Microloans for mental-health patients rolling out across Ontario

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There were times when Ed Middaugh had no home, no job and no money. He floated from couch to couch, in and out of hospitals during what he reluctantly calls "episodes," unable to buy food because payments for medications consumed his whole monthly budget.

These days, Mr. Middaugh, 34, diagnosed with bipolar disorder at age 19, runs his own general contracting business, where he does home renos, stonework and landscaping. He's bright, articulate, motivated – and steady, thanks to a better mix of meds.

He's also the recipient of an $8,500 small-business loan that enabled him to buy a used pickup and power tools – something he never could have imagined landing from a traditional bank due to a sporadic work history.

Mr. Middaugh is part of a quiet pilot micro-credit project run by the Rotman School of Management and the Centre for Addiction and Mental Health over the past two years. The partnership gives small loans to people with a history of mental-health challenges to start their own businesses. Often, these clients have no access to credit through traditional channels because they lack a sound credit history, or the required collateral, or they are on government support.

"That somebody is saying, 'We trust you, here's your money, you did it, you followed through with what you need to do,' " says Mr. Middaugh. "Just the level of trust and empowerment I got from that was invaluable."

Preliminary signs in the Toronto program are encouraging enough that it is now expanding through Ontario – from 17 clients to date to a target of 60 in the next year in the GTA, Ottawa, Kingston and Niagara/St. Catharines – with new backing from the Alterna Savings and Credit Union and partnerships with local agencies. It's thought to be the only program of its kind in Canada.

One client's e-commerce business is doing so well he is off monthly income supports, and now qualifies for conventional small business loans at a major bank. Most participants report an increased sense of confidence and inclusion, more financial independence and less indebtedness.

That, in turn, is improving the quality of many clients' lives – and making it easier to buy basic purchases, such as food, clothing or a Metropass, says the program's executive director, Narinder Dhami.

The program provides loans of typically $3,000 to $5,000, up to a maximum of $25,000, along with mentoring and development training to people who either have a viable business plan vetted by Rotman and, now, Alterna, or small-business experience. So far, the repayment rate is 100 per cent.

Microfinance – providing access to financial services to lower-income people – is a concept that's taken off around the developing world, but it also exists in North America (Vancouver City Savings Credit Union and Immigrant Access Fund Society of Alberta, for example, have been offering small loans to new immigrants without a credit history for years).

The program is run, deliberately, out of the Rotman offices at College and University, not CAMH. "There's a dignity when they walk through these doors – they're coming to a business school, not a hospital. And they're treated as entrepreneurs," Ms. Dhami says.

The partnership's very name – Rise Asset Development – speaks to the business-like approach, despite that it is, in fact, a registered charity, started with a $1-million donation from philanthropist Sandra Rotman.

"I don't feel like I'm being babysat. I'm treated with respect, as a professional, a grownup. It wasn't easy – they don't just give [a loan]away. It takes level of commitment and you have to be prepared. But it means I'm light years ahead of where I was even a few months ago," Mr. Middaugh says.

About one in five Canadians will experience a mental illness or a substance-abuse issue in their lifetime. The annual economic toll – through missed work, health-care pressures and lost productivity – is more than $50-billion a year.

Joblessness among Canadians with severe disorders is sky high – 70 to 90 per cent, according to CAMH. Past studies have linked employment with improved health outcomes – one found people with longer-term employment had a third the inpatient days of those with less work.

A national mental-health strategy released this month said the system requires a complete overhaul and recommended, among other things, creating more innovative approaches to employment.

It's a far cry from the 1950s and 1960s, when people with mental illnesses were often locked up in asylums, isolated from society. In more recent years, "the emphasis is on recovery – living effectively with an illness," says John Trainor, who directs CAMH's community support and research unit.

"Things that weren't thought possible for people, say, with a severe case of schizophrenia, such as living in one's own apartment, having a job, or starting a small enterprise, these things are now seen as possible. And every time we push that boundary a bit, towards recognizing capacity, it keeps working."

Alterna Savings joined the partnership last month and will provide advice and the financial infrastructure. It has a more than a decade's experience running microfinance programs, and has granted more than 400 loans totaling almost $2-million.

It's learned, over the years, what works best: it only grants loans with proper support such as access to mentoring, ongoing advice and rigorous requirements for a sound business plan.

"People who are starting up these businesses will have to compete in the normal marketplace at some point. So they need support getting off the ground, but it's not a charitable undertaking. It's a business undertaking that is focused on helping get people on their feet," says John Lahey, president and chief executive officer.

The full expectation of these higher-risk clients is they repay in full. If they can't, however, their circumstances are reviewed. Some flexibility is given if clients are facing particular challenges.

Self-employment is a natural fit for many clients who can't often fit rigid schedules of a regular job because of treatment schedules, anxiety or mood swings.

For Grace Cherian, 57, who has coped with bipolar and seasonal affective disorders for decades, working for herself has given her new confidence and pride.

"With self-employment, I can work around my schedule. And I don't have those anxieties about what to wear, how to get myself to work, and the cold [in wintertime]I would with a nine-to-five job," says Ms. Cherian, who now runs a business from her home as a writer, public speaker and mental health advocate.

Others are just embarking on the road to self employment. Dwight Perreira, 46, is a kitchen coordinator at a Toronto restaurant, but his dream is to return to music. He too has coped with mental-health challenges for decades, hospitalizations, living at times in shelters and ultimately, diagnosed with bipolar disorder.

In times when he was sick and off meds, he would go into fancy restaurants and order extravagant meals. Sometimes he would run up $700 bills in a day. Thousands of dollars in debt wrecked his credit history.

Now, he's one step closer to his career change. He's stabilized his treatment regime, established a business plan to become a self-employed guitarist and singer – and, this year, received a $3,800 loan to purchase a new guitar and amp. He aims to start trying out for regular gigs in bars or coffee shops – and also carve out a niche for himself in playing at non-profit events, such as for Mental Health Week.

"I'm hoping by 50, I'll be completely independent, musically," he says.