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July 2010

Church-based loans boost small businesses

By Hilaire Campbell

At a time when many high-flying finance companies have fallen to earth with loud thuds, a church-sponsored fund that loans money to small business is maintaining its record of success.

The Methodist Employment Generation Fund has advanced loans of more than $1.4 million to nearly 150 new businesses, and those businesses have created jobs for 350 people.

Former merchant navy officer Phil Hickling has managed the Methodist Employment Generation Fund for the past 15 years. He says the fund operates as a charitable trust under Methodist Mission Northern and was started in the early 1990s by a group in the Auckland and Manukau Methodist synods as a humanitarian response to rising unemployment.

Run mostly by highly qualified volunteers, Phil calls the fund a lending agency of last resort for start-up business people.

“Maybe they have no credit rating,” says Phil. “Maybe they’ve struck Baycorp, which can come back to haunt you. But anyone who puts a good case is eligible. So far we’ve helped 147 businesses.”

It’s a varied list: artists, boat builders, beauty therapists, divers, proprietors of continental cafes, frozen dessert manufacturers, to name a few. In 2008, a Zimbabwean migrant who was a casualty of Telecom restructuring, was helped into contract work with a loan for equipment. Now he is financial enough to send for his family. See also Kirsten Unger’s Organic Bakeworks featured in this issue.

“The fund’s success rate of 85 percent is high,” says Phil. “We are very proud of it.”

Acknowledgement came in 2006 when the fund was a finalist in the national Vero Excellence in Business Support awards.

Phil says in high risk lending there will always be failures. “But in our experience the most plausible aren’t always the most successful, and vice versa. The less likely have exceeded expectations.”

“The key to everything is mentoring, usually for the three year loan period. It guarantees transparency and firms relationships. Without its proper operation the fund wouldn’t exist.”

Phil says the Methodist Employment Generation Fund supports proposals that show initiative in developing people skills or generating youth employment. It’s a double bonus if they demonstrate benefits for society – a man who designed push mitts for wheelchairs is a good example.

The applicant’s religion doesn’t come into it.

“We’ve got all sorts,” he says, “including Muslims. We don’t ask, we just help.”

The original loan money came from Auckland-Manukau Synods but has been augmented by grants, some from the Tindall Foundation. The eight percent interest rate offsets any losses, and the small remainder is reinvested with the Methodist Trust Association. We like to keep it in the family,” says Phil.

There are no outside investors and the fund’s clear ethos is well worth supporting. If you wish to do so, contact the Employment Generation Fund, PO Box 5104 Auckland 1141 or email philh@mmn.org.nz.