Minneapolis goes Dhimmi and supports Shariah Finance
Minneapolis agency provides support for Somali man’s success
Associated Press
MINNEAPOLIS — Abdi Adam’s life story is typical of the entrepreneurial business owners along Cedar Avenue in Minneapolis’ West Bank neighborhood.
In 1998, Adam fled a dangerous home in Somalia and traveled thousands of miles to start over in Minneapolis. Once settled here, he recruited six partners to help start a grocery store, the same business he ran back in Mogadishu.
Over time, he bought the partners’ shares, then expanded into a storefront at 613 Cedar Ave., which offered room for the larger coolers and freezers Adam needed to satisfy more of his east African clientele’s needs.
Needed assistance
Adam’s path to success was paved, in part, by assistance he received from the city of Minneapolis’ Community Planning and Economic Development agency, or CPED, and the African Development Center, or ADC, part of a small cadre of nonprofit development specialists in the city.
The ADC, headquartered just a few blocks from Adam’s store, helped him write a business plan and addressed myriad questions about his business, suppliers, regulations, bookkeeping and financing that he hadn’t faced before.
“They helped me interview the people I bought my equipment from,” he said. “They even helped me think through the floor plan” at his much larger new store. “I couldn’t have done this without them.”
His new partners made another important bottom-line contribution by delivering a $50,000 loan, including matching portions from ADC and Minneapolis’ CPED. The city agency delivered a below-cost piece that made it affordable, and ADC structured the credit to conform with Islam’s prohibition against interest payments.
The investment has paid big dividends for Adam. Business is “much, much better than ever before,” enabling him to employ seven people in the store, support his own household and regularly send money back to Somalia, where food shortages are chronic and “conditions are terrible,” he said.
Lending program critical
And the success of immigrants such as Adam’s, repeated many hundreds of times in the city, has also paid dividends for the Minneapolis economy, which has seen new jobs and investment in key but formerly run down commercial corridors.
The scale of that expansion isn’t easy to measure. Public agencies don’t obtain information from borrowers about when they arrived in the country or their country of origin.
But Ramon Leon, executive director at the Latino Economic Development Center provides some numbers that demonstrate the trends. In 1994, there were no visible Latino-owned businesses — those with storefronts or signs — in Minneapolis, Leon said. By 2002, more than 3,500 Latino-owned businesses were operating, according to that year’s economic census.
Also in 1994, the first four Latino-owned businesses on Lake Street opened. Today, more than 300 are operating along that rejuvenated corridor east of Lyndale Avenue.
The number of businesses in operation is impressive, and so is the growing scale. Several businesses now have annual sales approaching $5 million, and others are on that track, Leon said, adding that “This has become an enormous economic power.”
At ADC, executive director Hussein Samatar points to his agency’s two-year-old lending program to indicate the growth in African entrepreneurship. The center’s loan matches a contribution from CPED and has provided more than $2.5 million to finance 96 businesses since 2005, leveraging much more in private financing.
That’s just the beginning, Samatar said. The east Africans who make up much of Minneapolis’ recent population growth faced numerous obstacles before they could fully join the city’s economic life. Many weren’t sure they’d become permanent residents, very few had an understanding of the regulatory and business culture here.
“And they weren’t used to this culture of financing,” which leverages equity with bank loans. “It’s different than what they knew in Africa,” Samatar said. Those hurdles are breaking down with time and advice from groups such as ADC.
Filling financial gaps
Bob Lind heads the business finance at CPED, and he said the city’s goal has been find the gaps in that capital picture and fill them.
“We aren’t out to compete with banks. But there’s risk in these loans, and we’re looking for ways that we can help lower that, giving the banks a way to extend a credit that they couldn’t otherwise,” Lind said.
That’s exactly the way it’s worked so far, said Rich Esquivel, vice president for commercial lending at Franklin Bank, one of the busiest lenders to Minneapolis’ immigrant businesses.
On tough-to-underwrite loans, “those programs minimize the exposure to the bank. It brings our piece of a credit down from 80 percent to 40 or 50 percent (of value). And the preparation and help from organizations (like LEDC or ADC) makes closing and servicing loans much easier.”
CPED’s role is evident up and down Lake Street, but it’s especially apparent at the Midtown Global Market at Chicago Avenue. The agency financed 28 immigrant-owned businesses in that urban shopping center, providing $637,000 in loans that leveraged another $1.1 million in financing.
One of the agency’s most popular loan programs — available to all citizens but heavily used by newly arrived entrepreneurs — reduces the cost of a loan by matching a market-rate bank portion with a 2 percent agency loan.
That program grew steadily from 2000 to 2006, when the city’s $2.5 million in loans leveraged another $6.6 million in bank and private financing. Over the last eight years, the program secured almost 1,200 Minneapolis small-business jobs.
Targeted loans
The newest CPED loan — a collaboration with ADC — is the only program specifically targeting an immigrant group. The alternative financing program adapts the 2 percent loan, structuring it to provide a return to the lender without charging interest rates, meeting the guidelines of Islamic Sharia law.
In its first 13 months, that program — the first public Sharia-compliant loan in the nation — made 15 loans that delivered almost $600,000 in investment. Many of those were small loans, averaging about $20,000, and they financed small or home-based businesses.
In the midst of all that growth, there are clouds on the horizon for this generation of newly arrived business owners. Tighter enforcement of immigration laws and the recession are having an impact, putting a chill on some plans and bumping up loan delinquencies.
But the expansion will continue, Samatar said, because immigrant entrepreneurs are moving rapidly up the commercial learning curve.
“They’re just beginning to realize how much power they can have” by building businesses and accessing the economic tools in their communities, he said. “They impress me all the time.”
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