The ORR MED Programme awards grants to agencies that help refugees develop, expand or maintain their own businesses and become financially independent.
Objectives: The overall purpose is to promote economic self-sufficiency in refugees by providing assistance with development, expansion or maintenance of refugee-owned microbusinesses. The program has two objectives: (1) assisting refugees in establishing microenterprise businesses through the provision of MED loans, training and technical assistance, and (2) assisting refugees in developing a credit history and/or repairing their credit score. Allowable activities include technical assistance, maintaining a revolving loan fund (including for credit-builder loans) and a loan loss reserve fund, and administrative activities associated with managing the program. Grant recipients also have the option of providing credit-builder loans for those refugee clients who intend to pursue an MED loan but first need assistance in building or repairing a credit history.
Target groups: The programme is available to eligible persons from the following groups: refugees, asylees, Cuban and Haitian entrants, Iraqi and Afghan Special Immigrant Visa holders, Amerasians and victims of human trafficking. Eligible refugee clients may take out a loan to develop a microenterprise business (a small business employing 10 or fewer people and requiring small start-up capital). Most microenterprises are family-owned businesses employing one or two people including the business owner.
Approaches and activities: ORR has supported MED projects by funding public agencies, community economic development agencies, local mutual assistance associations and voluntary agencies with grants ranging from US$146,000 to US$300,000 per year for five years, through a stiff and competitive grant application process. Recipients are responsible for the implementation of the project consistent with ORR guidelines. They are required to submit a semi-annual narrative, quantitative data and financial report, comparing actual achievements with the goals for the period.
The non-profit organizations may use the grants for a revolving loan fund, a loan loss reserve, and technical assistance such as for networking and outreach activities; providing pre-loan technical assistance such as one-on-one business consultation; training in a classroom setting; business plan preparation and access to business credit. The grant may also be used to provide post-loan technical assistance to refugee-owned businesses and for administrative costs related to the programme.
An eligible client may borrow up to US$15,000, repayable within 60 months with interest not to exceed the prime rate plus 4 per cent. The loan may be used for working capital, inventory, supplies, furniture, fixtures, machinery, tools, equipment, building renovation and leasehold improvements. Some examples of the business types that client refugees own and manage include ethnic restaurants, convenience stores, tyre retail and repair, phone repair, jewellery retail, auto repair, hair salons, alterations, import/export, trucking, taxicab and limousine operations, medical bill collection and home-based child care businesses.
The MED programmes are responsible for the management and collection of the loans they disburse during the entire project period.
Over the years, ORR has encouraged its grantees to seek loan and operating funds for their MED projects from other sources. Currently, almost all of the ORR MED grantees are recipients of grants from the Small Business Administration, the Community Development Financial Institution Fund of the Treasury Department, foundations, corporations and financial institutions such as Citi, Wells Fargo, Capital One and Bank of America. As a result, a significant portion of the funds they disburse each year to refugee borrowers are leveraged from other sources. The availability of loan funds from other sources has enabled the programmes to lend more than the ORR limit of US$15,000 to meet the capital needs of these borrowers.
Impact: Since 1991 the ORR MED programme has enabled thousands of refugees to become economically self-sufficient by providing them with capital and the necessary training and technical assistance to start their own business.
In FY 2015, MED programmes provided services to over 2,000 refugees, including one-on-one counselling, business training, and pre-loan and post-loan technical assistance including business plan preparation and financing to start, expand or strengthen a business. MED programmes have provided 558 loans of US$8,000 on average to ORR-served populations. Businesses that were created or retained through the MED programme contributed 1,163 jobs to the US economy.
Source: ORR, Microenterprise development.
Box 1.2d. Microenterprise Development Programme, United States (National level)
A recent OECD study titled “Working together for local integration of migrants and refugees” describes how countries, regions and cities can adopt a territorial approach to integrating migrants and why they should do so. 41 It brings together 12 lessons for developing and implementing migrant integration policies at the local level. Integration is a transversal issue that cuts across policy sectors (e.g. education, health, housing, welfare). Cities also intervene in employment and labour integration, providing a wide array of critical services to newcomers and long-established migrants, including entrepreneurship support. The lessons provide the following insights for local authorities aiming to promote migrant and refugee entrepreneurship.
Multi-level governance
Local and regional authorities can inform the relevant stakeholders about national initiatives to develop entrepreneurship that apply also to migrants living in their territory. In addition, they can inform higher levels of government about local experience with successful initiatives for migrant entrepreneurship. This exchange can happen, for instance, through thematic dialogues across levels of government that allow for information sharing and coordination (e.g. through initiatives such as national and local round tables, and integrated national strategies). Most interventions in favour of migrant entrepreneurship are local and very reliant on community-based infrastructure and organizations.
