Advice on combining lending to "for profit" businesses and s

[niamh at aspire-loans.com]

Dear List

I would be grateful for advice on whether it is good practice to combine
lending to micro-enterpreneurs who work on a "for-proft" basis and
lending to very small social economy projects. The latter are usually
run by small voluntary or community organisations. We currently run a
reasonably successful microfinance program but only generate about 25%
of our operating costs. Our funders want us to consider setting up a
new program lending to very small social enterprises, as support for
social enterprises is a government priority at the moment.

My worries about this are:
- Mission drift - we were established to provide permanent access to
finance for financially excluded entrepreneurs.
- I think this is a poisoned chalice - I don't believe that most of the
social enterprises involved are going to survive - they received
generous grant aid for set-up but many are now running out of money.
- We would receive good funding support for a period of three to five
years, but would then be faced with the same problem again
- We have built up a great team with real expertise in working with
micro-enterprises in tough, deprived communities. There is a cultural
difference between those clients and community groups. We would need
different staff and working methods.
- One of our greatest problem is attracting, recruiting, training and
keeping good staff who have a very tough job. It takes us about 6
months to train a loan officer and about a year before they are really
productive. I want to expand our lending upwards, so that we move into
small business lending. This would give staff an opportunity to
progress and learn more skills. It would allow us to maintain and
strengthen the hard-won expertise we have developed. If we expand
horizontally, we are just exacerbating our current staffing problems -
more staff to recruit and train with limited progression opportunities.

- One of our sister organisations already provides finance for the
social economy, but concentrates on large, profitable loans. I think
they should take the strain!

I have made this case to our funders but they have asked me for any
international experience that says that it makes more sense to have one
CDFI concentrating on lending to social enterprises and one to
"for-profit" entrepreneurs or that we should expand vertically instead
of horizontally.

I would also like to add that I am not being disrespectful about social
enterprises - I know of many well run organisations. Unfortunately,
this particular group of organisations were not well advised when
receiving grant aid for starting up.

Any advice or evidence would be greatly appreciated.

Niamh Goggin (Ms)



Niamh Goggin
Chief Executive
Aspire Micro Finance
54 York Street
Belfast
BT15 1AS
(Tel)+44 28 9024 6245
(Fax)+44 28 9024 6255
niamh@aspire-loans.com
www.aspire-loans.com
In its first 3 years in operation, Aspire has invested £1 million in
micro-entrepreneurs in Belfast and Derry/Londonderry, with 75% of loans
going to the most deprived and under-invested communities. Aspire
customers who complete a loan have seen their turnover rise by an
average of 27%, their net profit grow by 71% and employment levels have
increased by 24%. 85% of businesses were still in operation one year
after they received their loan.



This post transferred from the cdb-l mailing list

[gregcas at ihug.co.nz]

Niamh,

Interesting question. I've browsed through your website and it looks
like you do great work. There are not many excellent examples of an MFI
working well in a developed country context and Aspire has the potential
of being a real role model for the rest of the world.

I think that to make a huge impact an MFI needs ultimately to reach
financial self sufficiency. Without achieving financial
self-sufficiency an MFI is always at the mercy of its donors and will
never be able to tell its clients and its community that it is
permanently dedicated to serving the financial needs of the
under-privileged of the community.

Hence, I come down on the side of not reaching out to organizations that
are less likely to repay your loans. Do what you do best – serve micro
entrepreneurs who are going to set up small profitable businesses.
Expand your outreach to these organizations, control your costs and get
Aspire to the point that it is fully financially self sufficient. By
doing that, you will have established a model that presumably could be
replicated throughout the developed world. You will have done enormous
good to not only the communities of Northern Ireland but to other needy
communities as well.

Regards,

Greg

Gregory F. Casagrande
South Pacific Business Development Foundation
Web: www.spbd.ws <http://www.spbd.ws/>


-----Original Message-----
From: owner-COMMUNITYDEVELOPMENTBANKING-L@cornell.edu
[mailto:owner-COMMUNITYDEVELOPMENTBANKING-L@cornell.edu] On Behalf Of
Niamh Goggin
Sent: Friday, October 01, 2004 9:23 PM
To: communitydevelopmentbanking-l@cornell.edu
Subject: Advice on combining lending to "for profit" businesses and
social economy enterprises

Dear List

I would be grateful for advice on whether it is good practice to combine
lending to micro-enterpreneurs who work on a "for-proft" basis and
lending to very small social economy projects. The latter are usually
run by small voluntary or community organisations. We currently run a
reasonably successful microfinance program but only generate about 25%
of our operating costs. Our funders want us to consider setting up a
new program lending to very small social enterprises, as support for
social enterprises is a government priority at the moment.

