José Francisco de Conrado, Chairman of MicroBank, tells the story of how one day his assistant told him someone was in reception wanting to talk to the Chairman, not a manager, only the Chairman would do, he said. So the assistant invited him in, and he said he wanted to thank the Chairman personally. He had been working in a supermarket, but with the recession he was made redundant. He really didn’t know what to do. He felt at 55 years old he was on the scrapheap. But, he had an idea.
He could deliver fresh fruit and vegetables to restaurants and stores in his area. He saw the MicroBank advertisement, and went to a la Caixa branch and asked for a loan to buy a small delivery truck. In the eight months since getting the loan, his business had grown, and he now had two trucks and employed one other person. Mr. de Conrado notes, “All he wanted to do was thank me for being given the chance to make something of himself still. I was very touched by this man’s story. This is the reality. This is what we can do.”
This is no ordinary banking story. MicroBank was set up to provide a European version of microcredit. We are used to thinking of this as a developing world thing, but it isn’t any longer. In a reversal of trends, microcredit is being pioneered by MicroBank to promote the use of microlending in the poorer sections of Europe. The question is though, how do you translate a basic idea of loans of a few dollars into the kind of funds needed to get started in business in Europe?
Mr. de Conrado explains, “We had to look and see how this might work in a European context, where such small quantities are not sufficient to help people in poorer areas to get started in business. We decided to offer loans up to a maximum of 25,000 Euros, which is a realistic and sustainable amount.”
Would-be entrepreneurs, who have no other avenues open to them, are not asked for collateral. The bank simply looks at the person and the project, and thirty per cent of applications do not succeed. The decision is taken on the trustworthiness of the person, belief in the success of the project, and a check that there are not loan problems elsewhere. In a sense, MicroBank is taking banking back to its origins, entrepreneurial energy and money joined with trust.
Customers have their project assessed by the bank, but to get to this point they can get the help of local organizations to put together the proposal and get technical support for their business. The bank can also offer some additional help through the 5,000 in-house volunteers they have in the group nationally.
“By granting these loans, we perform important work in social cohesion, by allowing financially-excluded groups to access loans without the need for security collateral so they can set up self-employment projects and businesses. We also help families to get through unexpected situations.”
In the past two years the recession has affected this business, and would-be entrepreneurs are more wary. “We had projected to have twice the level of loans we have currently. This may seem counter-intuitive, because you might expect more people to seek loans because they have lost their jobs. However, people do not necessarily have confidence in the business climate to strike out on their own,” explains Mr. de Conrado.
With the economy improving, entrepreneurs outside of Spain may soon be able to find a bank near them, as MicroBank held a high-level conference last year, inviting two hundred banks from around Europe, to promote European microbanking. Bankers came from not just around Europe, but also from as far afield as Mexico and Japan. Mr. de Conrado comments, “Many of these banks certainly think there is a way to sustain business in this segment of the economy, and see this as new area of business opportunity.”
Designs on Barcelona: 2creativo
It took just two years for two young designers from Barcelona to get from a microloan application to sourcing partners in China. With no money, but big dreams, many would-be entrepreneurs just figure they can’t go anywhere, let alone to the other side of the world.
The young duo in Barcelona had no money to invest and were not customers of the bank, but they had an idea and ambition. They managed to get a 25,000 Euro loan to set up in business based on a handshake.
Based in Barcelona, 2creativo was started by Abel de Benito and Mariona Lopez, who wanted to start their own studio business for graphic and industrial design, creating a range of products from sweet packaging through to furniture design, taking projects from the creative concept to the finished product. The firm is based in the 22@ innovation district in Barcelona. Abel and Mariona have over 10 years of design experience each working with major companies, but they shared a dream of going it alone.
Mariona explains, “We were at a stage where we had developed as far as we could, either we just stopped and worked for other people or we started our own full business operation. It was a critical point for us, we could not continue as we were, but we needed a loan to move forward. We wanted to grow our own business, but did not have the capital and so we went to Barcelona Activa to help us, and they advised us on creating a business plan and then introduced us to MicroBank. They even arranged for us to meet MicroBank at the Activa offices.”
“It was amazing that so quickly we were thinking internationally. We went to China to source business partners, twenty days of looking around, three companies a day. We wanted to find a company that had the industry capability and was innovative, not just a cheap producer. It is an incredible journey for us.”
Entrepreneurs: From Dance Steps to Dog Walking!
As a successful and experienced choreographer, artistic director, and flamenco dancer, Nuria Ventura wanted to set up her own dance school. After receiving an initial loan of 25,000 Euros from MicroBank, she was able to set up Escuela de Danza Nuria Ventura. This loan was used to refurbish the premises and helped her to take her very first steps along the way towards opening her dance school.
The Dance School is in Sant Esteve de Palautordera (Barcelona) and the school began with 20 pupils. Now there are more than 60. “Securing microcredit was quite easy. I presented my business plan, they saw that I had a clear idea backed with solid experience and supported my new challenge” says Ventura. She adds, “I would not have been able to open the dance school without the microloan. The school gives me stability. It is my future”.
Montse Nzang used her loan to set up Cangur, a company that offers an integral service for pets, including home visits. Montse has a degree in biology, and set up her business out of necessity: she needed a dog sitter to come to her house in Ametlla del Vallès (Barcelona) and look after her two dogs. With the collaboration of the International Foundation of Women Entrepreneurs, an organization that collaborates with MicroBank, she developed her business plan. “I found MicroBank on the Internet where I presented a viable project.
It is very important that your project acts as your guarantee. With a EUR 15.000 microcredit and some small savings I was able to set up Cangur. I started it alone, and now there are two of us working full-time. Furthermore, we donate 0.7% of the profits to an animal welfare organization”, says Nzang.
The MicroBank Business
MicroBank was set up in 2007 to channel and strengthen the microcredit business la Caixa had previously been doing through Obra Social, its community projects arm. It has become the only bank solely devoted to microfinance in Spain. Since 2007, MicroBank has been working sustainably to adapt to growing demand and to guarantee its ability to provide more microloans in the future.
By September 2010, MicroBank had granted 11% more loans than in the 12 months of the previous year. Since its founding, the bank has financed 93,879 loans worth Euro 588 million.
MicroBank grants each year fifty thousand microloans, and the bank can see this quickly going to two hundred thousand microloans a year. Forty-four per cent of these loans have been granted to women, and 54% to people under 41 years old. While 58% of applicants are Spanish, the rest are non-resident, coming from South America, Europe and African, amongst other places.
According to the Spanish Savings Banks Confederation (Confederacion Espanola de Cajas de Ahorro – CECA), in 2009 a total of 32,750 microloans were granted in Spain, of which 32,000 were granted by MicroBank.
Forty per cent of the loans granted have been to expand an existing business, while sixty per cent has gone into creating new businesses. The future looks good too, as the European Investment Fund forecasts the annual growth rate of microloans at 67% and estimates a potential demand of 700,000 microloans throughout Europe, with a value of Euros 6,000 million.
A Report on the Social Impact of Microloans, produced jointly with the ESADE Business School, states that MicroBank loans have contributed to the creation of some 22,000 jobs. MicroBank is giving their expertise to others in South America, especially Mexico, and Europe.