The unemployment rate numbers are still startling, even after so many months of recession. A reported 9.1% of Americans are out of work, and this percentage does not include those who have given up looking for a job. Look more closely at the Hispanic and African-American populations, and the unemployment numbers rise even more: 11.3% and 16.7%, respectively. Clearly, we need to do something.
And that is where Howard Schultz, CEO of coffee retail giant Starbucks, has seen a way to help. He has partnered with the Opportunity Finance Network (OFN), a national network of Community Development Financial Institutions (CDFIs) serving all 50 states, to start the Create Jobs for USA program.
Goals & Mission of Create Jobs for USA
This initiative will help to create and sustain jobs by providing capital to CDFIs so that they can offer affordable loans to small businesses, nonprofit organizations, commercial real estate, and other under-served community businesses. These businesses will then have the capital necessary to start up or expand, creating new jobs. According to the U.S. Small Business Administration, small businesses employ more than half of all workers in the private sector. This program will give these “job creators” the money needed to offer or maintain more jobs.
Starbucks seeded the Create Jobs for USA program with $5 million in contributions as of November 1, 2011. Now, it’s our turn to donate. For a minimum $5 donation at any Starbucks location or on the Create Jobs for USA website, you will receive a red, white, and blue wristband emblazoned with the word “Indivisible.” Although Starbucks will not be matching contributions, the use of its well-known brand will help to get the word out and thereby significantly increase donations.
How It Works
The Opportunity Finance Network will use 100% of the money donated to the program to provide capital grants to the 180 CDFIs that comprise the network. These CDFIs are small community lending institutions committed to offering affordable loans to under-served small business owners and entrepreneurs, many of whom find it difficult to obtain financing through traditional banks. This initiative is working to get more money into the hands of people who can create new jobs.
For every $5 donation received through the Create Jobs for USA program, CDFIs will average a match of $30 in financing from community lenders. Opportunity Finance Network predicts that a job will be created or maintained for every $21,000 in loans, which means that every $3,000 in donations – plus the matching funds the CDFIs will be able to secure – means another job is available for one of the United States’ many unemployed workers.
This is yet another example of peer-to-peer lending giving nontraditional and under-served business owners an opportunity to grow using affordable credit. And as with other forms of micro-lending, the repayment rate for these CDFIs is nearly 98%, which means that the money donated through this program will be “recycled” – that is, the money will likely be loaned out repeatedly.
Partnership With Starbucks
By partnering with the OFN for this program, Starbucks is able to offer to the cause the $5 million seed money, a great reputation for an ethical working environment, and the benefit of its ubiquity. With a Starbucks seemingly on every street corner, it’s very easy for each of us to donate $5 when buying a cup of coffee.
The Indivisible bracelet is also a savvy way for Starbucks to help spread the word about this program. These bracelets are handmade in America using homegrown component parts and are designed with eye-catching, patriotic colors. Donors wearing these bracelets will have a built-in conversation starter, helping to further the cause of helping America get back on its feet.
As of November 14, 2011, Starbucks and the OFN report that more than $1 million has been raised through the program. With the $5 million that Starbucks donated as of November 1st, the OFN anticipates being able to create as much as $42 million in loans.
Criticisms of the Program
There are some concerns about the utility of this program:
1. Doesn’t Account for Lack of Demand in the Economy
The first issue has to do with exactly why small businesses have been laying off employees – and it has little to do with lack of access to loans. According to the Wall Street Journal, “the main reason U.S. companies are reluctant to step up hiring is scant demand.” If small businesses are simply not selling their products, loans will not help them to create new jobs.
Starbucks’ Howard Schultz recognizes that there is nothing this initiative can do about lowered demand for products and services, but he hopes this campaign will help to get the word out about the availability of these loans, which many small business owners are not aware of.
2. Large Amounts of Paperwork and Limited Availability
A further concern regarding the program is the amount of paperwork and red tape necessary for a small business to qualify for a loan through the CDFIs, which in turn must jump through several hoops to be considered a part of the OFN. And since this program is designed to help under-served communities, that means that struggling small businesses in areas that are not deemed low-income by the program are ineligible for Create Jobs for USA funding.
3. Association with Starbucks
Finally, it may strike some as hypocritical that one of the most ubiquitous American retail chains – which is probably responsible for the death of many local coffee shops – is working to help small businesses. It is possible to donate money to this cause without entering a Starbucks location. Though the coffee giant may receive some goodwill marketing by spearheading this movement, they are making it easy to donate without becoming a Starbucks customer.
The Create Jobs for USA program will certainly not be able to solve America’s recession problems on its own. But it can help to un-stick the credit market for small businesses, get Americans talking about the need for growth in small businesses, and remind us all of the importance of spending locally. That’s a lot of benefit for a $5 bracelet.
What are your thoughts on the Create Jobs for USA program? Do you think it has the potential to make a difference?