craschworks

http://www.forbes.com/global/2002/0527/036_print.html

Capitalist manifesto
Kerry A. Dolan, 05.27.02

If you give a machine tool away, it will collect dust. If you sell it, it
can cure poverty.
The ramshackle facade of Christopher Wilson's two-room home in the gritty
Southside neighborhood of Kingston, Jamaica, doesn't raise great
expectations. But through the rickety wooden gate and beyond the drainage
ditch lies a new, freshly plastered extension to his house and woodworking
shop.

Wilson, 36, who has a wife and two young children, brings in $800 a month
making cabinets, tables and chairs for a furniture store and for neighbors.
His business got a big kick six months ago when he bought a used drill
press and lathe for $650. It doubled his productivity, which in turn
allowed him to purchase the materials for the extension and hire a mason.

Wilson bought the tools, at a 20% discount from their secondhand value,
from a nonprofit called Tools for Development. Started 15 years ago by Roy
Megarry, 65, the former publisher of Canada's prestigious Globe & Mail
newspaper, Tools for Development has a simple but powerful premise: Make
secondhand equipment available to poor entrepreneurs at an affordable
price. There are no handouts. The entrepreneur pays for the tools either up
front or on credit, with interest rates slightly lower than banks charge.

Today there are three Tools operations, in Quito, Ecuador; San José, Costa
Rica; and the newest, in Kingston. So far 2,500 entrepreneurs have used
Tools to buy 6,000 pieces of equipment for $1.2 million. In the process,
says Megarry, they have created or helped sustain 10,000 jobs. The
institution's annual budget is $90,000. The $1.2 million from the sale of
tools was used for loans, training and shipping expenses.

Megarry was inspired during a 1983 visit to a slum outside Lima, Peru,
where he was attending a publishers' meeting. “I was born in a slum in
Belfast, but I had never seen Third World poverty on this scale,” recalls
Megarry. “I shed a lot of tears that day. I thought, 'I've got to do
something.'”

A few years later Megarry was visiting a technical school for boys in Lima.
The Canadian priest who ran the school told him that it needed saw blades
and drill bits, the parts that wear out. Megarry wrote to the president of
Sears Canada and in exchange for the donation of new drill bits and other
parts, gave Sears advertising space in the Globe & Mail.

He later ran ads in the paper to solicit donations of tools from companies
in the Toronto area and was swamped. The project continued to grow. In 1992
Megarry quit his career as a publisher to devote more time to Tools. He
drums up tool donations from companies at events such as meetings of the
Rotary Club.

He doesn't ask for money but is sometimes offered it anyway; he gladly
accepts it. Last year Megarry got an arm of Rotary International to pick up
75% of the cost of shipping tools from Canada.

At first he gave the tools away to small entrepreneurs. But he found that
many of the tools sat idle. So Megarry and CARE (a partner in the Peruvian
program) decided to start charging for them, although on easy credit terms.
“I realized we needed to be in the development business, not the charity
business,” says Megarry. He also realized that people attach more value to
something they've paid for.

The average purchase is $800; 80% of the recipients pay up front; the
remainder buy on credit. In Quito and San José the default rate on $20,000
of microcredit that has been extended so far is 3%. Tool's interest rate in
Quito, on sucre-denominated loans, is 19%; in San José, on loans in colone,
it's 25%.

“Most Jamaicans are wary of banks,” says Alain Williams, the project
manager in Kingston, not least because banks remind them of loan sharks.
They don't get those vibes from a tool seller.

Sewing machines are buzzing at Janet Shepherd's Cool Garments Creations
shop in Kingston. Shepherd, 48, bought four from Tools to add to the six
she already owned. The $650 she spent (plus another $175 for repairs) is
enabling her to more than double production of school uniforms, to 750 a
season. In the summertime, her busiest season, Shepherd clears about $4,300
making school uniforms. That's on top of the $100 a week she nets with her
regular business throughout the year. She's been in business for 20 years.

Megarry has bigger ideas as well. He would like to tap U.S. corporations
for tools. And he makes it clear again: “This is not a charity. We're
fostering entrepreneurship.”