My worries about this are:
- Mission drift - we were established to provide permanent access to
finance for financially excluded entrepreneurs.
- I think this is a poisoned chalice - I don't believe that most of the
social enterprises involved are going to survive - they received
generous grant aid for set-up but many are now running out of money.
- We would receive good funding support for a period of three to five
years, but would then be faced with the same problem again
- We have built up a great team with real expertise in working with
micro-enterprises in tough, deprived communities. There is a cultural
difference between those clients and community groups. We would need
different staff and working methods.
- One of our greatest problem is attracting, recruiting, training and
keeping good staff who have a very tough job. It takes us about 6
months to train a loan officer and about a year before they are really
productive. I want to expand our lending upwards, so that we move into
small business lending. This would give staff an opportunity to
progress and learn more skills. It would allow us to maintain and
strengthen the hard-won expertise we have developed. If we expand
horizontally, we are just exacerbating our current staffing problems -
more staff to recruit and train with limited progression opportunities.

- One of our sister organisations already provides finance for the
social economy, but concentrates on large, profitable loans. I think
they should take the strain!

I have made this case to our funders but they have asked me for any
international experience that says that it makes more sense to have one
CDFI concentrating on lending to social enterprises and one to
"for-profit" entrepreneurs or that we should expand vertically instead
of horizontally.

I would also like to add that I am not being disrespectful about social
enterprises - I know of many well run organisations. Unfortunately,
this particular group of organisations were not well advised when
receiving grant aid for starting up.

Any advice or evidence would be greatly appreciated.

Niamh Goggin (Ms)



Niamh Goggin
Chief Executive
Aspire Micro Finance
54 York Street
Belfast
BT15 1AS
(Tel)+44 28 9024 6245
(Fax)+44 28 9024 6255
niamh@aspire-loans.com
www.aspire-loans.com
In its first 3 years in operation, Aspire has invested £1 million in
micro-entrepreneurs in Belfast and Derry/Londonderry, with 75% of loans
going to the most deprived and under-invested communities. Aspire
customers who complete a loan have seen their turnover rise by an
average of 27%, their net profit grow by 71% and employment levels have
increased by 24%. 85% of businesses were still in operation one year
after they received their loan.



This post transferred from the cdb-l mailing list

[MWeiner at qmcica.com]

I think that is an excellent idea. You could also gain more profit by cross
collaterizing, meaning that you could offer two kinds of lending to the same
microenterprise, charging a higher interest rate for the private loans,
allowinbg you then to borrow funds from banks at a lower rate and earn an
interest differential. Therefore, you could do this without compromising
your capital needed for the non-profit side of your business.

Marian Weiner
President
QMCI
760-431-4343
----- Original Message -----
From: "Niamh Goggin" <niamh@aspire-loans.com>
To: <communitydevelopmentbanking-l@cornell.edu>
Sent: Friday, October 01, 2004 2:23 AM
Subject: Advice on combining lending to "for profit" businesses and social
economy enterprises


> Dear List
>
> I would be grateful for advice on whether it is good practice to combine
> lending to micro-enterpreneurs who work on a "for-proft" basis and
> lending to very small social economy projects. The latter are usually
> run by small voluntary or community organisations. We currently run a
> reasonably successful microfinance program but only generate about 25%
> of our operating costs. Our funders want us to consider setting up a
> new program lending to very small social enterprises, as support for
> social enterprises is a government priority at the moment.
>
> My worries about this are:
> - Mission drift - we were established to provide permanent access to
> finance for financially excluded entrepreneurs.
> - I think this is a poisoned chalice - I don't believe that most of the
> social enterprises involved are going to survive - they received
> generous grant aid for set-up but many are now running out of money.
> - We would receive good funding support for a period of three to five
> years, but would then be faced with the same problem again
> - We have built up a great team with real expertise in working with
> micro-enterprises in tough, deprived communities. There is a cultural
> difference between those clients and community groups. We would need
> different staff and working methods.
> - One of our greatest problem is attracting, recruiting, training and
> keeping good staff who have a very tough job. It takes us about 6
> months to train a loan officer and about a year before they are really
> productive. I want to expand our lending upwards, so that we move into
> small business lending. This would give staff an opportunity to
> progress and learn more skills. It would allow us to maintain and
> strengthen the hard-won expertise we have developed. If we expand
> horizontally, we are just exacerbating our current staffing problems -
> more staff to recruit and train with limited progression opportunities.
>
> - One of our sister organisations already provides finance for the
> social economy, but concentrates on large, profitable loans. I think
> they should take the strain!
>
> I have made this case to our funders but they have asked me for any
> international experience that says that it makes more sense to have one
> CDFI concentrating on lending to social enterprises and one to
> "for-profit" entrepreneurs or that we should expand vertically instead
> of horizontally.
>
> I would also like to add that I am not being disrespectful about social
> enterprises - I know of many well run organisations. Unfortunately,
> this particular group of organisations were not well advised when
> receiving grant aid for starting up.
>
> Any advice or evidence would be greatly appreciated.
>
> Niamh Goggin (Ms)
>
>
>
> Niamh Goggin
> Chief Executive
> Aspire Micro Finance
> 54 York Street
> Belfast
> BT15 1AS
> (Tel)+44 28 9024 6245
> (Fax)+44 28 9024 6255
> niamh@aspire-loans.com
> www.aspire-loans.com
> In its first 3 years in operation, Aspire has invested £1 million in
> micro-entrepreneurs in Belfast and Derry/Londonderry, with 75% of loans
> going to the most deprived and under-invested communities. Aspire
> customers who complete a loan have seen their turnover rise by an
> average of 27%, their net profit grow by 71% and employment levels have
> increased by 24%. 85% of businesses were still in operation one year
> after they received their loan.
>



