Episode 48 with Just founder Steve Wanta
Basing loan-worthiness on more than just payment histories and credit scores, but rather trust within your community? You may have heard of microloans for entrepreneurs in developing countries, but Steve Wanta wants to bring that concept to America, helping low-income entrepreneurs start businesses that could change their lives and the lives of their families.
With his organization, Just, Wanta and his team are not only finding financial assistance in the form of microloans for low-income entrepreneurs, but also helping them develop business strategies, stronger ties to their communities and a support network as they embark on taking control of their financial lives.
So let’s get Charged Up! about credit for microbusinesses.
Jenny Hoff: Steve, thanks so much
for joining me today.
Steve Wanta: My pleasure. Thanks
for having me.
Hoff: Let’s first talk about your
background. How did you get involved and inspired to help low-income
entrepreneurs succeed in business?
Wanta: Really, the origin starts with
my time in the Peace Corps. I was a Peace Corps volunteer in Guatemala. When I
finished in 2005, I was at the right place at the right time and Whole Foods
Market had just started their foundation Whole Planet, and I was hired to be
the fixer and bounced back and forth between Guatemala and Costa Rica where Whole
Planet Foundation had partnered with Grameen Bank, and John Mackey met Muhammad
Yunus two years before he won the Nobel Peace Prize and they talked about how
they could collaborate to support micro entrepreneurs in communities where
Whole Foods sourced product. From there, they set out to replicate the Grameen
Bank in those two countries, which ultimately meant 10 Bangladeshis were
airdropped into Central America.
Wanta: Yes. So they didn’t speak
Spanish. They knew how to give small loans to some of the world’s poorest
people and get that money back but there was an important piece of support that
was missing so I was hired to be that support, that guy on the ground. So, I
did that for 10 years. The foundation grew both the money I was able to raise
and also our programmatic philosophy which was rooted in those first few years
in Central America. After 10 years, I left to launch Just, the organization
that I oversee today.
Hoff: I love that Just helps low-income
entrepreneurs in the United States, correct? Because usually when I hear of
microloans, I do hear of in Africa or Central America, in different places but
you focus on U.S. entrepreneurs. Can you tell me a little bit about Just and
its philosophy and what it does?
Wanta: Sure. Just invests in
hardworking low-income entrepreneurs to create a more financially resilient
America. We offer capital, coaching and community designed to help people make
more money but we also see it’s important to build better financial habits that
can potentially help people spend less or spend more wisely so that at the end
of the day our higher purpose is to help people save more money. We actually say
our highest purpose is to help people live with less stress and more joy.
Hoff: Nice. How does somebody qualify?
What income bracket do they need to be in? What qualifies them to be able to
apply for a microloan from your company and receive that coaching which is
invaluable as far as teaching them all the tools they need to really make their
business efficient and successful? How do they qualify? What kind of traits are
you looking for?
Wanta: As much as we offer credit, we
talk about our real product being trust. This system, for decades, has been
applied around the world. We have reimagined that for the United States, both
unique opportunities and challenges facing our low-income communities. So,
through that, to qualify, you have to be trusted by someone that’s already in
our community. So, we’ve gone through to reimagine social capital that’s
critical to microfinance around the world. We’ve done that by creating a
leadership layer within our entrepreneurs. So, we put entrepreneurs that are
servant-leaders by nature through an eight-week leadership training program,
where we give them access to unique tools and unique ways of seeing the world
designed to help our leaders become lifelong learners as well as comfortable
facilitating conversations within small peer groups.
Hoff: OK. So, they go through a
training program. I know that one of your core goals is that they also give
back to their community. But as far as helping the entrepreneurs get their
businesses off the ground, make sure that they’re getting the financing that
they needed, make sure that they’re practicing good money management skills,
you look at instead of a credit report from somebody which is what a lot of
loans do for a lot of these people, they might be considered nonprime borrowers
– so, people that basically banks would not lend money to. You guys base your
trust on them on a different system. Even if they have very bad credit scores, if
there is somebody within the community of your company that recommends them,
that’s where you base your trust, correct?
Hoff: So, then what does that do?
Walk me through the process.
Wanta: Sure. I think it’s really
important to take a step back for a second. What is fundamentally challenged in
the United States is the narrative that low income entrepreneurs are less than.