Breaking silos: integrating policies at the local level
Information mechanisms: Local authorities can ensure that information about entrepreneurship opportunities, capacity-building and funding is available to migrants. In particular they can ensure that traditional entry points for newcomers, as well as entities that offer complementary services to migrants, such as local welcome hubs, language training centres, skills assessment and orientation centres, and public employment agencies, are equipped with updated information about entrepreneurship opportunities. Given the low take-up rates for migrants in public support programmes, cities could also reach out more directly to migrant communities.
Policy coherence: To ensure that migrants have the opportunity to build entrepreneurship skills like everyone else, local authorities should try to ensure that all relevant policies are aligned. This implies identifying and addressing obstacles that migrants face as a result of their limited knowledge of the local business and regulatory environment as well as obstacles they face in accessing entrepreneurship training for reasons related to lack of information, requirements related to language and to education certificates, and incompatible working hours. In particular, local administrations should take into account the situation of migrant women who might face obstacles in relation to child care and cultural barriers.
Examples:
• Plan Einstein of the city of Utrecht is an eight-week training for entrepreneurs to develop a value proposition for starting their own business. It addresses local community and refugees and is taught in English and Dutch.
• Other cities provide support in the language of the relevant targeted communities; for instance, in Copenhagen an entrepreneurship coaching programme provides courses in many languages through a network of professional coaches from migrant communities to make the support more appealing and to avoid the need for translation or interpretation. Other cities offer integrated entrepreneurship packages with training in languages, marketing skills, the legal and business environment and self-reliance, as well as initial funding.
• Eigen Werk provides integrated packages of entrepreneurship support to all people in Amsterdam.42 In addition to business management training, participants can benefit from microfinance for migrant entrepreneurs provided by the municipality. Both the Utrecht and the Amsterdam training sessions include assessing the compatibility of value propositions formulated by the participants with the training with the local market by mapping existing entrepreneurs, using data from the chambers of commerce, and running online tests to determining whether there is sufficient demand for the services or products proposed.
Coordination with non-State actors
Creating social capital: Given local authorities’ familiarity with the local market and business players, they can organize opportunities to strengthen the social capital of those who arrive and want to create their own businesses. They do so, for instance, by creating spaces for start-ups and building mentorship partnerships. In small municipalities, creating social capital might be easier because of the proximity of economic actors; however, it might also take more effort to overcome the limited experience or openness of the local business community to work with people from different cultural backgrounds.
/…
Box 1.2e. OECD – Local integration of migrants and refugees (Local level)
Examples:
• In Vienna, access to business networks is encouraged through a “Mentorship Partnership” between a migrant and an expert in the sector in which the migrant wants to create a business. Such partnerships last six months.
• OECD research in the city of Altena (Germany) pointed to a shrinking number of shops and services due to a lack of local entrepreneurs that could have been offset by transferring the businesses to migrant entrepreneurs settling in the city.
• Building on the experience of migrant networks: Many municipalities support migrant associations that offer advice and capital to newcomers who want to become entrepreneurs. Migrant associations and faith-based organizations are often the easiest way to access start-up capital, particularly in those countries where public incentives and allowances (i.e. temporary income support to entrepreneurs) are not available.
Examples:
• The city of Berlin supports the activities of a Turkish organization specialized in providing advice to migrants who want to set up, or are already running, a business.
• In Rome and Athens, the Chinese and the Filipino associations provide start-up capital to their members. In Rome, some faith-based associations (e.g. Associazione Tuscolana Solidarietá) provide microcredit to migrant women.
Improve access to finance with microcredit and self-funded communities
Microcredit: The provision of microcredit seeks to tackle market barriers and cultural barriers simultaneously given that commercial banks lend against the provision of collateral and for business models that are not necessarily used by migrant entrepreneurs. When combined with financial education and business advice, microcredit programmes can also address skills barriers. The main advantage of microcredit is that, unlike other financial products (e.g. guarantees, crowdfunding), it is a mechanism specifically designed for entrepreneurs who experience difficulties in the credit market.
It can also help individuals build a credit history to improve their access to traditional sources of finance. Although there are different models for how microcredit programmes operate, local and regional governments can have a strong role in raising awareness and directly connecting migrant entrepreneurs to microcredit schemes, supporting the operating costs of such schemes and connecting microcredit providers with other entrepreneurship training, coaching and mentoring programmes.
Community-based financing systems: There has recently been a revival of community-based financing systems, particularly in southern EU countries.
Examples:
• Spain has seen the growth of the Associació de Comunitats Autofinançades (ACAF, or Association of Self-Funded Communities) a non-profit organization that fosters the creation and development of self-funded communities, a group methodology that was developed in Latin America. The role of ACAF is largely to consolidate funding to support the development of the infrastructure for self-funded communities. Funders include regional and local governments, private sector companies and several private foundations.
Source: Anna Piccinni and David Halabisky, Centre for Entrepreneurship, SMEs, Regions and Cities, OECD.