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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

Work – the Hard Life

In Entrepreneurship, Poverty on August 10, 2011 at 6:09 pm

Having both moved around extensively in the low income neighborhoods of the city together with local NGO members on earlier occasions and made acquaintances with top managers representing the highest level of affluence in the country on later occasions, I’ve been able to observe many aspects of daily life in Colombia’s all 6 socioeconomic strata (social classes).

When it comes to the working conditions of the lower stratum, what most people face are long hours under the sun on thestreet corners and the traffic lights selling all kinds of things such as coffee, juice, breakfasts, avocados, chewing gum, cell phone accessories, children’s school utilities, books etc.

It’s questionable how entrepreneurial these people really are, considering the horribly low productivity level of what they do, but they are certainly persistent and hard working with the discipline to start working before sunrise (6 am) and continue working long after sunset (6 pm). Considering that their income is not close to being assured to reach the national minimum wage of formal jobs, their ‘forced willingness’ to work is admirable.

It’s not difficult to argue in favor of why more foreign companies should grasp the opportunity to invest in the enormous potential labour force in the lower strata, which to very affordable wages could be liberated from the inhumane working days on the streets. The monthly minimum wage in Colombia this year (2011) was set to 535 600 COP (286 USD), with an additional transportation subsidy of 63 600 COP (34 USD).This is a 4% increase from last year and is supposed to favor the creation of 2.4 million new jobs and the formalization of 500 000 work places. This is according to the objectives set by the new government. (Source: businesscol.com).

As for the upper classes, the salary, no matter how high, is not an indicator of how much free time managers have or how long vacation they can take. As in most places, top managers are the first to arrive to the office in the morning and the last to go at nightfall, obliged to make sure the overall operations are under control, and that their inboxes full of emails are taken care of.

Overtime work is the default rather than the exception and no extra pay for the extra hours worked is to be expected, although the salaries at the top level of multinational firms can be quite comfortable.

Besides an unemployment rate starting out at 13.5% this year, still struggling to come down from a high average of 14.6% the last 10 years, the incapacity of the formal sector to generate enough employments has given rise to a large informal sector. It includes around 34% of the workforce, of which 45% earn less than the minimum wage of the formal sector (Source: tradingeconomics.com, caracoltv.com, elespectador.com).

Despite the many challenges to employment, formalising your own company is easy in Colombia and entrepreneurship is also the great solution for many hard working individuals. More on this in an upcoming article on the reality of small businesses.

On Colombian development and opportunities,

Joni AlWindi

Education – the Challenging Life

In Education, Entrepreneurship, Poverty on March 23, 2011 at 6:34 pm

In 2007, my Master’s thesis partner and I carried out a field study researching the role and scope of low-cost private schools serving the children of low-income areas in Cali. We managed to visit around 200 schools in the city’s largest and most dangerous marginalized area, Aguablanca. In our findings, we could confirm that the private sector’s share of schools and pupils constitutes a clear majority (85% of all schools and 64% of all pupils) and that the private schools perform better on two of our three indicators of quality (teacher activity and pupil-teacher ratio). On the third indicator (material inputs) the results were ambiguous; although the overall infrastructure was better in state schools, access to both computers and books was better in private schools.

It’s not a surprise to anyone that private schools in general are more effective than “free” state schools. For many, however,it’s almost shocking to find out that low-cost private schools directed to the poor, first of all exist; secondly, that they capture such a large share of the poor children; and, thirdly, that they perform better than the state schools. On the top of that, they do this on much lower budgets!

Teachers in low-cost private schools, although they are less qualified and much less paid, are more dedicated to the actual interaction with the children. Thanks to the much lower number of children per school, they have fewer children per classroom to attend and as a result both more time and more material per child at their disposal for the actual teaching.

Besides thousands of private institutions providing educational services in the country, the Colombian private sector has a history of high participation in education efforts. Various foundations, entrepreneurs and other groups have supported with financial resources and human resources specialized on different aspects of education for the poor. Similarly, numerous NGOs contribute to a great extent to the improvement of Colombian education. Despite of this, the resources are not enough to secure a quality education for the poor. Most monetary, technology and innovative investments, even from the greatest of the city’s foundations, are directed almost exclusively to the state schools, where they are managed ineffectively, and, although it’s great to read about some improvements in state schools concerning school environment, quality of education, absenteeism and coexistence etc., the impact of such improvements are far too small compared to the great amount of efforts pouring in.

Today, a terrible amount of youths in ages 17 to 23 are left with nothing to do, being excluded from university studies in lack of secondary school diplomas, good enough grades or money to get access to a university. To attack this problem, an interesting law – and even more interesting if actually enforced – was written in 2006, regulating Education for Employment and Human Development; six beautiful words that not very surprisingly title very well what Cali and Colombia needs. The purpose of this law is to facilitate the provision of the skills and talents needed for successful performance of existing work tasks. This alternative to university education, if made accessible to all and in collaboration with the actual employers, sees an interesting future. The most recognized institution providing this service is the National Service of Learning (the SENA), which will be written more about in an upcoming article on Colombia’s ICT advancements.

When it comes to higher education, well-off Colombians, but also top-performing or hard-working students from all socio-economic classes, can get access to top-class universities of international standards. Exchange programs to go abroad for advanced studies are also promoted through scholarships on the higher levels to help provide top-class Master’s and Doctoral level knowledge for the future leaders of the country. More than 70% of the institutions for superior education are private and costly (between about USD 1,000 and USD 3,800 per semester). Credits as a form of student loan are possible to get for high performing secondary students, but a great share of the university students has to work hard to afford higher education studies, with schedules running until 10pm.There is deep controversy globally about the government’s role and responsibility in education, especially when contrasted to the alternatives provided by the private sector. This is something that I feel passionate about sharing my thoughts on and learning much more about. The Education Business topic will therefore be discussed in more detail in an upcoming article.

On Colombian development and opportunities,

Joni AlWindi