Microfinance is another solution for accessing sources of funds for low-income earners or those without collateral for loans. Because access to financial credit for the development of community income, household income that is necessary for many families, liquidity that circulates to help the community become stronger. This is the idea of providing “credit” that does not aim for profit as a basis, but thinks of creating a future for the community with a society that supports villagers to be ready to drive their careers and income with fair capital with Small Business Development Company Limited.
With the Microfinance model, a social enterprise that supports women’s savings groups in rural areas of the Northeast in terms of providing loans to be capital for everyone to expand and be able to stand on their own strongly, by the Small Business Development Company Limited, which is responsible for planting seeds for the community in the form of seed money, which is a loan to be capital for women’s groups in the Northeastern community who cannot access sources of funds in the normal system. The seeds that are planted will allow the community to grow and develop into strong trees that can support each other systematically.
Now, the admin will introduce you to another social enterprise business. If we hear the concept, we might think that this business is not much different from the main financial institutions in our country. But the truth that we cannot deny is that there are many people in rural communities who are too far from accessing the main financial institutions and still lack a lot of knowledge about money management. This leads to informal loans, interest rates that are higher than the law allows, and debt collection using violence. This is one of the reasons why Small Business Development Co., Ltd. has risen to solve this problem. We will study how to plug the leaks in this society from an interview with Mr. Itthirit Suwannakam, Assistant Manager of Academic Affairs and Funding Relations, Small Business Development Co., Ltd.
The beginning of a small business development company
The company started as just a development project during 1988-1996 under the name of the project to promote the activities of the village revolving fund. It received a budget for development from a foreign organization. It promoted women in Surin and Buriram to set up women’s savings groups. At first, it worked on lending through a group of partners. After that, it adjusted its work process and started to register as a limited company in 1996. At that time, the foreign organization withdrew from Thailand because they saw that the project had been in operation for some time and wanted the organization to be stable and self-sustaining in the long term.
“Why do women have to be savings women?”
The origin of this idea came from a bank that promoted women’s savings. There were foreign organizations that saw the success of women’s roles in money management. This idea was widely spread. Thailand is another area that has been influenced in this matter because the company also saw that women have a really special role and potential in money management. When there was this idea, it was thought that it was a good opportunity to have women come in and manage this matter.
“3 months of potential development before receiving a loan”
Mr. Itthirit said that before opening the group to initiate this project, there was a preparation process that took no less than 3 months, starting from explaining, understanding the area, experimenting with savings of the selected group for 3 months, organizing training in accounting and finance, and going down to give advice in the area. The people who go down to do this job are called the Women’s Savings Group Committee. The group that the company will give loans to must be a group that has been evaluated by the committee as having full potential.
The Role of Small Business Development Companies
The company will go to the area, provide knowledge, and develop people in the community to know how to save, to make sure that every family can really save money. This savings will be the initial money to be used to provide loans. Each group will have different savings potential, for example, some people pay 50 baht per month, while some people pay 100 baht per month. The savings that the villagers have collected, it takes a long time before they can be lent to members. Therefore, the company has a duty to add this money so that they can lend it. They can accumulate interest so that the group can grow to a level where they can continue their business even if the company withdraws. As for the company, it will collect interest from its own portion. The committee members who come to work will also have income from this.
How is it different from lending by financial institutions?
Most of the target groups that the company works with are people who need loans to circulate in their business but lack collateral to guarantee their debts. Therefore, they are unable to access mainstream sources of loans. In some cases, they enter a cycle of informal debt with high interest rates. Of course, there is no collateral to guarantee loans from major institutions. Therefore, the company is an assistant in granting loans without the need for any collateral.
“Rural people lack access to financial resources.”
Mr. Itthirit said that the company’s main objective is to solve the problem of financial sources. Although the initial intention was to create alternatives for women in rural areas to access financial sources, the company has now expanded to include men as well, starting with Surin Province. Later, it expanded to Buriram, Sisaket, and in the future, it plans to expand to Ubon Ratchathani. The company started solving the problem in the Northeast because, in terms of per capita income per year, the Northeast has a higher number of low-income earners than any other region in Thailand.
“Being a unsecured loan is a high-risk business.”
The company’s obstacles are no different from other financial institutions. Being an unsecured loan, the risks are very high. There is a large amount of outstanding debt which the company is continuously working to resolve. When the company issues loans, the officers and each group of directors meet every month. When a problem arises, both sides consult with each other, just like other financial organizations. The only difference is the method of solving the problem.
What services does the company provide?
Mr. Itthirit explained that the company currently has loans available through women’s savings groups, with limited loan sizes. For example, the group can borrow no more than 15,000 baht per person. If anyone needs a larger amount, they can use other services such as business development loans or loans for women entrepreneurs to increase their credit limit. In addition, there are services beyond money, such as sourcing silk for silk weaving groups, which is the procurement of raw materials to promote careers for people in the group.
“The need to strengthen communities”
In the past, the company has always tried to expand the scope of its services to cover other areas. However, due to the company’s current potential, the company only provides loans to women’s savings groups. Since the company’s loans are unsecured, they are very risky. However, the people in the women’s savings group have been evaluated by the committee for a while, so they are considered a guarantee for the company. The company wants to strengthen the community by starting with people in this community group first.
The company’s past successes The company has introduced technology to fill the gaps and solve the problem of lending to make it more convenient and reduce costs. Because the number of target groups has grown significantly, the company has also grown compared to previous years. The company’s funding sources have increased. Currently, loans are raised through online platforms. The funding sources are continuously expanded. When the funding sources increase, they can be more of a cost for people in the community.
Conclusion
The starting point for doing social enterprise business depends on the problems in each area and the potential of each person or each organization. For example, in the case of Small Business Development Co., Ltd., which actually saw many problems in Surin Province, but finance is something the company is already an expert in. Therefore, it believes that if it has the expertise, it will be able to do it well. As for other social issues, let other organizations that are experts do them. If in the future there is an opportunity to cooperate to solve social problems, then we can cooperate or integrate together.
“Look at the potential of the organization and the problems in the area first. Try to find the two things that are compatible. What are we good at? Let us help with that.”
“Friend” Capital for Society | The Practical Sustainability “Friend” Enterprise for Society
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Small Business Development Company Limited Address: 271, Moo 7, Salakdai Sub-district, Mueang District, Surin Province, Thailand, 32000 Tel: (66) 44-065-744 Website: https://www.sedcompany.org/ and Email: sed.surin@yahoo.com
Supported by the Office of Social Enterprise Promotion (OSEP)
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