Small business entrepreneurs are vital to a thriving economic landscape that propels society forward. Their ideas lead to more innovation and job creation and spur new economic growth throughout the country. A 2019 Small Business Administration (SBA) report found that small businesses contributed 44% of U.S. economic activity and created two-thirds of net new jobs. They are especially crucial to rural communities, employing 54% of workers and operating 85% of establishments. American small businesses also create 14 times more patents than universities and large businesses and employ 40% of U.S. scientists and engineers. Small companies also notably strengthen their local communities, providing discounts to teachers and veterans, donating to charity, and encouraging their employees to support other local businesses.
A significant number of these small companies are refugee-owned. According to a 2019 report by the New American Economy, refugees had higher rates of entrepreneurship than other immigrant groups and persons born in the U.S., and generated $5.1 billion of business income that year. Their local impact can be seen in cities like Columbus, Ohio, where refugee-owned businesses have generated $605.7 million annually. This success is especially remarkable considering the significant barriers to starting a new business as a refugee, including language barriers, accessing start-up finance without a credit history, and limited localized knowledge of how to navigate new markets and unfamiliar legal systems.
The Refugee Microenterprise Development Program (MED) capitalizes on the resilience and entrepreneurial spirit of refugees and other eligible populations and helps them overcome these barriers. Founded in 1991, the MED program assists people in creating successful small businesses that spur economic integration and generate jobs. More publicly available data could help accelerate the program’s future success in bolstering innovation and financial independence through economic inclusion.
Overview of the MED Program
The Refugee Microenterprise Development (MED) Program is administered by the Office of Refugee Resettlement (ORR) under the Department of Health and Human Services. ORR awards funds to grantee organizations with experience operating programs that provide loans, training, and technical assistance to refugees and other ORR-eligible populations who want to start a small business.
Some grantees include traditional refugee resettlement agencies like the Hebrew Immigrant Aid Society and the International Rescue Committee. Others are local NGOs providing broader social services, such as the Economic and Community Development Institute in Columbus, the Women’s Opportunities Resource Center in Philadelphia, and the Westminster Economic Development Initiative (WEDI) in Buffalo.
The MED program funds organizations in 21 states to support refugee entrepreneurship and small business endeavors. Programs help resettled communities bring jobs and economic growth to cities of all sizes—from major cities with populations in the millions like Houston and Los Angeles to mid-size cities like Omaha (Nebraska), Wichita (Kansas), Greensboro (North Carolina), and Boise (Idaho). The program also impacts smaller communities with populations hovering around 100,000 people, such as Erie (Pennsylvania), Akron (Ohio), Clearwater (Florida), and Auburn (Washington).
Grantee programs must provide certain allowable activities, which range from disbursing small loan capital (not to exceed $15,000) for the launch of a business to conducting workshops and ongoing technical assistance to refugee business start-ups. For example, the International Rescue Committee of Phoenix MED program has provided small business loans and training to help refugees start 200 businesses in the automotive, entertainment, art, food, and beauty industries.
A lack of credit history is one of the biggest hurdles for a refugee entrepreneur in accessing start-up capital. To mitigate this, some MED program grantees, like the North Carolina African Services Coalition, help refugees build their credit by providing $1,000 credit-builder loans to be eligible for business loans.
The program’s impact
One of the program’s key objectives is promoting entrepreneurship as a promising employment strategy for refugees. The opportunity to engage in meaningful work soon after a refugee’s arrival helps them feel integrated within their respective communities as they contribute to the local economy.
Buffalo, New York, where refugees have been heralded for revitalizing the city, is a prime example of this reciprocal benefit. Refugees reversed the city’s population decline and improved the safety and vibrancy of nearly abandoned neighborhoods. WEDI, one of the current MED grantees, has supported 100 small businesses. It also operates the Buffalo West Side Bazaar, which has incubated more than 48 small businesses.
From 1991 through 2005, the MED program helped 10,500 refugees gain new business skills and develop more than 1,800 micro-businesses, boasting a remarkable 88% survival rate after 14 years (far exceeding the average small business survival rate). The program also benefits clients by serving as a launching pad for additional financing opportunities. In 2005, MED program clients leveraged their initial loans to secure $4.5 million in additional capital from various non-MED sources. Significantly, the loan repayment rate was at nearly 100 percent during the fourteen-year timespan from 1991 to 2005. And in 2019 (the most recently available data), the MED program supported businesses that added 1,055 jobs to the U.S. economy.
More publicly available data from ORR could help inform future success and expansion
Historical data and case studies provide compelling evidence that the MED program benefits refugee entrepreneurs and welcoming communities. Still, more recent and detailed data from the Office of Refugee Resettlement (ORR) on the program’s performance would make it easier to ascertain the program’s impact on local economies. Each organization running MED programs must already report key performance indicators on a semi-annual basis and at the completion of the five-year program period. Some indicators reported semi-annually include the total number of individuals enrolled by gender and the number of jobs created and retained. At the end of each program, organizations must report the average change in net income and the business success rate. It would be helpful if ORR more frequently published this data, and other indicators, by geographic location.
Such data could be incredibly valuable at a time when cities are trying to entice entrepreneurs and small businesses, combined with the recent Welcome Corps program launch, which helps refugees to resettle anywhere in the U.S.
Demonstrating the interest of cities to attract diverse entrepreneurs, City Inclusive Entrepreneurship Network is an initiative under the National League of Cities committed to fostering “entrepreneurship-led economic growth” as part of their objective to become national leaders in innovation. Their network includes 250 cities across the country, like Jackson, Mississippi, and Pearland, Texas, which have pledged to build micro-lending programs that grant access to traditional finance for entrepreneurs historically excluded. The MED program is a tool that CIE cities could use to include refugee entrepreneurs in their plans. More data pulled from indicators on leveraged funds, improvement of credit scores, and the correlation between loan-related training and business outcomes will help cities see how the MED program can be a useful bridging program linking refugee populations to their own endeavors. They can also apply lessons from the 32 years of the MED program when creating similar endeavors.
The MED program can be a useful tool to incentivize new cities that are not established resettlement sites looking to attract refugee small business entrepreneurs. With the new Welcome Corps program, U.S. citizens can privately sponsor refugees to resettle anywhere, even in smaller and more rural municipalities. This is where the MED program comes in, helping refugees launch new businesses, providing them with employment pathways, and subsequently boosting economic growth in communities that have not typically been resettlement centers.
Programs like MED are critical in helping break down barriers that prevent refugee entrepreneurs from contributing to American society. With better access to the program’s performance, we can learn how to promote and expand similar programs, to the benefit of refugees, growth-minded communities, and the U.S. economy alike.