Which policy instruments are the most effective at financing business start-ups by under-represented groups? By Faisel Rahman, Founder & Managing Director, Fair Finance
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Presentation from the capacity building seminar “Financing business start-up by under-represented groups”, 27-29 June 2012, Trento – Italy; organised by the Local Economic and Employment Development (LEED) Programme and its Trento Centre at the OECD in collaboration with the Directorate-General Employment, Social Affairs and Inclusion of the European Commission. See www.trento.oecd.org
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Which policy instruments are the most effective at financing business start-ups by under-represented groups? By Faisel Rahman, Founder & Managing Director, Fair Finance
- 2. Policy Action Team 3 • Commercial Experience
- 3. Policy Action Team 3 • Commercial Experience • Motivation
- 4. Policy Action Team 3 • Commercial Experience • Motivation • Confidence
- 5. Policy Action Team 3 • Commercial Experience • Motivation • Confidence • Cultural Barriers
- 6. Policy Action Team 3 • Commercial Experience • Motivation • Confidence • Cultural Barriers • High Quality Business Advice
- 7. Policy Action Team 3 • Commercial Experience • Motivation • Confidence • Cultural Barriers • High Quality Business Advice • Appropriate Finance
- 8. Identity 1. Passport 2. Driving License 3. Utility Bill
- 9. Identity 1. Passport 2. Driving License 3. Utility Bill Analyses 4. Employment 5. Assets/savings 6. Credit history
- 10. Start up micro business - one bank account - cash based transactions - few invoices - no accounts - no cashflow projections - no or limited trading history - bad or no personal credit - bad credit history - legality questions 1.
- 11. Lender Average APR Morses Ltd 365% Provident 469% Rhodes Finance 1064% CLC 1564% Pay Day 2500%+
- 12. Priorities in choosing financial products 1. Price 2. Security 3. Brand/marketing 4. New technology 5. Ethics
- 13. Priorities in choosing financial products 1. Accessibility 2. Flexibility 3. Honesty and simplicity 4. Respect 5. Relationship
- 14. No-one wants charity They just want a fair chance
- 16. EMN Members 88 Members in 23 countries Full members, Corporate members and Partners NGOs, Banks, Think tanks, Research institutes, Funds 72% Practitioners 12% Corporate members 24% Eastern Europe 24% research, consulting companies European Microfinance Network
- 17. Challenges 1. Variable quality 2. Regulatory challenges 3. Expectation challenges 4. Funding problem 5. Limitation of scope
- 18. Successful microfinance organisations… Are small or medium social businesses Have non standard legal structures Innovating financial services Conduct a business that the mainstream consider too risky Independent
- 19. Successful microfinance organisations… Are small or medium social businesses Have non standard legal structures Innovating financial services Conduct a business that the mainstream consider too risky Independent - A regulators nightmare!
- 20. Bring social and commercial investors together Grants focused solely on areas where needed most Donors Social investors Increase impact by leveraging Banks commercial finance Lend on commercial terms Benefit from security and ‘first loss’ cover provided by social investors
- 21. …revolutionize finance, starting with the people whom the mainstream have left behind….