Lending when others won’t

 

Several years ago when Tane Mahuta, the magnificent Kauri tree tourist attraction in the Waipoua Forest, suffered badly from tourists’ possessions being stolen from vehicles (prompting The Lonely Planet Guide to advise against stopping there), Sheena Ross and her whanau proposed establishing a security service to solve the problem. With funding from Microwise to purchase a caravan, and other assistance, the objective was quickly achieved.
 

As a young man Dave Cooper was involved in a horrific road accident that left him a paraplegic and wheelchair-bound. He found that the gloves and mitts available to wheelchair users weren’t satisfactory, so designed more robust and practical versions. Dave located a supportive manufacturer, but after no success raising funds from banks he approached Microwise. The fund reviewed his business plan and advanced the money to get his business started. 
 

Those two examples provide an idea of the small but important role Microwise plays in New Zealand’s business funding landscape. In the words of its Auckland-based fund manager Phil Hickling, “we help people who can’t get funding from the usual commercial sources”.
 

While the crowdfunding phenomenon has been stealing the headlines, Microwise has been quietly flying under the radar – providing an alternative funding option, mainly in the form of unsecured loans in the $10k to $25k lending bracket.
 

Microwise is one of New Zealand’s oldest providers of microfinance to businesses. In fact, it’s very old. In 1746 John Wesley, founder of the Methodist Church, created one of the first microfinance funds, assisting people to kick-start businesses. “Wesley saw how tradespeople struggled to get going and simply wanted to help,” says Hickling. “It was a notable achievement, raising the lending capital by ‘public appeal’. A bit like crowdfunding today.” 
 

Some 250 years later the Reverend Wesley’s business initiative is still being continued by The Employment Generation Fund, aka Microwise, as ‘a lender of last resort’ and a mentor to those ventures it supports through its partnership with Business Mentors NZ. During the past 20 years, more than 150 Kiwi SMEs and social enterprises have grown through advances totaling over $1.8 million – leading to the employment of more than 350 people.
 

“The capital has traditionally been raised by way of grants,” explains Hickling. “We are not a deposit taker, which means life can be difficult raising funds, but it also eases compliance. As with many things finance-related, much has changed over recent years; our rationale is to reflect those changes and become more financially self-sustaining.”
 

Hickling covers the upper North Island from Taupo to Kaitaia and personally visits loan applicants (Microwise also has fund associates in Christchurch and Nelson). He says the application process is not dissimilar to the banks’. The new website (www.microwise.nz) is also proving helpful with its downloadable loan application.
 

The lending criteria mirrors other lenders too, he says, covering basics such as business plan, financial projections, assets and liabilities. Microwise needs to be satisfied that the business will grow – but don’t bother applying if you’re just looking for a lifestyle or hobby business, he says.
 

Continuing Wesley’s Christian principles of helping every fellow man, Microwise funds are extended to business owners of every religion or cultural background. The organisation currently charges a fixed interest rate of eight percent on its loans in order to preserve its capital base and offset any losses – understandable considering it is operating at the riskier end of the market.
 

Going forward, Hickling is upbeat about the next century of service from Microwise. 
 

The goal is to reflect the changing world of small business and microfinance, and the wider acceptance of social enterprises as a business model for the future.