So, our system today keeps people out of accessing resources that they need and
capital is just one of them. So, you have to start from the first belief that
people are inherently capable. If you do that, then you can start to ask the
questions, how could the system be designed so they could be successful versus
how do we mitigate risk? When we welcome someone to the community, we create
intentional friction. So, we do that by having very simple process that they
have to complete. And if they do, they’re demonstrating that they are showing
up and they’re demonstrating that they’re trusted by at least two other people.
And then from there, we create opportunities for them at a small group level to
have support and accountability. So, each entrepreneur within Just meets on a
weekly basis with their small support group that could be as small as 3 and as
large as 10. We then quarterly, monthly gather all of our community to connect
with one another as a space to be inspired by what is possible. So, all of
these little things start to add up to a more resilient community, a hopefully
more successful entrepreneur that’s saving more money.
I think the
thing that I uncovered by doing this work after being a funder for a decade is
that there are really three categories of reasons why people won’t repay you in
the system. Their business fails. They have an emergency. Or, they’re gaming
the system. There are bad intentions. So, what were really clear on with our
entrepreneurs is that no one can game the system. We have to protect one
another. If we can protect one another, we’ve got a fighting chance. We’ve eliminated
a third of the risk, then the other things that we do around coaching are
designed to help people have, if only incrementally, better businesses as well
the emergencies. We talk a lot about savings. The importance of creating your
own safety net as a way to be proactive in mitigating that third area of
Hoff: Give me the profile of a typical
entrepreneur that would join your community as far as their income goes, what
kind of business are they starting, how big are these businesses. Give me a
profile. Their credit history if you have access to it. What would be the type
of person that would join your community?
Wanta: Currently, we are exclusively in
Central Texas. We are focused on being intentionally small right now so we can
test and learn to build a scalable solution that has the client’s interest, the
impact at the individual level first and foremost. So currently we serve
exclusively Spanish-speaking women. Our average client has three children. Forty percent of those clients are single mothers. The average family monthly income is
$3,200 a month. Really, what we see for out entrepreneurs, they range from
buying and selling things within their community. Maybe selling things at the
flea market to those that have food businesses, oftentimes, people in the
beauty industry. And then you start to see people that do have a higher
capacity, maybe a family business that has a couple of employees. The common
thread between all of our clients is they don’t have access to credit designed
for their success. Whether they can access that at all or they wouldn’t qualify
or they have accessed predatory payday lenders in the past as a way of getting
through tough patches.
Hoff: OK. So ,they’re basically not
in the credit market. They’re not getting loans. The banks wouldn’t consider
them or they don’t have access to those kinds of loans for businesses.
Hoff: So, then you guys do these
microloans. How much of a loan would you guys initially give one of these
entrepreneurs and where do you get that money from and then how is it repaid?
Wanta: Starting again from our core
product which is trust, that first loan that we give to new clients that have
been invited by one of our leaders is $750. They pay that back in three months.
It’s a very short-term loan designed to test trust, test their ability to
manage that credit so it ends up being $60 weekly repayment for 13 weeks. So,
we understand that small frequent repayments are better suited for our clients
to help them manage cash flow. Also, it speaks to the discipline that we want
to see created within our community. Since this is a money show, it’s important
to be specific and talk about numbers. So, we charge $15 of interest on that
$750 over the 13 weeks. It really is, from business term, we would consider
that a loss leader. It’s a great way to build trust and we have 99.9 percent repayment
and we’ve got 98 percent of our clients come back for their second loan.
Hoff: So, it’s a minimal risk loan that
basically is there to establish credit per se. so it’s not something that’s
going to the credit bureaus but it’s your own little credit bureau in a sense
where you can see how they’re able to repay if they can make those weekly
payments on time, if they’re trustworthy in that sense.
Wanta: Just to be clear, because of our
age, we can’t right now, we haven’t been able to yet, but we will report to the
Hoff: OK. So eventually, this will
actually also help them build a credit profile that they can use in the future
when they need bigger loans for their business.
Hoff: OK. So, you start with the $750
loan. That’s going to take them a little bit, but obviously it’s not going to
be a huge boost to their company. And then they get incrementally bigger loans
as they prove their trustworthiness?
Wanta: Correct. We will lend someone up
to $5,000 in increments of $500 or $1,000. Until $5,000, it’s all trust. It’s
all their ability to show up, have other people that trust them. After $5,000,
we will look at cash flow. We will analyze people’s ability to pay because we
talk about we offer credit but we hate that. This is an investment and we want
to make sure people have the capacity to manage those investments.
