Posts Tagged ‘microfinance’

Walk taller by staying small

Tuesday, July 14th, 2015

As I write this, we are discussing our forthcoming regulation by the FCA. It seems sometimes that we, as a small charity, are paying for the sins of the global banks, for we will be under the same strict regime. Sledgehammer, nut; nut, sledgehammer Although it will increase our workload significantly, it holds no fears for us as we always aim to be honest and open in our dealings.

We are also being asked to sign the European Code of Good Conduct. Most of it is a mixture of good practice and common sense. It does beg the question: if the European Central Bank had followed its guidelines, would countless billions have been loaned so unwisely to Greece?

There is a principle here, if one were to be cynical: the bigger the institution, the greater the temptation to use and abuse the system. It starts with a joke in a City wine bar, and ends with LIBOR. Once discovered, the new regulation imposed on the sinners affects everyone else in the same industry. It’s not unlike going to a rock concert at Wembley, and each of the 80,000 crowd being frisked at the turnstiles because two drunken idiots were caught taking drugs behind the stage.

So, small is good, and can be great. Small values relationships, small is accountable, flexible and innovative. Small is, ideally, local. What is the reverse of ‘If it’s too big to fail, it’s too big’? How about ‘It’s too small to be noticed but too important to ignore’?

5 Lies about Microfinance in the UK

Monday, July 6th, 2015

1. Microfinance is only needed in the Third World, mostly in Africa.

Try telling that to the 1,300 businesses who have used our services to date. The UK has a particular need for this kind of support for small businesses. It’s banking is still dominated by very large national banks, with no regional or local banks, unlike the US and a large part of Western Europe. Big banks can’t do microfinance – it’s too expensive and too risky; and they would most likely argue that it was sub-prime lending that got them into such a mess in 2008, so why should they? While we welcome new initiatives, like Metro Bank, Handelsbanken and a swathe of peer to peer lenders, they have yet to make a big impact in the market; and are understandably not wishing to focus on the most risky sector of it.

2. If people have a low credit rating, they don’t deserve to start their own businesses.

Sad to say, this is a strong view held by many in the UK. There are many reasons why people have a less than perfect credit score, and we see such examples on a weekly basis. These include a partner or spouse walking out of a relationship leaving a trail of debt for the  remaining partner to manage; prolonged illness resulting in loss of employment, bereavement, and even, yes, people who have no credit cards and have never borrowed anything. Sometimes, bad mistakes or poor judgement can lead people into building up a mountain of debt. But most people learn from these mistakes, and handle their money better as a result. This is why Fredericks looks at every application on a case by case basis and takes everything into account before making a decision.

3. The Government does all that stuff through the Start Up Loan Company

This organisation has made an enviable job of raising the profile of business start ups in the UK over the last few years, and can point to some impressive case studies as a result. But over the last 12 months it has been quietly withdrawing from the riskiest propositions under the guidance of its new masters at the British Business Bank. In its own words, it acknowledges a ‘discrepancy between the risk appetites of Fredericks Foundation and SULCo.’

4. A microloan is too small to make a difference to someone.

Well that’s just silly. It can pay for a vehicle so you can deliver the goods or services you are offering, allow you to rent a  market stall or small retail unit; it can pay for an e-commerce web site; pay for you to build up enough stock to sell, provide a bit of working capital to enable you to buy some time to raise your profile or implement a sales campaign.

5. Microfinance just deals with hopeless cases.

Depending on how you interpret that, it is either a patronising and offensive generalisation, or true. It is true in the sense that most people who are unable to access finance from family, friends, banks or even the Government find it easy to lose hope. By the time they have encountered us, and find there are experienced and approachable people who are willing to listen, understand them, and believe in them, then that sense of hopelessness just evaporates….

….and that is one of the joys of what we can achieve. If you fancy applying for a loan, or joining the fun and helping us by volunteering or supporting us or simply helping to finance our work, please get in touch. Jut go to www.fredericksfoundation.org . It’s a great place to start!

 

 

 

 

Zero hours contracts

Friday, March 27th, 2015

A zero hours contract. That is pretty much where every budding sole trader and entrepreneur starts. No work, no customers, no money, no sickness pay, no holiday, no pension. Doesn’t sound good, does it?

So why do so many people sign up for their own zero hours contracts? Because the contract is with yourself. There is no work unless you go out and get it. There are no customers unless you pound the streets with your leaflets or blitz social media. There is no money unless you chase up payment of the bills. There is certainly no time to be sick, and nobody to ring up on a Monday morning after a heavy weekend. Holiday is one of those things you will fondly remember until you can generate enough income to pay somebody to cover for you. Your pension may well be the business that you own when you can afford to give up and sell it to your daughter!

It sounds like exploitation doesn’t it? Taking cruel advantage of someone who has not the power to demand a pay increase. But the reality is that the only people who will exploit you will be your customers and your suppliers. You will be in charge of everything else.

This week we funded an exporter of collactables, a burger stall, an interior designer and an Italian restaurant. Four more people on the zero hours contract list, but stepping up to help themselves.

Big Give update

Thursday, December 11th, 2014

To let you all know what happened last week – thanks to the fantastic support and persistence of some wonderful donors we managed to raise over £141,000! Of that £41,000 came from the Reed Foundation via Big Give. Whether you let us know who you are or whether you preferred to remain anonymous – we thank you! We also promise to use the funds to support some more brilliant clients, whose entrepreneurial spark just requires a small sum to get it launched.

