto Rican heritage, with a significant number identifying as Afro-Puerto Rican. They are typically low-to-moderate income individuals who are either unbanked or underbanked, lacking adequate access to traditional financial services outside of shark lending and pawn shops. This population also includes many women, an important group that also often faces additional barriers to entrepreneurship. Most of the entrepreneurs we already serve in these communities are mostly middle aged women with family owned business of less than five employees. 

A significant portion of this population lives below the poverty line, and many are micro, small, and medium enterprises (MSMEs) owners or aspire to become one. However, they face numerous challenges including limited access to affordable credit, lack of financial literacy, and systemic barriers that make it difficult for them to grow their businesses and improve their economic circumstances.

Our affordable loan fund is designed to meet the specific needs of this target population. By offering affordable, data-driven financial support, we can provide a viable alternative to traditional banking services, which often exclude or fail to meet the needs of this demographic. Our technology-driven approach allows us to assess borrowers' creditworthiness accurately and tailor loan terms to their specific circumstances, reducing financial risk and increasing accessibility.

In addition to financial support, our solution also offers training and mentorship, building on our existing work through the social impact incubator and accelerator programs. This holistic approach not only provides the necessary capital but also equips these entrepreneurs with the skills and knowledge they need to manage their businesses effectively and make informed financial decisions.

Our team is deeply rooted in the communities we serve. Co-leaders, C.J. Acosta and Nerma Albertorio, have over 20 years of combined experience in supporting the local entrepreneurial community, both on the community level and the high-impact tech startup community. All team members were born and raised in Puerto Rico, and some even within the same residential projects that are now home to our target population. This close proximity to the community has fostered a deep understanding of the unique challenges, needs, and aspirations of these underserved entrepreneurs.

We firmly believe in the principle of "nothing about us, without us." Our team is not just designing solutions for the community; we are designing solutions with the community. We have been part of ongoing dialogues, listening sessions, and feedback loops with community members, local business owners, and entrepreneurs from our incubator and accelerator programs. Their input, ideas, and agendas are integral to the design and implementation of our affordable loan fund.

To ensure we understand the needs of those we are serving, we have established an open-door policy for anyone who wishes to share their ideas or concerns. Additionally, we conduct surveys and interviews to gather direct feedback and insights from entrepreneurs who would potentially benefit from our program.

Moreover, our team includes some of the entrepreneurs themselves—individuals who live in these communities and have firsthand knowledge of their needs and challenges. They help facilitate communication, build trust, and ensure that the community's voice is always heard in our decision-making processes.

We are committed to promoting diversity and inclusivity within our team. We believe that having a team that reflects the communities we serve is crucial to understanding their unique needs and developing effective solutions.

As of now, our solution has directly served 59 entrepreneurs who have successfully completed our incubator and accelerator programs. By the end of this year, we anticipate that the number of entrepreneurs served will exceed 100. The majority of these entrepreneurs, around 80%, have been supported through our early-stage incubator program, while the remaining 20% have benefited from our accelerator.

However, the potential reach of our solution extends much further. Currently, there are approximately 30 other active programs across Puerto Rico, funded by the federal CDBG-SBIA grant, that are also producing thousands of capacitated entrepreneurs. These entrepreneurs, having already benefited from the training and resources provided by these programs, are well-positioned to gain from our loan fund, amplifying our impact and contributing significantly to the economic empowerment of underserved communities on the island.

While we are making strides in our mission, we acknowledge several barriers that we hope the MIT Solve community can help us navigate:

Financial: While not exclusively seeking funds, we recognize the value of financial resources to scale our affordable lending, particularly to cover operational costs and provide a larger pool of funds for loans. We hope to connect with partners interested in supporting social impact projects.

Technical: Our model relies heavily on data analytics and mobile technology. We would greatly benefit from technical assistance to refine our data collection, processing, and analysis methods, as well as improving our mobile platform's functionality and user experience.

Legal: Navigating the complexities of financial regulations, especially concerning microloans and financial transactions, can be challenging. Legal expertise and advice would be invaluable to ensure compliance while maximizing our impact.

Cultural: We aim to create a solution that is culturally sensitive and responsive to the needs of our target community. Collaborating with Solve could provide us with insights and best practices from global initiatives that have successfully addressed similar cultural nuances.

Market: Understanding the broader market dynamics, including potential competition and market demand, is crucial for our solution's sustainability. We hope to gain access to market research resources, industry experts, and mentorship to develop a robust market strategy.

Project Makers operates as an incubated organization under the Boys & Girls Clubs of Puerto Rico. This strategic arrangement has allowed us to leverage the larger organization's established infrastructure and experience in managing complex relationships, particularly with the federal government in the context of the CDBG-SBIA disaster recovery program. This has been instrumental in securing our main source of funding.

However, we've outlined a plan to transition Project Makers into a standalone entity over the next two years. This strategic shift is driven by our goal to expand our services and tailor our approach to underserved entrepreneurs in PR. 

Our leadership team at Project Makers is a testament to our commitment to diversity, equity, and inclusion. We value and celebrate the social, cultural, and identity-based attributes represented within our team. Our leaders come from different backgrounds, bring diverse perspectives, and represent a variety of lived experiences in entrepreneurship, reflecting the community we serve.

A significant step in our DEI journey was a transformational shift in our organizational structure, which manifested in the elevation of our former Operations Director to a Co-Managing Director role. This decision wasn't just about creating an equal power dynamic; it was an acknowledgement of her invaluable experience, her understanding of our mission, and her ability to guide our organization towards its goals. We recognized that her expertise and insights could further enrich our leadership, and we acted decisively to ensure that her voice is heard at the highest level. Understanding that the "male successful startup CEO" type and the "female service oriented non-profit veteran" had equally valuable things to bring into that role represents a shift in how things are usually done down here on the island.   

Our goals for advancing DEI include expanding diversity within our team, fostering an inclusive culture that celebrates this diversity, and continuously refining our practices to ensure equity. We are dedicated to providing ongoing DEI training to our team, conducting regular reviews of our policies and procedures, and actively seeking and acting on feedback from our team members.

Our actions mirror our words. By elevating a deserving team member to a leadership role, we have shown that we are ready to break norms and challenge the status quo. We are committed to continuously learning, growing, and evolving in our journey, ensuring that our organization is a place where everyone can thrive.