Thursday, January 15, 2009
Tuesday, January 13, 2009
Lessons for China from Seattle's Community Capital Development
Jim Thomas, CEO of Seattle's Community Capital Development, has created a great model that could be the answer for many developing countries like China.
Shown waving in this 2006 photo from USA Today, Jim is a funny, warm, and sharp businessman. I contacted him via email first on December 16, 2008. Then a snowstorm hit Seattle area long and hard. When ice and snow finally gave away to our normal marine climate, I finally had the change to visit him on December 30, 2008.
Unlike Washington CASH, which I profiled here, microfinance is not the sole focus of Community Capital Development (CCD). Rather, it would be a step up for its graduates. This page outlines its lending terms. Whereas Washington CASH focuses on helping people to move out of poverty by utilizing their skills, CCD hopes to take them onto prosperity by providing them with more resources. He took the rein of a HUD (Housing and Urban Development under US Treasury) community development grant of $2.5MM at City of Seattle in 1994 and turned it into a $14.5MM community development lending operation today. Obviously he’s done something right!
“Our mission is job creation.” Jim explained that, for every $35,000 financed by CCD, he expects one job to be created. His model combines training and financing (similar to Washington CASH). However, not all applicants are taking the same training courses. In fact, CCD requires all applicants to attend a seminar first, to assess their needs for further training. This can last from several hours to several years, depending on the student’s level of business experience. He estimates that about 1,100 to 1,200 people attend seminars every year, but only 60 to 70 microfinance loans are made in the end. Through the training process, most people come to realize that they are not ready to run their own businesses.
(This is very true, confirmed by statistics and my own experience. It is not easy to start a business. It is even harder to grow it into a profitable venture. Once it is successful, the business needs to stay on top of its competition in order to sustain itself if not to grow. It’s hard!) Through this “self-weeding” process, as Jim put it, CCD suffers very low default rate (5%, less than half of the loss rate of WaMu Home Loans’ portfolio!)
I thought about what I learned from phone calls to friends and family members in China in the past months. “The major problem in China today is not poverty,” said one high ranking official friend, “It is how to create jobs amid factory closures that is most urgent.” The other family friends followed such a line. Apparently, poverty is an old issue that government would like people to overlook until it fixes it somehow someday. More visible to the outside world now is China's urban development. A large influx of unemployed workers, including millions of migrant workers who do not want to return to rural villages, is a cause for concern. From this perspective, Jim Thomas should be a guest of honor to Chinese government at all levels.
Written by Hongqing Chen, a Portfolio/Risk Manager and contributor to Wokai Adventures (wokai.typepad.com) January, 2009
Unlike Washington CASH, which I profiled here, microfinance is not the sole focus of Community Capital Development (CCD). Rather, it would be a step up for its graduates. This page outlines its lending terms. Whereas Washington CASH focuses on helping people to move out of poverty by utilizing their skills, CCD hopes to take them onto prosperity by providing them with more resources. He took the rein of a HUD (Housing and Urban Development under US Treasury) community development grant of $2.5MM at City of Seattle in 1994 and turned it into a $14.5MM community development lending operation today. Obviously he’s done something right!
“Our mission is job creation.” Jim explained that, for every $35,000 financed by CCD, he expects one job to be created. His model combines training and financing (similar to Washington CASH). However, not all applicants are taking the same training courses. In fact, CCD requires all applicants to attend a seminar first, to assess their needs for further training. This can last from several hours to several years, depending on the student’s level of business experience. He estimates that about 1,100 to 1,200 people attend seminars every year, but only 60 to 70 microfinance loans are made in the end. Through the training process, most people come to realize that they are not ready to run their own businesses.
(This is very true, confirmed by statistics and my own experience. It is not easy to start a business. It is even harder to grow it into a profitable venture. Once it is successful, the business needs to stay on top of its competition in order to sustain itself if not to grow. It’s hard!) Through this “self-weeding” process, as Jim put it, CCD suffers very low default rate (5%, less than half of the loss rate of WaMu Home Loans’ portfolio!)
I thought about what I learned from phone calls to friends and family members in China in the past months. “The major problem in China today is not poverty,” said one high ranking official friend, “It is how to create jobs amid factory closures that is most urgent.” The other family friends followed such a line. Apparently, poverty is an old issue that government would like people to overlook until it fixes it somehow someday. More visible to the outside world now is China's urban development. A large influx of unemployed workers, including millions of migrant workers who do not want to return to rural villages, is a cause for concern. From this perspective, Jim Thomas should be a guest of honor to Chinese government at all levels.
Written by Hongqing Chen, a Portfolio/Risk Manager and contributor to Wokai Adventures (wokai.typepad.com) January, 2009
SBA January Web Chat: How Can Small Businesses can Deal with Credit Crunch
Host: Eric Zarnikow, Associate Administrator for the Office of Capital Access at the U.S. Small Business Administration
Time: Thursday, January 15, 2009 at 1:00 p.m. ET
Eric Zarnikow, Associate Administrator for the SBA’s Office of Capital Access, will host the January Web chat on “How Small Businesses can Deal with the Credit Crunch.” Zarnikow will answer questions to help chat participants learn about real-world strategies to employ during economic downturns, and how they can sustain themselves through the credit crunch.
The SBA has included information online on the Economic Recovery to help small businesses facing economic uncertainty — at http://www.sba.gov/helpingmainstreet/index.html
SBA's Web chat series, providing small business owners with an opportunity to discuss relevant business issues online with experts, industry leaders and successful entrepreneurs. Chat participants will have direct, real-time access to the Web chats via questions they submit online in advance and during the live session, with instant answers.
Participants can join the live Web chat by going online to www.sba.gov, and clicking "Online Business Chat." Web chat participants may post questions for Zarnikow before the January 15th chat by visiting http://app1.sba.gov/livemeeting/jan09/index.cfm, and posting their questions online
Time: Thursday, January 15, 2009 at 1:00 p.m. ET
Eric Zarnikow, Associate Administrator for the SBA’s Office of Capital Access, will host the January Web chat on “How Small Businesses can Deal with the Credit Crunch.” Zarnikow will answer questions to help chat participants learn about real-world strategies to employ during economic downturns, and how they can sustain themselves through the credit crunch.The SBA has included information online on the Economic Recovery to help small businesses facing economic uncertainty — at http://www.sba.gov/helpingmainstreet/index.html
SBA's Web chat series, providing small business owners with an opportunity to discuss relevant business issues online with experts, industry leaders and successful entrepreneurs. Chat participants will have direct, real-time access to the Web chats via questions they submit online in advance and during the live session, with instant answers.
Participants can join the live Web chat by going online to www.sba.gov, and clicking "Online Business Chat." Web chat participants may post questions for Zarnikow before the January 15th chat by visiting http://app1.sba.gov/livemeeting/jan09/index.cfm, and posting their questions online
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