Challenge 6: Financing
One of the most common challenges mentioned is “funding”, or better yet the search for and lack of finances for projects. How to pool funds to support development projects in origin countries? Some migrant organizations turn to their constituency and organize fund raising events for their project ideas. Development organizations have thematic programmes offering call for proposals to development actors wishing to implement remittances projects. Governments have been developing specialized bureaus and foundations to attract migrant funds for development efforts.
A lot of possibilities are out there for interested stakeholders to seek funding for their development projects. Get inspired by some examples below to see how you could go about financing your project. Or, check out the links page for interesting web pages of organizations and information portals that direct you to sources of funding.
Capital investments for social enterprises
Starting a social enterprise overseas requires considerable financial investments from the part of the migrant, which are not always easy to come by.
The Dutch foundation IntEnt has supported migrants for many years in their business adventures. IntEnt stimulates and facilitates private sector development by assisting enterprising migrants in the western world wishing to set up businesses in developing countries. From their experience, they have been able to draw some crucial lessons on how to support migrants in their business endeavours.
They have found that there exist five parties that can be approached to meet the financing needs for migrant social entrepreneurs:
- friends and relatives,
- business creation organizations such as IntEnt,
- microfinance institutions,
- venture capital funds, and
- new parties.
IntEnt argues the preferred way to seek financing is through locally operating banks. During the start-up stage, the migrant entrepreneur is in need of a relatively high amount of money to meet the running costs, says IntEnt. Such large loans are difficult to obtain through friends and relatives back home, or non-profit organizations such as IntEnt. Often, microfinance institutions are called upon by migrant entrepreneurs. Yet, these often lack the proper conditions for an overseas investors:
- migrant entrepreneurs need long-term loans. MFIs can offer the term, but have less favourable repyament periods for entrepreneurs
- migrant entrepreneurs need larger loan amounts than MFIs are capable of offering
- interest rates of MFIs can be too high for the means of the new (small) enterprises to be set up
Official banking facilities however would be more appropriate for such financing. Unfortunately, banks can be reluctant to finance such a start-up phase, where no tangible assets might yet be visible and plans only still exist on paper. Seeking alternative funding during this first stage is therefore sometimes necessary.
Stages in business development and financing needs
Figure inspired by 'Enterprising migrants in the driver's seat' (2009) by Klaas Molenaar, founder IntEnt
Partnering for financial resources
The choice of locality for business development was largely driven by allegiances of certain migrant savings groups to their home communities and Unlad Kabayan had little control over the geography of their activities – stretching the organization’s resources. Through partnerships they have overcome such overstretching of the budget.