Applying Cooperative Development Principles to Develop Historically Disadvantaged Businesses
In 2000, the Community Entrepreneurship and Business Initiative (CEBI) began in the Eastern Cape City of Port Elizabeth. The focus of the program was to develop the business and financial capacity of entrepreneurs and small business owners in townships by linking historically disadvantaged businesses to mainstream businesses in the Eastern Cape region. Cooperative development principles were applied to enhance local economic development, increase access to financial markets for historically disadvantaged township residents and their businesses, and create employment.
CEBI used a three-part strategy to stimulate rapid business development in two South African townships. First, community level economic development planning and a township based advisory committee guided CEBI activities, generating support and promoting community participation. Second, CEBI brokered linkages between community businesses and market players in the mainstream economy to increase demand for township business products and services. Finally, community-based business development centers provided technical assistance, training and financial services to support the growth of township businesses.
The Community Business and Enterprise Centers (CBECs) were established as development hubs capable of providing financial and non-financial business development services to local entrepreneurs. These full-service centers offered potential clients business, finance, and administrative and marketing services at one location. The financial services component was managed by ACDI/VOCA and included a sustainable, group-based microfinance program for women microentrepreneurs, a finance service cooperative owned and controlled by community-based shareholders, linkages with commercial bank small business lending programs and a small business start-up matching grants program.
The financial services staff continually sought ways to diversify the unit’s portfolio and was active in assessing the market demand for new loan products and developing new varieties of loans to target this demand. For example they introduced the “Speedy Loan” product, which offered small loan amounts for very short repayment periods to people attempting to respond to an immediate business opportunity. These loans required a solid business idea as well as strong experience in the area they were trying to finance. Speedy loans were structured carefully and accessed through associations and cooperative groups to reduce risk, and were met with overwhelming success, attracting 115 borrowers in the first two months of their existence.
ACDI/VOCA managed CEBI in partnership with the Cooperative Housing foundation (CHF) and the National Cooperative Business Association (NCBA). Their collective portfolio includes community development, economic restructuring, small business development, environmental protection, innovative financial systems, stimulation of economic activity through diverse means including housing construction, and auxiliary enterprise and employment generation.
