SME’s and Poverty Alleviation

One of the biggest challenges in areas of material poverty is availability and access to stable jobs. This affects all parts of a community because with little income coming in all businesses suffer. One of the contributors to this lack of stable employment is that many in areas of material poverty are micro businesses which employ one person and have little opportunity to grow into a business that hires more people.

On the other hand, more developed economies are built on small and medium sized business.

Chad Jordan wrote in his book Three Jobs, “SMEs are the universal building blocks of any economy. The United States is a prime example. Business Insider reports that 60-80% of new jobs in the U.S. come from small businesses [SMEs], and that 57% of the United States’ workforce is employed by small business with less than 500 employees. The biggest economy in the world is propped up by small business. Even further, research states that more than 51% [or higher] of the GDPs of so called “developed” countries are composed of SMEs, while only 16% of the GDPs of emerging nations are composed of SMEs.”

So what is preventing small and medium businesses to develop and grow in countries like Guatemala? For one things, there is a lack of banking options for this size business. With a heavy international emphasis on microfinance, SME finance has been overlooked. Small and Medium Enterprises are limited by high interest rates and unreasonable application and collateral requirements. This size business owner doesn’t have access to needed capital to grow their business and hire more employees.

For the Love of Missions jumped into attempting to meet this need in Guatemala. After building a relationship with a leather artisan in Antigua who employs 5 people, For the Love of Missions financed a loan intended to improve the infrastructure of the workshop, purchase new equipment and raw materials. As business improves for this small enterprise, new products will be developed, new employees hired and trained, and the local economy strengthened.

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