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A first Impression in the Amazonia

In Entrepreneurship, Social on March 13, 2012 at 9:58 pm

The River suddenly appeared like a huge Anaconda in the middle of the thickest forest you could imagine. It was a beautiful sight that reached me as we broke through the clouds covering the greatest rainforest we have: the Amazon jungle – the lungs of the earth. The Amazon Jungle and the Amazon River are probably the most spectacular natural resources of entire Latin America, if not of the entire world. Naturally, it’s one of the New Natural Wonders of the world. Without knowing what I was photographing from the plane, I managed to capture both the Brazilian and the Colombian harbor to the Amazon River in the same pictures.

Surprisingly, more average Colombians than what you’d suspect live here.  Many have found their place in life in this incredible area of peace by just touristing the country. Others are second or third generation in-country immigrants, who have happily lived here all their lives, taking advantage of opportunities that few have sought.

A minority still live in the jungle, in small communities of around 200-300 people, grown out of a few families that still live in primitive conditions. A great surprise, though, is that some of these primitive surroundings, found in the middle of the jungle, have relatively developed schools with something such amazing as… the Internet! Although with only a few computers, time will let these communities develop and continue to get civilized, very likely with the help of government programs that, although not serving all the most needed, might have some positive impact on these indigenous entrepreneurs. The entrepreneurial spirit has indeed found them.

As we entered the community after about an hour’s walk in the jungle, it didn’t take many seconds for the most dedicated mothers to roll up their merchandise before us. Having had no idea of the beautiful paintings and handicraft, 100% natural and handmade, that would be presented, no cash had been brought and we could offer  sweets and cookies to the very grateful children.

Within the capitals of the Amazonia, Leticia on the Colombian side and Tabatinga on the Brazilian side, business has also grown to reach incredible levels. Besides beautiful handicraft sold in most street shops, among the latest technology, cell phones, digital cameras, LCD TVs and computers are sold as basically everywhere else in the country. Hotels with all commodities and tourism agencies with the most exiting tours are also widely offered to national and foreign tourists. Among the most popular tours are kayaking along the river, climbing and sleepover in incredible trees, pink dolphin watching, visiting the island of the monkeys, night-walking in the jungle, boating and swimming in the river.

New hostels in the jungle are being built and prepared for the growing tourism, seemingly in favor of a positive future for many of the locals. Unfortunately, some indigenous tribes might not agree with the civilization taking over their territories, as roads are being extended into the jungle. I will research this area for an upcoming article on how nature is been sacrificed in exchange for people enjoying increased standards of living.

The government is subsidizing financially those indigenous people, who seek a future in the city. I got to see a complete factory of handicrafts that already exists, where a great quantity of handmade products are sold to the different shops in the Amazonia, but also to nation-wide entrepreneurs, who resell them in the larger cities of the country. With the right contacts, these products handmade in the Amazonia might see a prosperous future in the rest of the world. The Amazonia surely is a brand that sells. The river, the animals and the jungle are strong attributes of this amazing place of the earth. Hopefully, the future holds a positive development for all its inhabitants.

On Colombian development and opportunities,

Joni AlWindi


The Colombian Microcredit

In Business, Entrepreneurship on February 23, 2012 at 6:45 pm

Microcredit has lately been discredited as a means to help poor entrepreneurs. It has even been said that they are sucking the blood out of poor people. A New York Times report indicate that the most protests against microcredit are in the very pioneer countries Bangladesh and India, as a result of the serious amount of increasing debts that have expired. These two markets are saturated because the financial segment grew too fast, without much control, and so led to too many loans granted over each other until thousands of families had ended up in a negative debt spiral. (Reference: http://www.nytimes.com, January 6, 2011.)

In Colombia, the situation is different. Despite the fact that microcredit has been in the country for more than twenty years, managed effectively by some NGOs, it was only some five years ago that it attracted more public attention. Financial entities of the sector suddenly saw an important business opportunity in an environment that until then had been completely controlled by local money sharks, charging interest rates beyond 120%.

Currently, the country has close to 6 billion USD granted to microcredit. Although this only means 3.3% of the entire portfolio of the Colombian financial system, it is of great significance. Behind this money are millions of small business owners, the majority from the lowest socioeconomic strata who only need little resources to keep getting by. The number of borrowers are increasing steadily and with the overdue payments under control, the sector is showing healthy dynamism.

