Valjean Financing: An Argument for Lending to Former Prisoners

NEW YORK (MainStreet) -- What does the classic book Les Miserables have to do with small business financing? A new report out from the University of California says “plenty.”

The study lays out the argument that financing new business ventures for former prison inmates is not only good public policy, but good fiscal policy, as well.

But will it really work?

The study, entitled Valjean Financing: Credit for the Formerly Incarcerated, makes no bones about what it wants to see from society – increased lending dollars for qualified felons who have served their time and want to start a business.

When banks or venture capitalists see the term “felon” on a loan application, they’re not exactly digging into their desks for their “approved” stamp, and it’s difficult to start a business without financing.

Co-authors Ting Gao, Angelo Caraballo, Ruchit Duggal, David Cornejo Rodriguez and Jay Yang, all master's students at the University of California’s Hass School of Business, want to change that mindset.

Their data claims that private enterprise may remain skeptical on the topic of loaning money to ex-cons, but that private lenders and the federal government may actually benefit from such a deal. The UCal study claims a lending program to qualified felons could save the government and taxpayers millions of dollars.

Citing the “surprisingly low risk” of lending to ex-inmates who want to open a business, the researchers propose a model called the Valjean financing plan, named after the protagonist in the classic book Les Miserables, who spent 19 years in prison for the theft of a loaf of bread.