Bakeries, food and clothing vendors, stalls, stands and restaurants, consumer electronics shops, barber and tailor shops, taxi and bus drivers, they're all beneficiaries of a thriving micro-finance industry in Colombia, one of any number of nations where finding, or creating, employment is difficult at best, and obtaining steady, well-paid work even more so.
Nearly 50% of Colombia's 46 million citizens live below the poverty line. Micro-finance organizations such as Colombians Supporting Colombians (CAC) are giving entrepreneurs a leg up by providing micro-loans and other banking services that conventional banks are unwilling to offer. Some $3.5 billion in micro-credit was disbursed in 2010 to more than 2 million borrowers.
There are more than 1.2 million so-called micro-enterprises doing business in Colombia, along with small businesses making up an astonishing 96% of all companies in the country and employing 50% of national employment, according to a Vision Economica report.
Small- and micro-sized businesses are defined as those worth $147,000 or less, a debt capacity of no more than 120 monthly salaries--the equivalent of $37,000 and as many as 10 employees. In comparison, medium-sized and large-sized companies make up 3.6% and 0.4%, according to the National Dept. of Statistics.
Micro- and small businesses "generally do not meet the requirements set by commercial banks, which do not lend money to people with limited economic resources either, due to the risk of default," Jorge Varón, manager of the development credit fund of Colombians Supporting Colombians (CAC) program, told Helda Martinez of the InterPress News Service.
CAC began making micro-loans back in 2001 with backing from the US Agency for International Development (USAID). USAID "supported us until 2005 in the development of social projects and in meeting the requirements to launch a micro-credit program, which began to operate in 2004. Today, we are autonomous," Varón recounted for IPS.
"In the space of six years, we granted loans to nearly 9,000 people. We have 2,100 active loans, 90 percent of which were extended to people in levels one and two." Colombia's government categorizes its economy along six socioeconomic lines, one being the poorest and six the wealthiest.
Micro-finance started taking off in Colombia in 2007, growing 15% per year between that year and 2010, according to Vision Economica's July report, entitled, "Microcredit in Colombia."
The CAC credit fund grants loans between $28 and $14,300 that carry an interest rate of 2.1%. Repayment terms vary from one month for 'emergency' loans and between three and 36 months.
Interest rates on micro-loans are regulated by national law and a national decree that was modified in 2008 to foster growth of micro-finance and distinguish micro-lending from consumer lending, Martinez reports.
An experienced, independent journalist, editor and researcher, Andrew has crisscrossed the globe while reporting on sustainability, corporate social responsibility, social and environmental entrepreneurship, renewable energy, energy efficiency and clean technology. He studied geology at CU, Boulder, has an MBA in finance from Pace University, and completed a certificate program in international governance for biodiversity at UN University in Japan.