Small loan makes big difference

Derek Handley

Kiwi entrepreneur Derek Handley is hoping to give people in Africa a chance to build their own businesses through small-scale lending.

The 31-year-old Handley, who runs mobile-phone marketing company The Hyperfactory, has backed a new bank created by Hyatt fortune heiress Liesel Pritzker called Young Ambassadors of Opportunity.

The bank lends money through micro-finance loans starting at US$50 ($67) to people in Rwanda and Tanzania to help them expand their businesses and employ others.

Handley said he began to look for ways to give something back about a year ago but was put off by charities and their costly ways of raising money. "I was looking at what I should be doing as an individual that benefits more than me. But I wanted something that also aligned with my values."

Helping other entrepreneurs to get ahead appealed strongly to Handley, who founded The Hyperfactory with his brother.

"I see that an entrepreneur's challenge is always about how to scale a business and the exciting challenge here for me is about how to scale a fledgling industry."

Unlike charities, the banks lend the money to groups of people from the same community who are all responsible for paying it back.

Handley said although there was no physical collateral to borrow against, the use of social collateral meant the repayment rate was around 98 per cent.

"Charities such as 'dollar-a-day Christian Children's Fund' type activities are non-sustainable, and are throwing good money after bad, the money disappears and has no sustainable, commercial value," he claimed.

The loans, which start from around US$50, can give someone like a fruit seller or shopkeeper the chance to expand and hire others.

The money was usually paid back within a year and, in some countries like Rwanda, where the banks had been established for many years, some groups were up to their 18th loan.

Handley said his goal was to build up a network of people and get other young entrepreneurs involved.

"I want to show people you don't have to wait until you are 60 and then give back - it's about giving back in tandem with your life.

"I'd like to see how over the next 50 years this type of solution could go a long way towards eradicating poverty. It took only 30 years to build the information age, 50 years to build the railway and industrial age. This is the age of social change and I believe it is our generation, applying entrepreneurial answers to these problems is the way to do it."

Earlier this year Derek and Geoffrey Handley sold a cornerstone stake in The Hyperfactory to an American media conglomerate.

The brothers would not reveal how much listed Meredith Corporation paid for the 19.9 per cent stake but said it was "up there" in terms of other emerging New Zealand technology companies.

Last year Meredith had revenue of US$1.6 billion. It owns 12 television stations, 23 magazines and 32 websites.

In 2007 The Hyperfactory gained financial support from 42 Below founders Geoff Ross, Grant Baker and Stephen Sinclair, as well as American investors Rich and Paul Frank, who helped the company set up shop in Hollywood. It now has sites in Shanghai, Hong Kong and India as well as the United States.