Leveraging indigenous methods for funding

24 May, 2019 - 21:05 0 Views
Leveraging indigenous methods for funding Micro-enterprise in action

eBusiness Weekly

Funding is always important in running a business. At start, one requires start-up capital for capital expenditure.

Once the enterprise is up and running, there will be need for working capital for operations and the occasional order finance for specific contracts or deliveries. Ordinarily, these can be supported by financial institutions.

However, in our current environment banks are not too keen to lend, a snap survey revealed that many have put lending on hold while they await guidance on interest rates and also forecast the next few months in the year.

The small business owner may not easily be able to secure the money they need to keep moving from formal sources. It may be worth it to revisit some non-formal ways of capital raising.

As indigenous people, we have always had methods of mobilising resources that can be extended to modern day enterprise. These include the farming work parties, crowd-funding of positive and negative social events, savings clubs, and paying it forward/grant arrangements.

At farming work parties, people from the work community would take turns to invite the local community to come and assist in some labourious farming task — clearing land, or planting, or weeding or harvesting.

All the hosts needed to do was provide refreshments for that day in the form of food and drink and they would have all the labour they needed for as long as it took to complete the necessary task.

The social contract in the community was such that everyone was obliged to participate when invited to another’s farm and as such resources were always accessible.

This could still work for those in the specific business of farming but the learning point for any other kind of enterprise is that one can gather people around their project and get input from a community — it could be in the format of a baby/bridal shower, where they provide simple snacks and drinks and the attendees bring in physical gifts useful in business or services. Not all capital must be cash.

Crowd-funding was used in our communities long before technology platforms like gofundme and indiegogo were created. When one sought to marry, they would receive tangible support from the family to raise the bride price. When one went on to wed, they would often tap into the family again for resource support. Even in unhappy and sad circumstances such as a funeral, our locals would tend to pool together to ensure there is a place to bury the deceased, the requisite transport and especially food to cater for all the mourners throughout the mourning period to burial. It was not uncommon to have people at your doorstep asking for mealie meal for this purpose.

In the same way, there is opportunity to open up one’s enterprise or invention to the community or one’s network or even total strangers that may just have goodwill and want to provide some small support to a new or growing enterprise.

What is vital then is to make the investment case sound and strong, then others can buy in for no reward other than the satisfaction of having given another a leg up.

Savings clubs have also been a way of resource raising, probably more potent and easier than the two prior points. Often the people that came together would have a common cause or intention, but none would have adequate resources to fulfil the intention.

As such they would organise themselves, usually women, to take turns to give each member the same amount of capital, trusting that she

would also do the same in another month for the other members.

This would ensure that the recipient had adequate capital to get a project going and those at the beginning would benefit more if they had a ready and viable project they could deploy funds to which would yield returns they could fund others with thereafter. Essentially this arrangement was meant to ensure that each saver gets a lump sum with no interest costs.

They have since evolved as some savings clubs allow members to borrow off the pooled funds at some interest and non-members to also borrow at punitive interest — in either case the investors would enjoy interest on their saving. Important to this method would be picking similarly inspired folks, and trustworthy ones too.

Many micro-enterprises are surviving in this way and grow rapidly such that they end up approaching micro-finance institutions or banks to assist them with keeping deposits and fund management as the administrative burden grows. Never underestimate what small income and big organising can accomplish.

Finally, the pay it forward/grant type of activity is another method that was used extensively in the times past in our local families. It was not uncommon for one member of the family to receive the education needed in life first and all resources focused on him, such that when he was done and stable, he could in turn invest in others siblings or family who would keep the cycle going.

The one who would have actualised would of course have free reign over his individual wealth but have moral obligation to take care of others.

This method can be customised such that in a family, members pool resources towards one enterprise until it thrives, then that can be the funding source for diverse economic activities according to the individual preferences.

One is sometimes required to start off doing a business they don’t really like, only as a way of raising the capital for doing what they really want.

Traditional funders are good, but in an environment like ours they tend to only work with those that are already doing well and do not take as much risk. It is a good thing for emerging small business owners to look inwards more than outwards as they start and grow their businesses. Many of the things we require in business, we already have a connection and access to!

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