Introduction
A community development corporation is a non-profit making organization. The corporation is set up by the community members to help in offering support to community development programs. The corporation may engage itself in offering services or undertaking activities which promote community development programs. The main aim of the community development corporations is to improve the living standards of the low income people in the community.
Community development corporations are involved in various activities in order to meet their objectives. These activities may include engaging in activities that promote economic development, promoting education through setting up of institutions that provide technical skills to the community members and community organizing activities. The activities carried out by the community development corporations play a significant role in contributing towards the development of small businesses.
The community based corporations were first formed in 1960s. Since then, they have grown rapidly, both in size and number. A study conducted in 2006 showed that there were over 4600 community development corporations in existence. The corporations had led to economic stability in the community through the development of over 86000 affordable housing units. The study helped to bring out the roles played by the community development corporations in the development of small businesses.
The intent of the paper is to discuss the role of community development corporations in the development of small businesses. The discussion will be based on the education sector and its contribution towards the development of small businesses. In addition, discussion on how the community development corporation acts as a source of finance for development of small businesses.
Discussion
Most of the small businesses need enormous amounts of capital or investment to start up than others. The community development corporation is either going to raise the necessary funds or bear the large risks involved in starting up of the business. The majority of the people in the community may not have enough capital to start the business. For example, a person may be willing to start a fishing pond. The pond may be meant to rear fish for sale when they mature. The farmer may be constrained by lack of funds, to start the fish pond. The community development corporation may decide to help the farmer in starting the fish pond. This may be through providing some services without charging. This acts as a motivation to the farmer, and he or she is capable to start the business.
Community development corporations also play a significant role in the establishment and development of small businesses through the provision of loans and capital to the community members. The community development corporations usually assist the community members by providing loans to them. The mode of payment of the loan is flexible depending on the individual. The loan, in addition, is provided at a lower interest rate as compared to loans from financial institutions. The community members are able to set up small businesses once they are provided with financial support. Financial support is the main contribution the community development corporation provides to facilitate the development of small businesses.
Community Development Corporation helps in the provision of merit goods such as education and medical services. Merit goods are those goods which do not yield a substantial amount of return to the investor. The supply of merit goods should be adequate and should be made available at low or subsidized prices. This is to encourage their consumption. Provision of education to the community members helps to provide them with the required skills for carrying out particular activities. An individual may use the skills developed to set up their own business. For example, a carpenter may decide to start his own workshop instead of being employed. Merit goods are expected to improve the welfare of the particular community and should, therefore, be provided through community development corporations in order to encourage their consumption.
Community development corporations help in the provision of the technical skills. This is through the provision of education to community members at affordable prices. Other merit goods may include street lighting and removal or collection of garbage in the community. These are factors which provide favorable conditions for the starting up of small business. An investor is going to start up a business in a clean environment which has sufficient security and well lit. It is the role of community development corporations to ensure that these factors are made available.
Community development corporations play a significant role in the protection of natural resources. The resources are essential, for the welfare of the community. The resources would be exploited if left in the hands of the private sector. The resources are the raw materials for start up of small businesses. The private sector aims at maximization of profits, and they are going to use the resources until they are depleted by over-extracting. The resources include mines and forests. Mines may act as the provider of raw materials for building. It is the duty of community development to ensure a well defined systematic policy of tapping the resources is followed. This helps to protect the long term, or future, the interests of the economy. However, the natural resources available should not give to those who are starting the small businesses. The community development corporation should remain in charge of the natural resources. Their role is to ensure that the resources are utilized in the required manner and in the right quantities.
Community development corporations lead to the improvements of infrastructure within the community. However, this may extend to the neighboring communities. Any business requires a well planned and proper infrastructure which is in good condition. This may include well maintained road network system, good communication channels and proper housing for storage of the produced and unsold goods. Road network makes it easier to transport raw materials from the source to the business premises. Also, well maintained roads make it easy to transport the finished goods to the customer or point of sale. It is the role of community development corporations to ensure that there is proper infrastructure in order to facilitate the development of small businesses.
Small businesses require proper and well ventilated warehouses to store their commodities. Goods, which are easily, perishable, require being stored, under good conditions, to minimize incidences of the owner incurring heavy losses. Such facilities can be provided by the community development corporations free of charge or at a subsidized price. This provides motivation to individuals members in the community to start up small businesses. Community development programs may also be useful in providing sheds. The sheds are prominent in traders who deal with few items. For example, people selling second hand clothes and agricultural products may be provided with selling sheds. Setting up a shed may be expensive to the trader. Therefore, if the shed is provided, traders are encouraged to start small businesses. They may be required to pay a substantial amount of money to cater for the setup cost and maintenance of the sheds.
The Community Development Corporation also plays a crucial role in small business development through the provision of small business incubation facilities. Incubation facilities are meant to encourage individuals to develop their idea into real business. This may be in the form of providing space for community members to carry out their business at low cost. The community development corporations may also decide to provide the facilities free of charge. The facilities provided are meant to encourage an individual to develop the business knowledge and ideas into a viable business plan. An individual who has been subjected to such conditions is able to come up with an idea which translates to a real business. Therefore, incubation facilities are vital in the start up of a small business. Other examples of business incubation facilities include interaction with other successful entrepreneurs. The community members are able to acquire vast knowledge regarding business operations. The Community Development Corporation can also assist in searching for donors. The donors would help to support the local community in starting up their businesses by the provision of funds.
