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Last February, Angela Perez was on the brink of financial ruin. A full-time mother with a full-time job, she was the sole supporter of five children and a commercial fisherman husband, who was staying at home with the children at the time. Her weekly paycheck was the family's lifeline, so when Perez was forced to miss a week of work because of an extended child custody case in Ketchikan, the situation became serious.
The Christmas season had just ended. Bills were coming in and the rent was due. Perez and her family were facing eviction, which would have meant relying on the generosity of friends or the Glory Hole until she had saved money for a new apartment. When a friend suggested she contact the St. Vincent de Paul Society of Juneau, Perez acted because she had no other options.
As it happened, Dan Austin at St. Vincent's had been thinking extensively about how best to help the working poor. He had established a unique credit union program through which someone like Perez, with no credit, could receive a low-interest, low-payment loan and thereby avoid destitution.
Perez does not like debt and was not looking for a huge loan. She wasn't looking for a handout, either. When she entered Austin's office and he asked her "what's best for you," she was relieved. Austin helped her figure out exactly how much money she needed, $750, and what she could afford to pay per month, $50. He then sent her to the Alaska State Employees Federal Credit Union, where she opened an account and took out her loan. She was able to pay her rent, continue working, and avoid slipping into what Austin calls the "underclass." She also has been able to establish credit.
"One of the biggest obstacles to people entering the middle class is not having access to credit," Austin said.
Austin began brainstorming for a way to help the working poor more than two years ago. The problem he saw in his job at St. Vincent's was that poor people, unlike the middle class, often have no credit, or bad credit that they can't make better. So when they hit a "bump in the road," like the one Perez hit in February, they fall further into poverty and lower their chances of ever making it out.
The solution came to Austin from an unlikely source: An article on micro-lending programs in Bangladesh. Microloans are relatively small loans given to people that stand no chance of getting a loan from a conventional financial institution.
After reading about microloans in the Third World, Austin wondered whether a similar program would work in Juneau. He shared his ideas with Sharon Kelly, CEO of the state employees' credit union and a fellow member of the Catholic Community Service board. Kelly agreed that a micro-loan program similar to those used overseas could be successful here.
"Credit unions are all about people helping people," said Kelly. She petitioned the National Credit Union Administration for a change in her credit union's charter to allow it to admit low-income members. That done, establishing the St. Vincent Credit Union Program was relatively simple.
With revenue from St. Vincent's thrift store, local donations and state and federal grants, including support from the United Way, St. Vincent de Paul maintains an account at the state employees' credit union. The money in the St. Vincent account is used to secure loans to low-income clients. If the client pays back the loan in full, without missing a payment, St. Vincent's will reimburse the client for the interest paid. Much of the money for these reimbursements comes from interest earned on the St. Vincent account.
Perez never had a savings account before taking a loan from St. Vincent's, and plans on saving her interest reimbursement. She also is building credit so she can take out another loan if she needs to in the future.
"It was a blessing, it really was," she said. "It gave me some kind of dignity, because I wasn't taking a handout. It was a real professional way to do it."
The St. Vincent Credit Union Program has given a total of $73,000 in loans this year to 81 clients. Fifteen of the clients are on their way to paying off their loans entirely.
In time, Austin hopes the program won't require the infusion of funds from the St. Vincent de Paul Society. He believes this will be possible within the next two years once the account holds at least $200,000 and the amount of loan repayments coming in each month equals the amount loaned out.
"Low-income people will be helping low-income people, without the government, without money from charities and donations ... They will be self-supporting," he said.
For the time being, Austin is forced to turn away approximately half of the people who approach him for membership in the program. No one goes away from St. Vincent's hungry, he said, but he is forced to prioritize. Only those clients who pose the least risk are allowed to participate in the program, which has a delinquency rate of 9 percent.
Kelly, from her perspective at the credit union, is impressed with the success of the program, which is one of the first of its kind in the nation.
"We're very, very pleased with what is happening," Kelly said. In fact, she said, her organization has been asked to put together a model of the St. Vincent program for other credit unions to use as an example.
Perez, who is back on her feet, raising her children and working to publish several children's books, is sure of the credit union's success. Not only did the program allow her to avoid a fall into extreme poverty, it also taught her there's always a way for her to help herself.
"You're never at a point where there's nothing."