Successful micro-business program will be expanded

The Newfoundland and Labrador Federation of Co-operatives (NLFC) today received a two-year, $460,000 funding commitment to maintain and expand its successful Collective Enterprise Development Program (CEDP). CEDP provides micro-loans and advisory services for individuals looking for self-employment opportunities through membership in co-operatives and business credit groups.

The funding, through the Canada-Newfoundland Agreement for the Economic Development Component of the Canadian Fisheries Adjustment and Restructuring Initiative (EDC), was announced by George Baker, Minister of Veterans Affairs and Secretary of State for the Atlantic Canada Opportunities Agency (ACOA), and Beaton Tulk, Minister of Development and Rural Renewal.

The Collective Enterprise Development Program is based on the formation of business credit groups and co-operatives at the community level comprised of six to eight people who provide advice and support for each other's businesses. The micro businesses obtain small business loans from commercial lenders and use that credit history to work up to larger loans. Loans are guaranteed by a $1 million fund to which NLFC and the Department of Development and Rural Renewal have each contributed $500,000. Micro-businesses typically employ less than five people.

The Collective Enterprise Development Program was initially created in 1997 in response to the groundfish moratorium to help people develop alternative approaches to employment creation and economic development, particularly in rural communities. The NLFC delivers the program in partnership with over 20 local development agencies and financial institutions. They include the Newfoundland and Labrador Organization of Women Entrepreneurs, Regional Economic Development Boards, Community Business Development Corporations, Chambers of Commerce, local banks and credit unions.

"This new investment builds on the early success of the program and will extend the services to other areas of the province," said Minister Baker. "Continued gaps in the availability of credit for micro-lending make this program necessary in Newfoundland and Labrador."

"This program has given people in rural communities the opportunity to start their own businesses," said Minister Tulk. "New businesses have been created across a wide spectrum of industries from agrifoods and information technology to the service sector. Many groups came forward during the jobs and growth consultations speaking very positively about the accomplishments of this initiative and recommending that the program be expanded across the province."

Mr. Tulk added that many of the province�s 20 Regional Economic Development Boards have targeted micro business development as a means of strengthening their regional economies and creating new jobs.

"Our client base is diverse. We service students, older people looking for second careers, single mothers, former fisheries workers, and people with disabilities. We are constantly impressed by what they accomplish with hard work and small amounts of money," said NLFC manager, Glen Fitzpatrick, "People in our province want to work and will pursue self-employment when given a little help and direction."

The program has proved highly successful. Since 1997 the NLFC has assisted in the start-up or expansion of 200 micro-businesses employing over 250 people. More than 200 loans totalling $285,000 have been advanced to these businesses and the payback rate has been 99 per cent.

By responding to the lower, under $5,000 segment, funding available through the NLFC�s program is complementary to other types of business funding: Community Business Development Corporations, ACOA�s business development program, the Department of Development and Rural Renewal�s Strategic Enterprise Development Fund, and commercial lending through banks.

The three-year $81.25 million Canada-Newfoundland Agreement for the Economic Development Component of the Canadian Fisheries Adjustment and Restructuring Initiative (EDC) was signed on August 16, 1999. The agreement is designed to build upon the strategic plans and priorities of the Regional Economic Development Boards to improve the long-term economic climate in regions impacted by the downturn in the groundfish industry.

It is delivered federally by ACOA and provincially by the Department of Development and Rural Renewal.

For more information, please contact:

Doug Burgess
ACOA
(709) 772-2935

Josephine Cheeseman
Department of Development and Rural Renewal
(709) 729-4570

Glen Fitzpatrick
NLFC
(709) 726-9434

CEDP provides micro-loans and advisory support services for individuals pursuing opportunities for self-employment, through membership in co-operatives and business credit groups. The Newfoundland and Labrador Federation of Cooperatives manages the CEDP which is delivered and financed by external partners.

The Micro-Business Lending Service

Clients join business credit groups (peer lending circles) and gain access to micro-loans ($500 - $5,000), marketing networks, training, peer counselling and problem solving support. Client identification, group formation and operational activities are guided by a local project coordinator, with the assistance of a volunteer area committee.

By repaying smaller loans, clients gain credibility and subsequently access to larger loans. All loans are approved by the group, based on client intent to invest in a micro-business and ability to repay. Loans are registered with the Credit Bureau to assist clients with development of a positive credit rating. Loans are secured by CEDP and the Department of Development and Rural Renewal, but are issued by local financial institutions.

The Micro-Business Lending Service responds to a gap in commercial credit, particularly in rural communities. Clients of the program would not normally be able to access funding through traditional lending methods.

Clients have indicated that the support services available through group membership are also of significant benefit. Group members purchase from each other and market each other�s services. More experienced micro-business operators help those with newly developing enterprises. Some groups hold workshops to address common skills development needs such as basic accounting and small business taxation. Many existing clients have indicated that they joined their group to access a loan but have remained because of the peer support.

Bradley White, founding member of one of the first business credit groups on the Green Bay Peninsula, started his business, White�s Woodworking and Upholstery in October 1997. Since then, the lending service sponsored by the Emerald Business Development Corporation, has allowed Mr. White to access a total of three small loans totalling $5,500 through a commercial lender. Last summer, Mr. White employed two students and plans to provide employment for an additional full-time person in the future.

Inge Van Ulden, owner of Wallnuts in St. John�s, joined the lending service in 1996. She was a founding member of the RHUBY Business Credit Group which was sponsored by NLOWE. To date, Ms. Van Ulden has accessed $6,500 in small business loans through commercial lenders for such things as marketing and promotion. Today, Wallnuts employs four people.

Micro-business operators form co-operatives to enable them to work together to meet common business needs. Co-op members share equipment and business premises, engage in volume purchasing and jointly market products and services. These and other joint activities help reduce operating costs, improve markets and increase sales.

The Co-operative Business Development Service tends to be most applicable when micro-business operators are in the same sector i.e. agriculture, crafts, cultural industry. Peer counselling, business networking and skills development are also key client benefits of this service. Loan guarantees are also available to assist in levering the funds required to implement co-operative business plans.

Example: Eight former fisheries workers have established individually owned goat farms and a processing facility on the Bonavista Peninsula. They have formed a co-operative to collectively process and market their milk and cheese products. The Cabot Caprine Co-op currently produces 6,000 litres of milk a month and products are available in local stores under the "Lands End Farms" label. The co-op is currently exploring opportunities to export their products to mainland Canada and perhaps the northeast United States.

Over 200 micro-business operators are currently participating in co-operatives and business credit groups through 10 service delivery sites across the province. These clients are also providing employment for an additional 75 business partners and employees. Two new sites are pending and services will be provided for over 60 new clients during the next six to eight months. Continued growth is projected over the longer term.

The NLFC is the provincial organization representing the co-operative business sector in Newfoundland and Labrador. Its members include fishery, retail, childcare, and worker co-ops. The NLFC�s co-operative/community development mandate includes delivery of the Collective Enterprise Development Program in partnership with local development agencies across the province.

• Central Community Development Corporation, Exploits Valley

• Emerald Business Development Corporation, Bay Verte Peninsula

• Grand Lake Centre of Economic Development, Humber Valley

• Metro Business Opportunities Corporation, St. John�s

• Newfoundland and Labrador Organization for Women Entrepreneurs, St. John�s

• Red Ochre Regional Board Inc., Northern Peninsula

• Trinity Conception Community Development Corporation, Trinity-Conception

• Labrador Straits Chamber of Commerce, Southern Labrador

• Rising Sun Developers Inc., White Bay North

• Discovery Regional Development Board, Clarenville - Bonavista South

• Northeast Avalon Community Futures Development Corporation, Conception Bay South

• Gander Area Community Development Corporation, Gander - Twillingate - Eastport

• Irish Loop Regional Economic Development Board, Southern Avalon

• Kittiwake Economic Development Corporation, Gander Area

• Marine and Mountain Zone Corporation, Port aux Basques - South Coast

2000 03 16                                                                 1:20 p.m.