Investing in Character
Immigrant Access Fund
A microloan model prepares newcomers for employment and invests in their long-term success
Take un- or underemployed skilled immigrants with tremendous drive and character, but no credit history, no assets, and no success with mainstream lending institutions. Mix in a community that sees incredible potential in its newcomer population and is willing to put their credit where their confidence is. What do you get? Alberta’s Immigrant Access Fund (IAF).
The IAF Loan Program provides internationally trained newcomers, regardless of occupation or training, with loans of up to $10,000 to help cover costs to get back to work in their field in Canada. While most loans cover training, professional fees, exam expenses, assessments and books, IAF Canada Executive Director Dianne Fehr maintains an IAF loan is for whatever will lead to employment success
“IAF invests in people who the banks would turn away – people who have skills and abilities our society needs…. IAF loans are made to people who are trustworthy and are of good character. We lend to people not based on where they are today, but where we believe they will be in the future.” IAF
The key question IAF asks is, what will help get this person fully employed in their chosen profession? This means, for example, loans can be used to cover living expenses while the applicant is studying. According to Fehr, if the money allows a newcomer to work fewer hours in order to focus on their studies, IAF will support that. In one case, IAF paid for the cost of snow tires for a doctor who had to travel outside of the city to meet his medical residency requirements. In another, a highly certified mechanic with a job offer needed a loan to buy his own tools (a job requirement). The IAF loan can also cover the costs of child care so the newcomer can attend classes.
Investing in immigrant futures
IAF invests in people with potential. That means it doesn’t just focus its loans on professional newcomers, but to all skilled newcomers, including tradespeople. For example, having worked as an architectural draftsperson and teacher, newcomer Anthony Marks was open to exploring his career options when he arrived in Canada. A loan from IAF helped Marks cover the cost of a welding program which will help him secure a related job in Edmonton. While starting a new career in a new country at age 48 may seem daunting to some, Marks’s attitude fits the profile that IAF looks for in its clients. “For the first few months it was real tough… But there are a lot of opportunities if you are dedicated,” says Marks. IAF is continuing to expand its loan services to newcomers who may be pursuing trades certification.
A value-added approach
A lending program that is flexible and community focused is part of IAF’s niche success. When starting the program, the option of partnering with a bank or formal lending institution was excluded in favour of a flexible community-based approach that allowed IAF to lend to whomever they want, be flexible in renegotiating loan terms should a newcomer experience difficulty and ensure that their loan work is connected to the local community. Fehr explains
“IAF lends to people who typically cannot access mainstream credit because they are unemployed or in low paying ‘survival’ jobs, do not have a credit history in Canada, and have no assets… We call our approach ‘value added’ because we refer loan applicants and recipients to other community supports that will help them integrate, explore pathways to working in their field in Canada and provide guidance outside of IAF’s expertise. We make them feel welcome.” 2012 Report to the Communitu (PDF)
Each IAF loan is rooted in the place where the newcomer lives and is based on trust. If someone is having trouble, IAF’s loan managers are available and ready to refer them to community supports for help. Pre-loan, if they decide a loan applicant’s learning plan isn’t going to be successful, the applicant is referred to a community partner for help refining the plan.
According to Fehr: “Loans are just part of a bigger picture of helping newcomers get work. They’re grounded in immigrant experience. We know that it’s difficult. We know that people have difficulty when they come. There are lots of pieces in the puzzle of getting back to work, but the financial barrier is a key one. Without help, many people may not get beyond that. We give them what they need.”
High social return
“Micro loans have been proven globally to be an effective tool to alleviate poverty among people unable to access mainstream credit due to lack of employment, credit history, and collateral. IAF is applying this body of knowledge to the licensing and training requirements of Canada’s skilled newcomers.”
As a “lender of last resort” for newcomers, IAF partners with community agencies that have either experience with micro loan programs, or strong ties to the immigrant population in their community. Community volunteers work closely with IAF staff to make loan decisions and build relationships with the people they loan to. These local connections have helped IAF establish a trusted network of advisors that reduces risk and ensures low write-off rates. At the same time, newcomers build their credit rating in Canada, essential for future loans, mortgages and more. As Fehr says, “We’re not a bank; we don’t want to just lend money. We want to add value to those interactions and relationships.”
IAF takes a long view of its investments in immigrant success. Its model is based on the concept of a “social return on investment (SROI).” To calculate a social rate or return, University of Calgary researchers looked at the probability that an IAF loan will lead to increased earnings over someone’s working life. They found: “The longer the remaining working life after accreditation, the greater the total benefit accruing to the upfront investment. The higher the probability of success in terms of finding employment in the immigrant’s chosen field, the larger the gain in earnings over the high school age earnings profile.” The study (PDF) showed IAF has an average social rate of return of 33% on loans. By any formal investment measure, a 33% SROI is a huge success.
While micro-loans for newcomers are not entirely new in Canada, the IAF’s unique approach is growing. With offices in Edmonton, Calgary and a new affiliate serving Saskatchewan, IAF is now exploring an innovative “e-loan model” to reach newcomers in cities where there are no local micro-loan options. It aims to launch the model this Fall. IAF maintains close ties to other Canadian micro-lenders, looking to develop new opportunities for newcomer and lender alike.
The micro-loan model confirms that investing in the incredible wealth of human capital arriving in Canada each year reaps huge dividends. IAF’s success is limited only by the amount of money they have to loan.
Making it Work for You:
- A good idea that works can be improved upon. Don’t be afraid to innovate.
- Traditional ideas and approaches to credit or financing shouldn’t be a barrier to new ideas and approaches. A good idea that works can be improved upon. Don’t be afraid to innovate.
- Don’t start with the money, start with the impact you want to have on your community.
- Look for champions and supporters in your community, nonprofits, corporations and government.
- Relationships of trust are the core of a successful lending program. Take the time to connect a financial innovation to community values and supports.
- Do the math. Think of investments in diversity as opportunity costs
For this Good Idea contact:
Dianne Fehr, Immigrant Access Fund
16, 2936 Radcliffe Drive SE
Calgary, AB, Canada,