Walter Hossli, the executive director of Momentum, emphasizes that micro-credit is about far more than starting businesses. “We do economic development from the bottom up,” he says. “Micro-credit is part of that.”
Hossli, who was a key volunteer with the Mennonite Central Committee in Edmonton before he was asked to start up an economic development program in Calgary, says that while traditional lenders look at five Cs to assess a loan applicant’s creditworthiness – capacity, capital, collateral, conditions and character – lenders like Momentum focus on the last element. “Rather than the five Cs, it’s one C.”
That doesn’t mean just anyone can qualify for a loan. Participants in Momentum’s business development program who don’t measure up are ruled out from receiving a loan. “An example might be a person who has not made any progress on their character,” says Hossli. “For example, a person who has defaulted on a student loan – and we would know that because we do a credit check on applicants – and has not made any attempts at contacting the student loan institution.”
Hossli says those who do qualify for micro-financing almost always start out wanting to start a small business but through the process also gain invaluable life skills. “A business doesn’t have to be the be-all and end-all in your life; it can be a phase,” he says. “It sharpens people’s perceptions about their future. The business planning process is well-suited to help people look at what they want to do in the future.”
Momentum doesn’t track business survival rates, but Hossli remains convinced that the program is fulfilling its mandate “to help individuals build personal, social, physical, human and, yes, financial assets.” Last year more than 3,000 underemployed Calgarians had the opportunity to build a sustainable livelihood and contribute to society. With approximately $1 million lent since the program began in 1993, and hundreds of businesses launched, it appears that in Calgary micro-credit is a viable option for those who perhaps thought they had few.
Another group involved in micro-lending is Alberta Women Entrepreneurs, an agency founded in 1995 with funding from the federal government and headquartered in Edmonton. AWE has a revolving, $5-million loan fund dedicated to female entrepreneurs who want to launch a business. “We see a lot of people who have an idea but don’t know where to start,” says Tracey Scarlett, AWE’s chief executive officer. “We will work with them to identify gaps in their business plan.” And while most AWE loan recipients have been rejected by traditional lending institutions or likely would be, Scarlett claims that 75% of the startups it funds are still operating five years later. The key element, she says, is the personal commitment the women make to pay the money back.
With offices in both Edmonton and Calgary, AWE has made loans to hundreds of businesses across the province at a rate of prime plus 3% to a maximum of $100,000 to eligible applicants. Loans average about $55,000 each. Examples of businesses financed by AWE include Eagle Spirit Embroidery and Gift Shop, an aboriginal-owned business in Cardston, and Phlo Design, a small graphic design firm located in Edmonton. Scarlett would love to see micro-lending programs like AWE’s spread across the country.
For micro-finance to really work, though, it requires a close working relationship between lender and borrower that goes beyond contractual obligation, notes Aidan Hollis, a professor of economics at the University of Calgary who has studied micro-credit. That relationship helps ensure both business success and the repayment of the loan. “It makes sense in a small village in Bangladesh where people know each other,” says Hollis. “In Alberta, it makes sense in a similar kind of situation.”
While it may not be an appropriate way to finance most ventures, micro-finance can have a positive trickle-up effect for commercial banking by bringing previously marginalized people and businesses into the mainstream economy, Hollis says. “They develop a credit history with [a micro-lending] organization. Later they may be eligible to borrow money from a bank.”
Back at Éclair de Lune, Philippe Poncet is preparing for his regular afternoon rush by removing a selection of chocolate and almond croissants from his commercial oven before sitting down to take a much-deserved break out of another 12-hour workday. “You have to work a lot of hours,” he says. “But it’s a passion. I have three employees and I want to expand – maybe one day a café.”
Pages: 1 2
Follow Alberta Venture On: