November 21, 1997
(Development and Rural Renewal)

The following statement was issued today by Beaton Tulk, Minister of Development and Rural Renewal. It was also read in the House of Assembly:

I would like to provide Members of this House with a description of the Collective Enterprise Development Program, a new business assistance program that my department launched this October in partnership with the Newfoundland and Labrador Federation of Co-operatives.

The Collective Enterprise Development Program is a micro-lending program that offers small business loans. Its unique feature is that the program encourages the creation of small groups of people interested in exploring and establishing new business ventures. The groups then act as a sounding board for the business plans prepared by individual members and are ultimately responsible for approving each member's loans.

The Collective Enterprise Development Program loans are provided by commercial lenders typically banks or credit unions. They are not government grants or gifts. If any member of the group falls behind with their payments, the borrowing privileges of the entire group are suspended. This is why this kind of program is also known as Peer Lending or Circle Lending. Where this approach has been used in other countries, loan repayments have been close to 100 per cent.

Once a person is judged ready by the group to start a business, they can under this program secure their first loan of $500 from a local bank or credit union. Upon its repayment, successive loans are available up to a maximum of $5,000.

The Department of Development and Rural Renewal and the Newfoundland and Labrador Federation of Co-operatives have each contributed $500,000 to the cost of setting up this program. This funding acts principally to provide loan guarantees to the commercial funding institutions and to provide expert business advice to the lending circles through local coordinators that will be guided by the Federation of Co-operatives.

I believe this program is ideal for rural Newfoundland and Labrador. First, it is a program in which people help each other, and we have a long history of mutual help.

Secondly, this program builds on the strengths and skills of a community by sharing skills among group members. Few entrepreneurs have all the skills necessary to start a business. This program ensures that we tap into community strengths.

Thirdly, the Collective Enterprise Development Program builds on people's interests, on the things people are good at. And because the businesses operate in a co-operative rather than a competitive manner, it encourages the growth of complementary businesses which in turn helps build strong community and regional economies.

The Collective Enterprise Development Program is a useful addition to our small business support programs. Many existing business assistance programs assume some familiarity with business concepts. This program is particularly helpful for people with limited business knowledge.

I am also pleased that my department has been able to partner with the Newfoundland and Labrador Federation of Co-operatives on this program. This program is a co-operative process that relies on effective partnering between community-based organizations and government, something in which the federation are experts. The federation has a long history of co-operative effort and I think it is only fitting that they should be the deliver agents for this program.

As Minister of Development and Rural Renewal, I am confident that this program will be an effective economic development tool for rural Newfoundland and Labrador. This program will help to foster entrepreneurship and new business start-ups throughout the province. It will result in new jobs being created in communities through all areas of the province. The program in its pilot form has already attracted over 60 people and is expected to have 100 participants by next January creating 100 new businesses. It is an innovative and flexible approach to the need for business development in rural areas, and it will help my department meet its prime objective: the development and renewal of rural Newfoundland and Labrador.