In April 2022, Umpqua Bank announced a groundbreaking partnership: The Oregon-based financial institution had launched a managed fund of $1 million to help facilitate 0% interest Kiva US loans to historically underrepresented small businesses owners.
Six months later, Umpqua and Kiva are celebrating the disbursal of that entire million to women and BIPOC entrepreneurs across four US states.
Umpqua reached the million dollar milestone by triple matching loans made by lenders on Kiva’s website. With the help of their communities and Kiva lenders, hundreds of qualified borrowers in Oregon, Washington, California, and Idaho have now unlocked the capital needed to help their businesses thrive.
How Umpqua lent a million dollars in six months
“The power of Kiva’s model is that it not only creates opportunity for entrepreneurs, it also gives anyone who cares about economic justice and opportunity a way to make a real, meaningful difference.”
As a traditional financial institution and the largest bank in the Pacific Northwest, Umpqua must follow federal regulations that make it almost impossible to offer small business loans of less than $50,000. Many small business owners don’t have the credit history, equity, or collateral to qualify for such loans, and these barriers are even higher for BIPOC and women entrepreneurs.
By leveraging Kiva’s innovative crowdfunding platform, the bank found a way to support microfinance through its bank, which offers grants and programs to address racial and social justice issues and make an economic impact on under-resourced individuals and communities. By making it easier to access loans and other financial services, Umpqua is helping small business owners stabilize and scale, perhaps to a point where they may become traditional banking customers.
“We’re trying to think creatively about how we bring the pieces together for these entrepreneurs to make that experience as seamless and easy as possible,” said Eve Callahan, Umpqua’s chief marketing and communications officer, in a recent interview with Opportunity magazine.
Umpqua’s 3-to-1 match means that for every $25 someone lends to one of the program’s Kiva US borrowers, Umpqua puts in another $75. This enables more small business owners to get funded faster and start putting their ideas into action.
It also gives lenders a chance to make an impact in their own communities.
“The power of Kiva’s model is that it not only creates opportunity for entrepreneurs, it also gives anyone who cares about economic justice and opportunity a way to make a real, meaningful difference,” Callahan told Kiva earlier this year.
“Our partnership with Kiva gives people a chance to learn about entrepreneurs’ stories, understand their goals, and then become part of their success by contributing any amount, small or large, that we’ll triple-match.”
The program quickly reached the million dollar mark, creating a sustainable source of microfinance capital as loans are repaid and the fund is replenished. With Umpqua’s pending merger with Columbia Bank in Washington, the partnership has the potential to reach even more Kiva US borrowers.
Funding women and BIPOC entrepreneurs
“Cash is a lifeline, and Kiva's zero percent interest model is a gift for small businesses seeking to grow thoughtfully.”
Around 85% of Umpqua’s support for Kiva loans goes toward BIPOC business owners, like Ximena, who runs Huitzil Imports, a shop selling imported Hispanic and Latinx goods in Beaverton, OR.
Ximena and her husband regularly travel to Mexico to procure jewelry, crafts, spiritual totems, and other handcrafted items from traditional artisans. In early 2022, however, plane tickets were so prohibitive that they needed an infusion of capital in order to make the trip. Dozens of lenders in their community contributed a Kiva loan of $2000, including a significant triple-matched sum.
“I saw Umpqua Bank and thought, ‘Wow. I couldn’t believe they noticed us,’” marvels Ximena.
The loan covered the cost of the plane tickets as well as inventory purchased from the couple’s network of indigenous artisans and craftspeople, expanding their offerings to the Portland area’s Latinx community.
An Umpqua-backed Kiva loan also helped Lola bring diverse tastes to the cultural landscape. As the founder of Umi Organic, she developed a line of healthy Japanese-style noodles and sauces using locally-sourced organic grains. Lola first sought a Kiva US loan to broaden her packaged offerings into grocery stores in 2017, and the next one parlayed that success into contracts with Portland public schools, hospitals, and universities.
“Cash is a lifeline, and Kiva's zero percent interest model is a gift for small businesses seeking to grow thoughtfully,” said the chef-entrepreneur, whose most recent loan was triple-matched by her hometown bank.
Further south in San Francisco, another food-based small business owner has scaled thanks to the Umpqua-Kiva partnership. Mehdi launched Oyna Natural Foods after he and his family immigrated to the US from Iran. He and his wife quickly built a foodie following for their authentic Persian kuku, a vegetable fritter they make with organic ingredients. Business has been brisk, but Mehdi needed resources to grow.
“We are updating the packaging line with new machinery that requires funding,” he explained on the Kiva website.
Along with 31 Kiva lenders, Umpqua Bank helped this immigrant family-owned company increase production and efficiency and create more opportunity for success.
Kiva US loans help bring equity to underserved communities
Small businesses are an important driver of the US economy, making up 44% of economic activity and creating two out of every three new jobs. Yet many US entrepreneurs are excluded from traditional bank loans and other financial services due to low credit scores and other socioeconomic barriers.
Rather than require collateral or high credit scores, Kiva US loans ask potential borrowers to seek seed funding from their family and community to vouch for their credibility. This process of “social underwriting” is a powerful predictor of a loan’s repayment and promotes Kiva’s mission of financial inclusion for all.
With this practice, Kiva US has facilitated more than 7,800 zero percent loans to borrowers in the following communities:
- 63% to women
- 32% to people of color
- 17% to immigrants
- 43% to borrowers with less than a 650 credit score
Some use the money to purchase inventory, others to buy equipment, but every Kiva US borrower shares the ambition to grow their business and improve their lives. It’s this strong desire for success that Umpqua Bank believes makes Kiva borrowers a sound investment.
“When people make an investment in entrepreneurs at this level, they take it very seriously and pay it back,” says Callahan.
Of the $1 million currently disbursed, she reminds that as borrowers repay their loans, the capital will be available to invest in more entrepreneurs.
“It will self-perpetuate and continue to support the fund. If you have a small business or even just an idea, there are funds available.”