Hoff: For people who want to invest,
let’s say, in Just and they want to be loan providers, do they get interest
back? What is the incentive for them or is that more of a social
entrepreneurship, kind of more social capital they get back?
Wanta: No. Absolutely. We want to
create systemic change. And the only way we can do that is by developing an
economically viable model. Microfinance really is the forbearer to the modern
impact investing that we talk about, that oftentimes people are drawn to. So,
we have already borrowed money from family offices and we’re paying interest on
that money. It’s a spread that we can manage. The theory is that we’ll get big enough
where that spread will cover all of our cost. To date, we haven’t built a very
easy way for people and the general public to be a contributor to some really
cool things out there. The Calvert Foundation has a program called Yours to
Own, I believe. It allows people to contribute in small increments, as little
as $20 with a return of 1 percent to local community development projects.
Hoff: Which is cool. That’s even
better than you’re getting at the bank right now, as far as interest goes.
Wanta: Yes, totally.
Hoff: So, if it’s sitting in the bank,
you might as well go contribute it to something that you can get a return and
it also helps the community.
Wanta: Yes. So, we’re in the process of
becoming what is known as this Community Development Financial Institution -
CDFI. There’s a group called “MyCnote.com” that’s taking this crowdsource, this
peer support model and essentially making a very same argument. You’re not
getting any money of savings in your bank account, so why not put it to work
with CDFIs. So, there’s so many cool things that are coming out today that are
marrying our business and social interests. So, hopefully we can see more of
Hoff: Right. Because it’s not the kind
of interest that a traditional lender would get back. They would charge a much
higher interest if it was a risky business but it’s more of an interest that an
individual would get from their banks. It’s a win-win situation where you can
offer low interest loans to people who really need it, and the people who
contribute to those loans can get more interest than they would get if it was
sitting in the bank. And so, there’s a lot of companies out there you say that
facilitate this process, the people, if they wanted to invest in this could get
Wanta: Yes. There’s a few now in
different sectors. I think one is called Fundrise which invest in real estate.
Another, MyCNote is what I mentioned before which is focused on community
development financial institutions. So yes, I would hope to see more and more.
The question is, the devil is always in the details. As a programmatic guy from
a foundation, I always wonder when I look underneath the hood and see how it
all really works.
Hoff: Right. Exactly. At the end of the
day. These are for-profit entrepreneurs that you guys support. These are not
guys starting nonprofits.
Wanta: Absolutely not. They are really,
I think, the image of someone hustling on the side, a side job or a side
company in addition to their part-time work. Many single moms that need to make
a little bit more money while taking care of their children. It’s a profile of
clients that are really resilient. They really are capable but there’s a lot of
stuff working against them. So, this access to a little bit of capital and some
coaching and probably most importantly, a community of like-minded peers is —
Hoff: Sure. Keep them motivated.
Hoff: Absolutely. I love that idea. I
worked with a social entrepreneur organization for a while which was similar in
a sense where they look at people who are contributing social value to the
community but through for profit companies, and then they would contribute some
money in as far as consulting from business consulting which is very valuable
to people who don’t have a business background. Who are some of the more
interesting entrepreneurs you guys have supported or that you’ve seen?
Wanta: There’s two that I always refer
to. I think they are beautiful stories because they demonstrate the potential
progress. Maddie, she started a piñata business. It didn’t go so well with her
first loan but she was able to repay her loan. She learned from the experience.
Then she took her second loan and then she bought party supplies, tables,
chairs and she paid rent – that went a little bit better. And then her third
loan, she borrowed $3,000. She could have borrowed $3,500 if she wanted but
instead she took less. She bought a sewing machine and she took her own lessons
on how to use so that she could sew tablecloths as part of her party business.
She’s seeing the capital as a new door that’s opening and she’s able to
incrementally add to her business. It’s not being viewed as this debt that she
has to pay off so she can be free. She’s really seeing it as a catalyst for her
future growth. And then another client that I think is so great, Reina. Single
mom. Three kids. She buys and sells handbags. She runs around Austin and
selling these handbags. Through our leadership program, she realized her need
to have greater control of her money and her inventory. She made that decision
all on her own. And through that, she challenged herself to save every $5 bill
that came across her hands. So, within one month, she was able to scroll away
$900 in $5 bills.
Hoff: Wow. That made a big
Wanta: Yes. And then that story which,
I think, is the powerful part of any sort of community is she’s able to share
her tips and tricks with this community of people that are wanting to do the
same. So we’re creating an aspirational environment where people get to share
and contribute to helping other people make those sorts of changes.
