Local Economic Development

Support for micro-businesses is a powerful, cost-effective way to drive local economic development in rural communities.

Microbusinesses are small enterprises of up to about $100,000 in annual turnover, and employing fewer than five people. If proactively supported micro-businesses can deliver real economic growth and important social outcomes, in the short- and medium-term. They are a core community asset on which communities can build.

Microbusiness led development has proved itself nationally and internationally. Studies have indicated some clear advantages of microbusiness-led economic development:

■         Microbusinesses by definition have the potential for growth, and are thus capable of bringing new elements to the economic foundation of the community.

■         Microbusinesses are diverse, building the community’s economic base across a range of economic sectors and spreading community development risk.

■         Owners and employees can grow in business knowledge and experience along this trajectory. This builds the capabilities and skills of the community, opens new synergies, and positions the community for success in a business environment of accelerating change.

■         Microbusinesses are more likely to draw on the local labour market, with all the multipliers in economic and social activity for the community that this brings.

■         Owners of microbusinesses are typically entrepreneurs, willing to take risks to establish new enterprise and to be self-reliant in their approach. This places the economic development of the community on a solid ground of expanding internal achievements, driven not by external parties such as government or other grants but by the growth of home-grown skills, capabilities and experience.

There do exist some local schemes already. These are home-grown, developed quietly within communities, and are not widely known. In our work with rural communities we have come across a number such initiatives.  For example, these include: a community association with an asset base donated shortly after WWII; a community cooperative funded by small donations across the community; a local council initiative leveraging low cost funds from the state Local Government Finance Authority; and an informal network which connects local investors with local businesses.

A different model we are looking at centres on a loan fund structure.  Under this model funds would be secured from government, corporations, foundations and private donors.  Low-interest, short-term loans would be made to microbusinesses.  Microbusiness borrowers would be supported by local mentors and linked online in sector networks, as in incubators.  The fund would operate under best-practice financial services principles.  The fund could be both a centralised RCA entity, lending out across communities, and funds owned and run locally with RCA support.  Major banks have indicated their willingness to support such a project with advice on policies and systems.

Getting the model right

We are currently mounting a study to look at the pro’s and con’s of these different models for microbusiness financing.  The outcomes of the study will be be:

  1. A  survey of models in Australia and overseas.
  2. Identification of the best models under different community conditions.
  3. A feasibility study for the first implementation of the top-ranked financing model.

 

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