Micro-Loan Fund Aims to Provide Non-Traditional Financing

Lynne Brown, Weavers Way New Economy Incubator Committee

The Backstory Behind Easy Pay,
As Told in ‘Organized Money’

In Chapter 5 of Mark Pinsky and Keith Mestrich’s new book “Organized Money: How Progressives Can Leverage the Financial System to Work For Them, Not Against Them,” authors Mark Pinsky and Keith Mestrich write about the impetus behind Weavers Way’s development of Easy Pay and its benefits to the Co-op and to members.

“Weavers Way Co-op, a small grocery chain in Northwest Philadelphia, paid $425,000 on credit card fees in 2018, according to Norman Weiss, the store’s purchasing manager. Writing in the Shuttle, the Co-op’s house publication, he asks if ‘there is a better method of offering shoppers a convenient payment method that doesn’t send $425,000 out of the co-op economy to be spent by banks and credit card processors on who knows what.’

“In the same newsletter, Weavers Way general manager Jon Roesser extols the cooperative ideal. ‘Sustainable civilizations yield common prosperity,’ he writes. ‘As member-owners of Weavers Way, we are setting the example through our support of a cooperative enterprise that is forever working toward mutual prosperity.’

“Weavers Way’s credit card fees are part of the billions of dollars credit card financial institutions and independent processing companies earn annually on transaction fees (apart from annual card membership fees). Little, if any, of Weavers Way’s $425,000 ends up supporting the cooperative movement.

“…The power of the cooperative model to blend profit and purpose, and the values of cooperatives that put member interests before outside investor priorities is diminished as a result. That is one factor that led Weavers Way to give a big chunk of business to a friendly and supportive big bank instead of a local credit union when it was expanding its business to a new location recently. The bank offered financing on good terms and worked hard to help the Co-op. In addition to the money it will earn from the loan it made to Weavers Way, the bank is happy to attach its reputation to a much-loved community business.

“To reduce its credit card transaction fees, Weavers Way came up with an innovative solution that organized money in a different but beneficial way. It offered its members a two percent incentive to prepay for purchases through a program it calls Easy Pay: deposit $100 in Easy Pay and receive $102 of value. It is cheaper and preferable to pay members two percent for use of their money than it is to pay credit card companies more than two percent for theirs.

“In addition, the prepayments put a small amount of working capital into the business that might even earn a modest return for Weavers Way. And Co-op members who can afford to prepay benefit financially, at least in the 2019 interest rate environment, because they are effectively earning a higher rate on their money than they can in savings or checking accounts anywhere. Members who deposited and spent $100 each month in 2018 earned two percent per month on their money compared to less than two percent per year in a savings account, or approximately 12 times as much.”

In his remarks at Weavers Way’s Fall General Membership Meeting on Oct. 27, Mark Pinsky, author of “Organized Money: How Progressives Can Leverage the Financial System to Work for Them, Not Against Them,” basically told those gathered to “put your money where your mouth is.” This is also the message our New Economy Incubator Committee is sending with its launch of a micro-loan fund that will help entrepreneurs and small businesses in Northwest Philadelphia. 

In case you missed the presentation about the micro-loan fund at the GMM, here’s a thumbnail sketch: the NEI is partnering with the Free Loan Association for Germantown and Germantown United Community Development Cooperation to offer small loans to those who need money for business purposes but may not be eligible for traditional financing. Instead of providing conventional forms of capital, a potential borrower would only need what we call “social capital”—proven connections with their community through places of worship, labor unions, community groups or neighbors who are willing to vouch for them. Additionally, there are no fees or interest to be paid by borrowers, so their money can go back into their businesses and the community. 

In his presentation, Pinsky spoke about how he was inspired by Weavers Way (see sidebar) to start thinking about progressives needing to make their money work for progressive causes. The committee sees this fund as being part of what Mark is talking about — it’s one way of making our money work for what we believe in. 

The FLAG Micro-Loan Fund needs to grow so we can make bigger loans and have more social and economic impact in Northwest Philadelphia. You can boost the local economy and help your neighbors by making a tax-deductible contribution to Germantown United CDC, the fiscal sponsor of the fund. Make checks payable to Germantown United CDC. Note in the memo: “FLAG Micro-Loan Fund” and mail them to Germantown United CDC, c/o FLAG Micro-Loan Fund, 5320 Germantown Ave, Philadelphia, PA 19144. 

If you are interested in joining the New Economy Incubator Committee or would like more information about the micro-loan fund, please email Peter Winslow at winslow@philaflag.org or go online at www.philaflag.org.