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History Table of Contents
1998 Summer Conference
Summer Conference 1998
Rethinking Canada for the 21st Century

Canadian Enterprise and Ingenuity: Success stories in institutional innovation: private sector/NGO-not for profit/public sector

Martin Connell, President, Calmeadow

I want to tell you about micro-financing. It’s not so much a micro subject, as a macro subject because I think what’s happening in the micro-finance field is that it’s rapidly becoming a major factor in global economic activity

It’s not necessarily a Canadian story, per se, but I do think it’s going to have growing relevance here.

In the four days that you’re here we’re going to have about a million people will enter the workforce globally. How many of those are going to find their way into jobs with government, factories, supermarkets, banks, etc. is anybody’s guess. My guess is that very few will.

We know they’re not going to go on social assistance, so they’re going to have to do something. I think about 75 or 80 per cent of those people will become self-employed, one way or the other.

In fact, if you look at the world’s population right now roughly one-half of those who are working work for themselves.

And we all have shapes and visions of what the world looks like and a lot of us have had those shapes put together for us over the last 10 years.

It’s easy to recollect that there’s factories being built all over the world; that the free open economies and markets are generating opportunities in Thailand, Bombay. Hi-rise towers dominate the landscape, but the reality is that there are literally hundreds of millions of people who are living in the shanty towns, along the open sewers and the crowded laneways of these big cities and that most of them will be lucky to earn an average of three dollars a day as they go about their jobs as porters, tailors or sidewalk vendors.

Here at home the contrasts are obviously far less marked, but they’re still unsettling. Sure it’s easier to find a job today than it was maybe five years ago in the peak of the recession, but why is [that] when we run an ad for a receptionist at our bakery in North York we still get 200 applications?

Why are the numbers of self-employed, which now are roughly 20 per cent of our actively employed population, still growing when the economy is growing?

Some of these people who choose self-employment do it because they want to, but increasingly more and more are doing it because it’s the only choice they have.

At Calmeadow we’ve been working with the self-employed for the past 15 years. In fact, 14 years ago I was standing on this podium launching a conference on the subject of micro enterprise to an audience of Canadian NGOs interesting in learning about the field.

I have tremendous respect — and we as an organization have tremendous respect — for the ingenuity, the creativity and the entrepreneurial spirit of the self-employed.

We see tremendous opportunities for a truly global industry of micro-finance. We see literally hundreds of millions of people of low-income nature, self-employed soon having access to financial services.

I’ll give you an example of what I mean, which hopefully will explain what micro credit is all about.

A person like Norma Salazer of Guatemala City. Norma used to support her family by selling cleaning rags on the streets.

She worked hard, but earned little and for nine years she saved everything she could until finally she could open up her own grocery in her own neighbourhood with her life savings of $80.

She and her husband built a small shack with a rough shelves in it in front of their squatter village home on the outskirts of Guatemala City.

It had a little window facing onto the street, with dozens of this and dozens of that; things that she could buy with the money she [brought in] from the products she sold the day before.

A few months later she was able to access a loan for the first time in her life; $250 from a local micro-lending organization. She used that money to buy a greater variety of goods and open up her inventory.

Gradually, her sales started to increase. Now, she’s on her third loan. She’s expanded that inventory even more and the impact on her family’s life is such that they now have electricity, running water and two of her oldest children are attending high school, which is an opportunity she herself never had.

Providing micro loans to people like Norma take organizations that are focussed exclusively on financing the self-employed.

A good example is BancoSol in Bolivia. Calmeadow takes a lot of pride for its early association with Banco Sol. We are a co-founder and one of the earliest shareholders.

And this organization is now making loans to over 80,000 vendors and artisans in Bolivia and having a profound impact on Bolivia and even in the rest of the world to the extent that now competition from other financial services in Bolivia is generating capital and loans for over 200,000 clients and various organizations, with loans outputting at an annual level of $100 million a year.

It’s also triggered reforms in banking law and regulations in Bolivia that now recognize the home-based, self-employed entrepreneur as a creditworthy individual whose value of their loan is now treated as an asset.

These people may not even be able to write. They may not even own the house they live in, but their collateral security of their name and character is being recognized by the institution.

There are now over 15 different countries in Latin America that have their own self-sustaining, self-sufficient financial institutions that service this market, whereas 20 years ago there might have been zero money being made available except through the traditional loan shark to this sector. There are now over 500,000 people at least who are accessing loans averaging $250 to $300.

We also see in Asia situations like the Grameen Bank in BRAC and the BRI in Indonesia where in the aggregate roughly 5,000,000 customers are being serviced with loans maybe around $200 or $300.

