Minneapolis, MN (HOL) - The city of Minneapolis has launched a new interest-free financing program to help small businesses that don’t borrow money from traditional banks because of religious and other restrictions.
Dubbed as the Alternative Financing Program, the effort is aimed primarily at the city’s burgeoning small businesses owned by Muslims, whose faith restricts them from receiving interest-based loans. Non-Muslim businesses can also use the program, but priority is given to small businesses that can’t grow without the program. The loan can be used for neighborhood retail, service or light manufacturing in targeted areas.
“This is not only a good thing, but it’s a smart thing for the city to do,” said Mayor R.T. Rybak, who announced the program Wednesday at the shop of Shukri Gedi, the first recipient of the loan (shown in the photo with the mayor).
Gedi owns a tiny Somali shop at the Karamell Mall in south Minneapolis. Since 2004, she has wanted to expand her business but didn’t have enough money and, for religious reasons, didn’t want to use the interest-laden traditional bank loans.
With a $25,000 loan from the new program, her dream came true. Her shop has more merchandise, and she is selling a lot more of the bright-colored cloths. She’s expected to repay $634 a month over the next several years.
“You’re showing me that I’m not alone in this struggle,” Gedi told the mayor and several Minneapolis City Council members.
The council approved the plan last year after Hussein Samatar, executive director of the African Development Center, testified that more than 40 percent of Muslim-owned small businesses have no access to capital because of religious restrictions.
At a 2 percent rate of return, the city agreed to contribute half of up to a $100,000 loan. A private lender will pay the other half at its rate of return and will set the terms.
“The city has taken a step forward toward helping its citizens,” said Samatar, whose community development organization has been offering Islamic financing for years.
Council Member Robert Liligren of Ward 6 said: “Community development is not about building Target stores in downtown.”
Abdirahman Aynte can be reached at [email protected]