Counting only the entities supervised by the financial superintendency, the number of beneficiaries amount to 1.1 million, and if NGOs and other cooperative entities are included, the number could be tripled. The entities dedicated to granting microcredit are increasing and the loans are continuously extended to remoter areas.

In general, the credits are small, between 1.5 and 2 million pesos on average (830-1100 USD), with payment due dates in 24 and 36 months. They are given to people with businesses such as neighborhood shops, bakeries or hairdressers and even to ladies selling empanadas in the street corner. Among the approximately 90 entities (banks, financial companies, cooperatives and micro financial NGOs) identified to be dedicated to microcredit in Colombia, the largest 12 institutions capture 90% of the market. By the end of 2010, 69.3% corresponded to banks and financial companies, 25.4% to micro financial NGOs, and the remaining 5.3% to cooperatives. (Reference: http://www.portafolio.co, March 6, 2011)

It’s not only the micro-businesses and poor people that are included in the micro-credit category, but even exporting small businesses are included and benefit from microcredit. The average interest rate for microcredit lies between 33% and 39%, but for the micro-businesses it’s 7.5% of the credit value and the cost of analysis of the loan.

Despite the high financial costs, the sector insists on liberty of interest rates to motivate the business of handling the chores of the administration of microcredit, for example related to frequent visits to remote houses and businesses of borrowers.

The Economist ranks Colombia as country number 9 in the business of microfinance, after its neighbors Peru, Bolivia, Ecuador and El Salvador. What Colombia is doing and can do to improve this important ranking will be discussed in brief in the end of this article series. More details about the Colombian microcredit will be presented and its progress will be followed also in the continuation.

Main reference: PODER, February 2011, paper issue.

On Colombian development and opportunities,

Joni AlWindi

Micro Businesses in the Colombian Economy

In Business, Entrepreneurship on January 20, 2012 at 6:45 pm

For most transition economies, micro, small and medium sized enterprises (MSMEs) constitute the backbone of the economy. In Latin America and the Caribbean, the micro-businesses represent 90% of the establishments, while the small and medium sized companies represent 8%. Micro-businesses are crucial, both for economic growth and also for the creation of employment. On average, 40% of the formal employments are provided by micro-businesses, while the SMEs provide close to 30%.

The importance of micro-businesses in the Colombian economy can not be understated. As many as 94% of the country’s companies are micro businesses (with only 2.03 workers per establishment on average). Together, they employ 49% of the Colombian workforce. The small companies constitute 5% (with 30.4 workers per company on average) and generate 32% of the employment. The medium- to large-sized companies thus constitute only 1% of all the companies in Colombia (with an average of 526.3 workers per company) and occupy only 19% of the workforce.

In Colombia, the different business sectors can be divided into six larger categories; farming and livestock (1), commerce (2), construction (3), manufacturing (4), services (5), (including various investment and other financial services, real estate and other business activities), and other sectors (6). Commerce and manufacturing are the two sectors with most concentration of MSMEs. This distribution is similar in Latin American MSMEs overall.

When it comes to geographical distribution, the MSMEs are concentrated in the big cities. This is a natural effect of agglomeration economies, making it possible for micro and small companies to benefit from being part of a larger chain. Notably, the capital Bogota attracts more than 60% of the MSMEs, followed by the central northwestern Antioquia Department and the southwestern Cauca Valley Department with both around 12% of the MSMEs respectively. The Atlantic Department in northern Colombia captures just above 4% of the MSMEs. The rest are dispersed over the other areas of the country in even smaller concentration.

Even though the potential is immense for MSMEs to have a much larger impact in the growth of the country, the difficulty to achieve sustainability has been too strong. Barely 50% of the micro-businesses survive their first year, and only 25% the second year. The main obstacles facing the Colombian MSMEs are above all the following factors; the economic situation of the country (1), access to financing (2), the tributary system (3), access to markets (4), and labour legislation (5).

Despite their strong national labour force involvement, Colombian SMEs count for less than 20% of the total Colombian exports. Especially as the country has become more and more involved in global business promotion, the internationalization of SMEs has become an important topic. This will be elaborated on in the end of this article series.

Main reference: Jorge Gamarra Navarro 2005

On Colombian development and opportunities,

Joni AlWindi