So, the result is that now micro finance has been raised to a level where virtually all of the large multilateral funding agencies are paying attention, starting with the World Bank.

This is a really significant situation, because we now have resources and push coming from these major institutions, whereas 15 years ago they didn’t even want to talk to you about it.

This breakthrough in lending is not based on hi-tech finance. It’s lending based on the newly-discovered belief that the informal, low-income sector does indeed represent an economic opportunity for both lenders and holders of capital. It’s lending that’s based on business and commercial concepts and not on charity.

At Calmeadow we believe that if we’re going to make a change in people’s lives on a broad scale, we cannot do it with charity. We have to do it in ways that can endure and be sustainable.

To emphasize the point, Banco Sol mobilized $6 million in equity capital in 1992 and now has a loan portfolio on the street of over $60 million.

Here in Canada, obviously, we face a far different kind of challenge and while our capital markets deftly meet most of society’s needs there are literally tens of thousands of Canadians who, for one reason or another, are unable to access business credit. Most of them struggling to survive against all the odds, but many do, indeed, survive.

People like Bibi Nusrat of Toronto, a client of Calmeadow.

Bibi immigrated with her family five years ago from Pakistan. She grew up in a conservative family where her mother married her off at the age of 16, just after she graduated from Grade 10.

In her community, women were not allowed to work outside of their homes. During her first three years in Canada she stayed at home with her children and working with her husband.

It was only when it became increasingly difficult for them to live on her husband’s income that Bibi started to look for a job of her own.

After some disappointing experiences, she decided to do what she could and what she was good at, which was to take care of children.

As a mother of four who wanted to one day start her own day care centre, she was able to take a $1,000 loan from Calmeadow and design a playroom in her own home, purchase toys, books and games for the children and set up a swing set in the backyard.

She now provides day care for five pre-school children in her home and earns $21 per child per day.

In her words, "working at home makes it so much easier , because I am my own boss. I don’t have to work for someone else, plus I can take care of my own children."

Our goal at Calmeadow is to find a sustainable way to bring credit to low-income, self-employed here in Canada and to those, who for one reason or another, fall outside of the commercial credit loop.

To date, while we’ve had some modest success here, we have still provided loans for over 1,000 different individual Canadians and at present we have an active portfolio of roughly 450.

We know from our experience that these small loans can have a positive and lasting impact on people’s lives.

I’ll give you another example.

Robert Baxter and Jennifer Tough of Dartmouth, Nova Scotia. Their dream was shattered when they lost their home and their business in the 1990 recession.

They had a craft business making handicraft jewellery and a variety of household decor. In the 1980s, their business expanded to a point where they had opened up retail stores in different major malls in the Halifax-Dartmouth area, but when the recession of the 1990s hit their sales plunged and in their struggle to survive they lost their stores and their house.

In the words of Mr. Baxter: "we tried to pay our debts for four years, but then we had no choice but to declare bankruptcy to get the banks off our back and in a way it was a real load off our back, but were then able to concentrate on getting this business back in shape."

It was after three years of struggling and trying to rebuild the business and trying to make ends meet that they first came across our loan fund in Nova Scotia.

With a $1,000 loan they were able to re-establish their name in the market by distributing brochures across Canada and along the border with the U.S.

With a second loan of $3,000 they published a colour catalogue. They’ve hired a part-time employee and hope to soon be moving out of their basement. Their sales are growing and their business will continue to grow.

We share our vision at Calmeadow with literally hundreds of organizations around the globe. It’s a vision built on the creating of opportunity, of translating dreams and actions into success.

When Professor Muhammad Yunus of the Grameen Bank in Bangladesh walked through the gates of his university in 1976 to make his first experimental loan to a woman outside of the campus, a micro entrepreneur, he unwittingly unlocked a revolution; a revolution in how we see the poor — not as objects of pity or hostility, but as fellow travellers simply scrambling for a livelihood; long on ambition, but short on capital [and] access to capital and the kind of investment that will allow their small business to succeed.

With half the world’s population dependent on sweat equity for their survival, the importance of accessible financial services becomes obvious.

Our revolution in thinking has now become a revolution in practice. Lenders everywhere now recognize the impact on economies that access to capital can play for these smallest of enterprises. Politicians see the payoff as community development starts to develop more quickly.

As we move into the next millennium we’re definitely going to witness a rapid escalation in the growth of financial services to the poor, both here in Canada and abroad.

Aided by electronic technology, costs will come down, competition will accelerate and customers will materialize where before there were none.

Micro finance is not a magic bullet for poverty alleviation. Micro finance is an opportunity for people, whether here in Canada or in developing countries; an opportunity to break loose of the constraints of their marginalization and succeed where before they could only dream.