This post transferred from the cdb-l mailing list

[freda.owusu at merton.gov]

Dear Niamh,
We are a small local loan fund operating in London. We lend to small
businesses but have always had an open door to social enterprises. As we are
lenders of last resort we look at each business in terms of their financial
need as well as the business proposal itself. Wherever possible we refer
social enterprises on to specialist lenders if it seems more appropriate,
but we have lent directly to a couple of childcare providers in the past,
and they have fully repaid their loans without any problems. We also share
risk where possible with local banks on specific loans.
We take the view that even though social enterprises have other "bottom
lines", the business idea itself must still be viable, well-researched, and
sustainable enough to be able to service a loan - so the initial cashflow
statement is essential. The added dimension for charitable social
enterprises is their capacity both in legal terms (ability to borrow
according to their governing docs.) and in business management terms.
If you are able to set up a framework for doing the pre-loan appraisals and
checks which are specific to social enterprises, it could be possible for
you to do both without spending too much in terms of resources. It depends
on the likely deal flow. If you think you are likely to get too many
applications which require many specialist advsers, then it may be better to
leave it alone. However if it is unlikely that you will get many requests,
then it could be useful to explore the potential now and build up experience
and expertise from various specialists such as Social Enterprise London,
Charity Bank, Unity Bank, Triodos, Co-op Bank, and others.
Hope this helps,
Freda Owusu
Loan Fund Manager
Merton Loan Fund

-----Original Message-----
From: Niamh Goggin [mailto:niamh@aspire-loans.com]
Sent: 01 October 2004 10:23
To: communitydevelopmentbanking-l@cornell.edu
Subject: Advice on combining lending to "for profit" businesses and
social economy enterprises


Dear List

I would be grateful for advice on whether it is good practice to combine
lending to micro-enterpreneurs who work on a "for-proft" basis and
lending to very small social economy projects. The latter are usually
run by small voluntary or community organisations. We currently run a
reasonably successful microfinance program but only generate about 25%
of our operating costs. Our funders want us to consider setting up a
new program lending to very small social enterprises, as support for
social enterprises is a government priority at the moment.

My worries about this are:
- Mission drift - we were established to provide permanent access to
finance for financially excluded entrepreneurs.
- I think this is a poisoned chalice - I don't believe that most of the
social enterprises involved are going to survive - they received
generous grant aid for set-up but many are now running out of money.
- We would receive good funding support for a period of three to five
years, but would then be faced with the same problem again
- We have built up a great team with real expertise in working with
micro-enterprises in tough, deprived communities. There is a cultural
difference between those clients and community groups. We would need
different staff and working methods.
- One of our greatest problem is attracting, recruiting, training and
keeping good staff who have a very tough job. It takes us about 6
months to train a loan officer and about a year before they are really
productive. I want to expand our lending upwards, so that we move into
small business lending. This would give staff an opportunity to
progress and learn more skills. It would allow us to maintain and
strengthen the hard-won expertise we have developed. If we expand
horizontally, we are just exacerbating our current staffing problems -
more staff to recruit and train with limited progression opportunities.

- One of our sister organisations already provides finance for the
social economy, but concentrates on large, profitable loans. I think
they should take the strain!

I have made this case to our funders but they have asked me for any
international experience that says that it makes more sense to have one
CDFI concentrating on lending to social enterprises and one to
"for-profit" entrepreneurs or that we should expand vertically instead
of horizontally.

I would also like to add that I am not being disrespectful about social
enterprises - I know of many well run organisations. Unfortunately,
this particular group of organisations were not well advised when
receiving grant aid for starting up.

Any advice or evidence would be greatly appreciated.

Niamh Goggin (Ms)



Niamh Goggin
Chief Executive
Aspire Micro Finance
54 York Street
Belfast
BT15 1AS
(Tel)+44 28 9024 6245
(Fax)+44 28 9024 6255
niamh@aspire-loans.com
www.aspire-loans.com
In its first 3 years in operation, Aspire has invested £1 million in
micro-entrepreneurs in Belfast and Derry/Londonderry, with 75% of loans
going to the most deprived and under-invested communities. Aspire
customers who complete a loan have seen their turnover rise by an
average of 27%, their net profit grow by 71% and employment levels have
increased by 24%. 85% of businesses were still in operation one year
after they received their loan.


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intended solely for the use of the individual or entity to whom they
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