Micro finance: OPENING DOORS FOR ENTREPRENEURS

Very few people have the heart to follow their dreams. Rupatee Singh was a housewife. She is now the proprietor of her own mini mart. A dream she could not have realised were it not for the support of Microfin Trinidad and Tobago Limited,  a subsidiary of Development Finance Company (DFL). Through Microfin she was able secure a loan to expand her business. She started off selling some 30 heads of chicken every weekend. She later expanded and was selling 200 to 300 heads of chicken in less than a week. In addition, she also sold chicken parts, feed and other dry goods. “A friend had approached me about taking over his chicken depot. I decided to try it. After getting started I realised that my sales and profits could be significantly increased if I could purchase a plucking machine and a freezer. A friend had told me about Microfin so I approached them,” said Singh.

She recalled that a  Microfin official paid her a visit, discussing with her the business plan and later she received the loan she needed. Since then she has expanded twice, on both occasions assisted by Microfin. She described the Microfin staff as helpful and pleasant and had high praise for the organisation that helped her to create employment for both herself and her husband. Singh’s story is one of many being repeated all over Trinidad and Tobago as a result of the success of several agencies now delivering microfinance services. Among these are the Government sponsored National Entrepreneurship Development Company Limited (NEDCO) and Microfin,  DEL’s private enterprise initiative. Microfin’s general manager, Julian Henry, said that the company measures its success not only in terms of dollars and cents or profits but in terms of the clients who have succeeded and surpassed all expectations.

“We are happy when our clients have raised their own standard of living and improved the quality of their lives. When they initially come to us there are those who can barely make ends meet but later are able to expand their capital and asset base. They gain respect in the community and this is how we measure success,” states Henry. Microfin provides a maximum loan of $30,000 and approval in five days or less. Henry said the company  applies international best practice to its operations, including management and other systems. In this regard the rate of interest is 20 to 25% on the reducing balance. DFL, he said, is driven by the goal of providing not only development financing but by doing so in a viable and sustainable fashion.  There are also other interesting micro-financing initiatives on the landscape.

The Programme for Enterprise Development (PROFED),  a key part  of  the bpTT sponsored Mayaro Initiative for Private Enterprise Development (MIPED). bpTT is also financing a project called HOPE, which is headed by Sr Rosario Hackshaw and provides small loans of $2,000 or less.  bpTT’s initiative is a model which several other major players in the energy sector including Atlantic LNG and BHP Billiton are looking to replicate in other communities. The ultimate goal of each of these agencies is the same – to assist the poor by providing finance that will enable them to establish and more effectively run viable micro enterprise initiatives.

These initiatives create employment, generate income and thereby have a long-term positive impact on the wider community. In many instances these projects are meant to target persons who cannot access funds through the commercial banking system as result of lack of collateral and capital. In the case of PROFED it seems that conventional wisdom has been proven wrong. According to Christopher Power, general manager of PROFED the most remarkable finding for him is the fact that contrary to prevailing wisdom in the commercial banking sector the delinquency rate resulting from the loans given by PROFED is very low. “Poor people pay their debts,” he said.

In fact, the main challenge for PROFED is far from delinquency. “The major challenge for us is the lack of proper management skill among our clients. There is no shortage of entrepreneurial spirit and business ideas. The problem is that when it comes to issues such as planning and investments they simply do understand these things,” explained Power. PROFED was started with a US $1.2 million commitment from bpTT. Garvin Craig, bpTT’s team leader, economic evaluation, said that the decision to venture into microfinance was made after researching the needs of the Mayaro community. “Having completed our community assessment what was identified was the definite need for this kind of facility,” he said, noting that people had business ideas but could not access the finance to develop these ideas.

“The people of Mayaro welcomed the initiative, especially those who have received loans. Many clients recently shared with us how their lives have been transformed. It is now being replicated by other companies. We consider the initiative a definite success,” said Craig. PROFED provides loans of $2,000 minimum and $100,000 maximum. The rate of interest is 10 percent per annum taking into consideration the risk factor. Although the organisation has only been in operation since 2002, it is already operationally self- sufficient and is expected to be financially self-sustaining by 2008. NEDCO has also entered the pot. The company has set up the Entrepreneurial Training Institute and Incubation Centre (ETIIC) which was formally commissioned and launched by Prime Minister Patrick Manning on Monday. ETIIC will provide a technology centre, product showroom, research centre and will have lead responsibility for the provision of training in management and other skills for entrepreneurs.

NEDCO was started in August 2002 to facilitate the enhancement of the Small and Micro Enterprise (SME) sector in Trinidad and Tobago. “We have assisted some 3,500 persons in start ups and expansion of their business. At least 5,250 jobs have been created and over 75% of our original clients are still in business. The real value of this is in the area of $53 million,” stated Sandrine Rattan, NEDCO’s manager, corporate communications. NEDCO’s loan limit is $50,000. This is a mixture of character and less collateral based lending. The interest rate is eight percent per annum. When asked about the sustainability of such a rate (the lowest of all the various microfinance institutions), Rattan stressed that the focus, is really a social development one. She emphasised however, that the process is not an easy one and it involves much hand holding to ensure client success and the economic viability of their businesses.