August 2, 2013
When you think of starting a business, what comes to mind? I suspect you think about things like legal fees, incorporating, patents, copyrights, and start-up funding. Many small businesses in the US begin with $50,000 or $100,000 from an IRA cash-out, the depletion of a personal savings account, or a home equity loan/line of credit. Some manage to get started with less, and many need significantly more. (Most of us have probably heard the stories about Steve Jobs and Steve Wozniak starting Apple Computers in a garage. Likewise, though, I suspect few have heard about the $250,000 initial investment they received from a millionaire investor. … but I digress …)
I was recently in Sylvia, a mountain community that is home to a large indigenous population (the Misak), located about 3 hours outside of Cali, one of Colombia’s larger cities and the rival location for the country’s capital at its founding. Sylvia has been isolated for many years as it was known as a hotspot for the FARC, a militant guerilla group. While FARC activity has quieted significantly since the start of peace talks in Cuba, we encountered a significant number of military road blocks and outposts during our journey.
In Sylvia and the surrounding region, we met with various groups to discuss their programs, current needs, and future interests. It was clear that their primary interest was in seed funding (micro-loans and project grants). We were shown cross stitch projects such as tablecloths. When asked, the women indicated that with a $25 investment in supplies, they could produce several table clothes and/or placemats that would sell in total for about $200 in Cali’s markets. In short, they could turn a $25 micro-loan investment into a $175 profit. What’s more, they were quick with their responses. They knew what they spent on supplies, how long it took to make a tablecloth, and what it would mean to accept a loan to build their business … all important business skills.
Even more impressive was the cheese production of one of the group’s members. Her family has built a small addition to their home in which they produce what’s locally referred to as “queso campesino,” a basic, slightly salty cheese. Jennifer was excited to tell us that her cheese is organic. She also indicated that she would like to expand her business, but needs some additional funding. Banks in Colombia are unlikely to give her a loan as she has little she can use as collateral. Sitting in her humble farm kitchen, in a typical country home of 4 rooms, we asked what she thought she needed to expand her business. Much to our surprise, she pulled out drawings of a small factory layout, and contractor quotes for construction estimated at $2,500. We then asked if she would also need additional equipment in response to which she pulled out a list with pricing estimated at $2,000. Finally, I asked some market and distribution questions to which she had immediate answers. She indicated she had already talked with her distributors about expansion, and had done some market analysis as well. Jennifer is confident that she can expand her market, selling her cheese as far away as Cali, enabling her to also provide more jobs in the community.
I confess I’m not one of those people who treat micro-finance as a panacea. It isn’t. Often, behind these programs is a (capitalist) assumption that everyone wants to start a business, and that they have the skills to do so. Unfortunately, that is not the case. I’ve met with people who have made it clear that even if they are inclined to start a small business, they often lack basic business skills and don’t know where to acquire them. Clearly, this is not the case among the folks in Sylvia. Not only do many of them have good business skills, but I had the sense that their business support groups were a way of sharing their knowledge. (FYI … Five Talents USA is one of few programs of which I’m aware that links business training with micro-credit programming.)
In my mind, a micro-loan for someone prepared to take advantage of it, or a small investment in a business poised for growth, is what a “helping hand,” as opposed to a handout, is all about. People like Jennifer have demonstrated they have the ability to succeed. All they need is a little assistance. Part of my work is to help identify these types of programs and businesses, prepare those who aren’t quite ready but show promise, and with a little persistence, come up with some funding. It sure doesn’t seem like much to ask if we can expand a business in Sylvia for $4,500 that will provide additional jobs and economic stability to the community.