Morgan puts money into grassroots loans

Trade Me founder Sam Morgan has invested in South Pacific Business Development, which has given loans to 1200 Samoan families. Photo / Supplied

Trade Me founder Sam Morgan has invested $700,000 in a Pacific Island-based microfinance company that lends capital to women wanting to start their own businesses.

South Pacific Business Development (SPBD) has been working in Samoa for 10 years and has now expanded to Tonga.

Microfinance companies, such as SPBD, provide loans and training for people in impoverished countries and lower socio-economic communities that do not have access to banking services and business mentoring.

SPBD founder Gregory Casagrande said the company wanted to promote a way out of poverty for people in countries where it was "impossible to get credit".

Casagrande said the company lent money only to women because they were more likely to reinvest their profits back into their businesses and families.

"The men tend to spend a bit on cigarettes and alcohol. One dollar yields more return from women than men. They reinvest in their kids' education and home improvements."

The loans are used to start a variety of businesses from crab fishing to sewing to corner stores and taxis.

Since the company started microfinancing in 2000, more than 29,000 loans, worth $17 million, have helped 1200 Samoan families become more financially viable.

Casagrande said that according to the Samoan Government, for every $1 the company lends, $7 is created for the country's gross domestic product.

"Unsecured credit is impossible [to get]. Banks won't give them credit because they have no assets. We work on a character assessment: what do the women in your village think of you? Will they work with you?"

Microfinance companies are a "huge risk" for investors as the people the money is lent to have little or no formal education or experience running businesses.

But most women SPBD lends to have proven creditworthy, Casagrande said. "Two per cent of our customers are in arrears. That's pretty remarkable, and they're making reasonable returns. Most banks wouldn't have portfolios like that."

Investors such as Morgan receive interest payments of 5 per cent, where as SPBD charges interest rates of between 8 per cent and 25 per cent to its clients.

Casagrande said that might seem high by Western standards but incorporated into interest payments are weekly training workshops, access to further loans, life insurance, and operational costs of the company.

"This is a way to get people out of poverty," he said. "Handouts breed dependency. Creating meaningful business opportunities will help the family, help them finance their micro enterprise and housing improvements. A lot of people don't have foundations in their homes, instead they have dirt floors. This can greatly change their life standards."

Morgan said he chose to invest in the company because of its strong principles and rigorous and strategic operations.

"I haven't had a report come late or payments. Greg could be running a global company but chose to build a company in this sector.

"Greg is in every village in Samoa working with people with very little [or no] income and they all have lots of kids. It allows them to save a little for medicines. This is targeting base-level grassroots," Morgan said.