Thank you everyone and thank you Reed Foundation!

The Big Give (Loan)

Tuesday, December 2nd, 2014

It’s a bit of a problem talking about ‘giving’ and ‘donation’ when everything Fredericks stands for is about lending and paying back. The whole ‘hand up not hand out’ strapline could sound hypocritical in the context of a blog post that is blatantly asking for gifts. The simple message is though that we help people with people and we help people with loans. The money comes back but the people cost money. All those of you who have met our hard-pressed client managers will know how thinly stretched they are. If you give up your time or your resources to support us then we salute you for it. You are fantastic and heroic!

But this week: Thursday, Friday and Saturday (4, 5 and 6 December 2014) at 10am there is an opportunity to make a little money work by turning it into a little more money. The Big Give will lever in additional finance for Fredericks, bringing in a match from Reed Foundation which has generously chosen to support us.

So please set an alert on your phone for 9.58am in time to gather up your battered credit card and click here: http://bit.ly/fredsbiggive

To find out more visit the Reed Foundation – Development and Human Rights page

Swimming lessons

Wednesday, October 22nd, 2014

I was fortunate enough recently to spend time in Somerset and to listen to Lydia and Annie tell me about some of the early lessons from our work with the excellent Yarlington Housing Group.

The first should be no surprise. Good things don’t come quickly or easily. It takes time to build confidence and to build a mindset to deal with the challenges that running your own business will inevitably throw up. Particularly so when the popular perception of making a business is influenced by TV programmes like Dragons’ Den or The Apprentice. Interesting television as these programmes may be, they are not the reality of 99% of self-employed people.

Building self-confidence in people who have skills and experience involves care and attention. As does equipping them with a range of strategies to deal with things such as selling, winning contracts and getting bills paid. I have seen examples where excited would-be-entrepreneurs are metaphorically shown a few videos of Rebecca Adlington and are then thrown into the business ‘deep-end’ and told to swim. Women and men come at this from many different directions, some take to running a business like proverbial ducks to water, others are more like me getting into the North Sea. It takes a long time and there are nearly as many backward steps as there are forward ones.

The second clear lesson emerging, which again shouldn’t come as a bolt from the blue, is that before anyone can take on the financial side of running a business they have to get their personal finances in order. At Fredericks we know this because we lend money. But even if your business doesn’t need any finance to get going, you should not start generating income if you can’t keep track of money in and money out.

I learnt a lesson about financial exclusion recently when an applicant took the responsible route and went of their own volition to Step Change, a debt advice charity, to make arrangements with their creditors. Absolutely the responsible thing to do. If your debts are not both out in the open and under control we won’t be lending you any money. The bad news is that this very act excluded them from the subsidised rates of the government’s Start Up Loan scheme. So first they are denied credit from banks by their own credit history, and then they are denied access to state support because they have tried to get their credit record in order.

Only about one third of the people who apply to us now qualify for the government’s Start Up Loans. To my knowledge Fredericks is the only lender offering responsible credit to people who cannot access the government scheme. Not even the CDFI sector is daring to tread here. Our first successful Yarlington applicant didn’t qualify, but we still supported him.

My point is though, that we are here to help, coax and cajole those whose confidence is lowest and whose lives are the most chaotic because that is where the need is greatest. Exclusion comes in many forms, but where there are people who have the courage to take control of their lives we should be going the extra distance to support them.

Independence Road www.independenceroad.co.uk @IndependenceRd is a joint project between Outset and Fredericks Foundation.

Making your mark

Thursday, July 24th, 2014

I am often asked: “What sort of businesses do you fund?” To which I never have a satisfactory answer. I often reel off the businesses from my last few panel meetings: surfboard repair; will writing; sandwich shop; furniture removals; car servicing; office rental; glamping – just to demonstrate that they are many and varied. There are some things we don’t fund, such as gambling, the sex trade, firearms and things which might bring the charity into disrepute. But there simply isn’t a helpful answer that says “Pick from this list and we will help you!”

One common red herring for people contemplating setting up their own business is that they need a brilliant and original idea. I am all for brilliant and original ideas, but I’m very comfortable with tried and tested formulas too. I was at a recent event where people were encouraged to stand up and outline their business ideas. There was loads of enthusiasm and cheerleading in the room. But when one man said he wanted to open a simple ordinary cafe this was met with a ‘Surely what you mean is you want to ‘start’ with a simple cafe, and then develop a chain before moving onward to world domination?’ No, I just want to open a friendly cafe with me running it and my wife and son helping.

Fredericks would love to help you to achieve world domination. In fact, when your business idea goes global, we will knock on your door and ask you to help some people just like you used to be. Many a great business started in a garage or kitchen at home and we are always excited by enthusiastic entrepreneurs.

The vast majority of our clients, though, just want to run a simple business that will earn them a living. They would all love that business to grow and become something that they can sell or pass to others. But they are all fairly happy if it can simply support them and their family. That is as real and as brilliant an ambition as you may ever need.

So to return to the original question: the answer is that it is not about the type of business, it is about the type of person. Are you adaptable, flexible, hard-working, resilient, imaginative? Do you listen to advice and share your experiences? Do you accept help? Are you good at what you do? These are the qualities our panels look for in prospective borrowers. you don’t need to conquer the world, just make a mark on your own world.