Hoff: Absolutely. And so, when you guys
do your coaching and you guys provide some tips on how to better manage money,
how to budget, what are those tips that you give? What is something that you
would say maybe to an entrepreneur not in Central Texas? A low-income
entrepreneur or somebody who’s working a side hustle, trying to make a little
bit of extra money. What are the tips that you really give these entrepreneurs
in order to be most efficient with their resources to make it successful?
Wanta: We really see financial
education and literacy as behavior. The first step to changing a behavior or
building a habit is awareness. What are we doing today? How is our past
influencing our future? We have a few different exercises which are really
simple and they are designed to generate greater personal awareness around your
money. So, this most simple one that we do with all of our entrepreneurs is
have them take a card, a 3-by-5 card and for a week, write down everything they
buy. It’s very different. I would challenge you to do this, Jenny.
Wanta: Write down everything you bought
on a piece of paper and a pencil. It’s very different from having Mint or
something other track your expenses automatically through your phone. Sure, you
can look back at it but there is an emotional decision when you buy something,
especially if you know you have to write it down. Everything we do, we always
go through it first as a team at Just, so my experience writing down everything
for a week, I realize I was spending so much money on coffee for all these
coffee meetings that I had and it wasn’t one of shame that I shouldn’t be
spending so much on coffee, was this now this new awareness. It was much easier
for me to decide to make coffee at home first versus I think some of these
money management blogs will tell you just eliminate your Starbucks latte and
you’ll save thousands of dollars a year. But we would say if that brings you
joy, why deprive yourself of joy? From there, that less stress, more joy that
helps inform us. So, through all of these experiences that we talk to with our
clients, we have them to have a mentality of an investor, which means, for us,
choice. And if you spend a lot of money going out to eat with your family, you
have a choice. If you decide to go out to dinner, we want you to see that as an
investment in your family.
Hoff: Yes. Absolutely. So, it’s
changing your mindset so that there is value to every dollar that you’re
spending. How could being an entrepreneur change the life of somebody in a low-income
Wanta: Well, I think that there’s
something really special about the entrepreneur regardless of their status in
life, whether they’re running a large company or a woman that’s buying and
selling stuff at a flea market. There is this willingness to take a risk. There
is this willingness to change, this desire to change. This desire to grow and
believing that you’re capable. So, for us, that is why the filter of focusing
on entrepreneurs is so important because we see them as this foothold into
communities so that as they change and grow and evolve and improve, they’ll
start to be community leaders that may affect their family or may affect others
that are seeing them be more financially secure. We know that change has to come
from inside out. Entrepreneurs are predisposed to that change. We believe if we
can create a network of trust and role models, we can have the potential to do
something pretty cool.
Hoff: Very cool. What are three things
that somebody listening to this right now who’s considering starting their own
gig should consider as they get started?
Wanta: For every person, that journey
will be different. I’ve had a big guy give me a piece of advice and it was
never take anyone’s advice. It was a healthy dose of irony there but, I think,
is really important if you’re going to do something, understand why you want to
do it, really look at that why; realize you can start incrementally too; and
third, don’t be afraid to take a leap.
Hoff: All right. And finally, what gets
you charged up about helping struggling entrepreneurs learn the ropes and get a
leg up in making their goals happen?
Wanta: I get charged up by the
excitement people have when they’ve been trusted seemingly for the first time.
So, I get even more excited about doing that as many times as possible.
Hoff: Very cool. Very cool. I know for
a lot of people who have been through that before, who have been single
parents, who have been struggling, who keep getting denied for credit cards or
getting denied for loans, and they feel like they’re in a hole that they can’t
get out of, I’m sure that is a very fulfilling feeling for them too, to finally
have somebody say, “Hey, I’m going to give you a chance because I believe you
can do it.”
Wanta: Yes. And what we say is
that poverty is a human problem that requires a human solution.
Hoff: Absolutely. Absolutely. Great
interview. Thank you so much for talking to us. Very inspirational. I think
that a lot of people should either be inspired to start something on their own
and see if there is help out there or to get involved in helping create more of
these kinds of organizations and organizations like yours so that more people
can get access to money and to loans, so they can make their entrepreneurial
dreams come true. Thank you so much for joining me today.
Wanta: My pleasure. Thanks for having
See related: Charged Up! podcast: Becoming a successful entrepreneur
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