What do small business owners need?

I am spending one week interviewing small business owners in an impoverished community, San Andres Azumiatla, in the city of Puebla. These business owners are members of Caja Depac Poblana, a savings cooperative, and must save a small amount on a monthly basis in order to qualify for loans. They take out out loans mainly to improve their businesses but also for unexpected expenses such as

an illness.

After interviewing many business owners, I felt inspired by their stories of survival, perseverance and business acumen. I was surprised by the commonalities in the obstacles that small business owners in poor communities face in order to grow their businesses.

Sra. Maria is a mother of four young children whose husband dedicates himself more to politics than to his family. He eventually left for the United States and didn't send any money to his family. Sra. Maria was forced to find a way to make a living in order to support her family. She opened a butcher shop that is one of the most popular in the community. She currently buys about 6 cows that she slaughters based on demand. Her customers are her neighbors who like the quality of the meat she sells them and maintain their loyalty to her in spite of competition. She currently operates her business from a small room in her house with full time hired help where she has a meat cutting machine and a refridgerator. Sra. Maria's dream is to open a first class meat shop with a glass display, a clean space that is comfortable and appealing to the customers and a diverse selection of meat products. She strives towards registering her butcher shop with the city slaughter house. She is confident that she can realize her dream if she perseveres, making small but constant strides towards her goals. The biggest obstacle she faces is access to credit with a sufficient repayment term that allows her to generate the profit necessary to repay her loan.

Sra. Anselma makes gorditas, a traditional snack from Puebla that consists of fried tortilla with cheese and salsa. As many women in the community, she was a housewife for many years until her husband lost his job and she faced serious health problems, generating an unprecedented level of expenses. In desperation she turned to community loan sharks who would lend her 200 dollars which in a matter of few months became 1,000 dollars. She eventually accrued almost 10,000 dollars worth of debt at an exhorbitant interest rate of 10% monthly. Sra. Anselma opened two gordita stands and has made a serious effort to pay off her loan. She cooks the corn the night before and then wakes up at 5am to take the corn to be ground. Then she prepares the sauces and stores everything in containers that she will need for both of her stands. After dropping off the ingredients to the stand that is operated by hired help, she drives to her stand to set the stove and tables in place. After being up on her feet for more than seven hours, she goes to the market to buy the ingredients she will need for the next day. Sra. Anselma dreams about having an enclosed stand to sell gorditas, where she can be protected from the wind and the rain, offering more quality to her customers. She wants to grow her business and open more gordita stands in the city of Puebla. Sra. Anselma needs help improving the image of her business, learning about ways to ensure higher quality gorditas and diversifying the snacks that she sells.

Sra. Anselma and Sra. Maria are two of the savy business women who want to grow their businesses yet lack the necessary tools to do so. They need support in expanding access to markets, sufficient capital to buy raw materias in bulk, and credit to invest in equipment. Most importantly they need to believe that they can make their professional goals come true.

Getting to the root of the problem

Reading all of the statistics in the last post, it is easy to get discouraged. Where do we start? How can we identify the root causes of the poverty we detected?

BCDF board members and staff decided to use a useful tool called the problem tree to help us differentiate the effects of poverty from its causes. We asked ourselves what are the root causes of poverty, what is the core problem BCDF needs to address and what are the symptoms of the problem.

After analyzing the root causes of problems in its different dimensions such as education, economy, community organization, infrastructure and the environment, we came to the conclusion that the core problem is weak community economies. The consequences of weak communities include lack of tools, skills, and educational knowledge to incorporate favorably into the workforce, insufficient household income, unemployment and underemployment, deficient basic infrastructure and environmental degradation.

So if we know what the main problem is, what should BCDF establish as its objective? Our objective should be to strengthen and energize community economies in order to contribute to breaking the cycle of poverty in marginalized community. There are various strategies we can pursue such as providing technical training for youth, promote direct access to markets, catalyzing community based development plan, and promoting favorable conditions for agriculture. Since the root causes are complex and multidimensional, there are many ways to attack them.



Based on this problem analysis, what should be BCDF´s strategic lines of work be given its mission and operational capacity? In lively discussion in our strategic planning meeting, we defined our three strategic lines:
1. Investment in human capacity,
2. Advancing community economies
3. Strengthening community infrastructure

These are the three components necessary to accomplish integral community development, breaking the vicious cycle of poverty and empowering community members to become self-reliant. We believe that through education, income generating opportunities and community spaces we can catalyze sustainable community improvement.

BCDF in Mexico

Many people ask me why the Beck Group decided to open a foundation that works in Mexico. In 2009 Mexico passed a threshold to become a high income country. It is one of the 5 high income countries in Latin America , among Chile, Uruguay, Argentina and Panama. Mexico has the 11th largest economy in the world as measured by gross domestic product and purchasing power parity. In spite of these seemingly positive economic indicators, if we zoom in on Mexico we can see an incredibly high level of poverty and one of the world´s worst social inequalities.

Nationally 44.2% of Mexican population live in moderate poverty and 70% live in multidimensional poverty. In terms of social rights such as health and education, 40% of Mexicans lacks access to basic health care and 21.7% of all students drop out from school. In 2010 the highest daily minimum wage was US$4.45 and therefore 20% of Mexicans lack access to sufficient food.

Mexico is a young country: 31% of the population is young. But the children and youth live in deplorable conditions. 17 out of 100 Mexican youth migrate to the US. 25% of all children and youth live in extreme poverty while 60% live in some level of poverty. 13% of youth of working age are not employed.

Even though there are many states with social needs, BCDF decided to focus on doing work in the state of Puebla. Puebla is the 4th poorest state in Mexico based on income and 7th most marginalized based on access to social rights. Out of 217 municipalities, 69% are highly or very highly marginalized. In Puebla 29% of the population didn´t finish middle school, 49% live in overcrowded housing and 61% earn less than 250 dollars per month.

These statistics are depressing. How can a small grassroots non-profit organization make a difference in Puebla?

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