Environmental protection and conservation are highly essential in promoting the success of any business. The success of any type of business depends to s greater extent on the environmental conditions surrounding the business. Community development corporations play a significant role in environmental protection and conservation. The community development corporation helps to ensure no business is going to impact negatively on the environment. Negative impact may be in the form of pollution or depletion of the ozone layer. Small businesses are going to develop in pollution free environment. For example, an individual may decide to start a fish rearing activity. The person can only start the business in an area where there is free flow of clean water. It is, therefore, important for the community development corporations to ensure the environment is well protected and conserved.
Private enterprises lead to wasteful and undesirable multiplication of services and products. Proliferation of models and brands confuses the public through highly persuasive and cost advertisement. This, often, increases the price paid by the consumer. Community Development Corporation helps to identify such products and services. The services and products can be easily produced at a lower cost by community members. Therefore, it is the duty of the community Development Corporation to provide guidance to the community members on potential areas of investment. For example, private enterprises may lead to the development of many organizations dealing with similar goods and services. The enterprises spend a lot of resources advertising for their products. High competition implies that a firm has to carry out aggressive campaigns in order to fight off the competitors. This increases the cost of production. As a result, the selling price of the product and service is going to increase.
The membership of the community development corporation is made up of community members. Although not everyone on the membership board is a community member, a majority of the members understands the community better than the other members. They are in a position to identify the problems facing community members, sources of the problem and how they can be solved. They advise the community members of the profitable businesses to start. This may help to reduce the community problems. This helps small business development. For example, they may identify the need to set up a school within the community in order to reduce the time taken by their children walking to school. An individual may start up a small school as a way of addressing the problem. Also, members of the community development corporation are able to guide the community members on the procedure required in order to start up a business and the legal documents required.
Community Development Corporation plays the role of providing education and information. They are necessary to ensure the business is successful. This is done during seminars and workshops organized by the community development corporation. Seminars and workshops are meant to educate the community members on bow they can start their own businesses. During the seminars and workshop, the community members are taught on how to manage the funds borrowed for business purposes. Most people have the tendency to divert money meant for business to other ways. This makes it hard for the individual to repay the loan as required. The importance of keeping proper books of account for the business is also emphasized during the seminars and workshop. The seminars and workshops help to facilitate the interaction among various people with different business ideas. An individual can be able to improve on his or her idea depending on the feedback he obtains from sharing with other people. This is indispensable in facilitating the development of small businesses.
Community Development Corporation plays a crucial role in determining which projects are socially acceptable and those which are not. A business would be considered viable where the social marginal cost (SMC) from the business is equal to social marginal benefit (SMB). A business is not desirable if it results in private marginal cost equal to private marginal benefit (PMC=PMC). The supply of some services leads to the emergence of externalities. Externalities are the benefits and costs which cannot be quantified in monetary terms. Hence, it is difficult to measure their social value. It is the role of the community Development Corporation to carry out businesses which lead to externally. The corporation should advise the individuals on how to carry out their businesses in order to minimize the incidences of negative externality, which increases their, production cost. The role of the community Development Corporation, in this case, is to help in correcting the externalities. The externalities may arise from the small businesses which may have been started by individuals.
Community development corporations play a decisive role in small business development through the creation of a market for their output. Smaller businesses may be producing less output than grown and established businesses. Sometimes, they may lack market for their output. The Community development corporation may sell the output on their behalf. The community development corporation buys the output from the producers. They have a stronger negotiation power in the market than an individual producer. They, thus, help the producers to sell their output at the prevailing market prices. This helps to ensure they are not overshadowed by large scale producers. The community development corporation, hence, helps the development of small businesses through the creation of a market for their output. For example, Community Development Corporation may sell milk on behalf of the farmers in order to maximize on the selling price. However, the success of this role depends on whether the producers produce homogeneous products or closely related products, which can be, sold together..
Community Development Corporations promote the development of small businesses through protection of the domestic or local businesses within the community. This involves prohibiting the importation of goods into the community if the goods or services are being produced within the community. Importation of the goods may be at a cheaper price than the locally produced goods. The customers are going to consume the imported goods or services at the expense of the locally produced goods and services. The small businesses are, thus, going to make losses. However, with the intervention of the community development organizations, exportation may be banned. This helps to ensure that customers can only consume the locally produced goods and services. Development of small businesses is thus facilitated. Community development corporations also play a pivotal role in ensuring that goods produced meet the customer requirements. This helps to ensure customer satisfaction, which leads to, the customer loyalty. There is going to be development of small businesses as a result of community development corporations.
Community Development Corporation plays the role of ensuring there is income distribution among the community members. The objective is to reduce disparities in income and wealth among community members. Community Development Corporation achieves this role by assisting the less privileged in society than others to start a small business. There is an unequal distribution of wealth among community members. This makes it possible each an every member of the community to pay for the price of commodities and services produced within the jurisdiction of the community. Demand for the output is going to be high. This leads to increase in output in order to meet the increased demand. Increase in output means that the business is growing. It is rational, therefore, to conclude that community development corporation contributes to the development of small businesses through the creation of demand for the product as a result of increase in income among the community members.
Conclusion
We can conclude that community development corporation plays a tremendous role in the development of small businesses. We can conclude that a community development corporation acts as a source of finance for the development of the small business development. They provide loans at a lower interest rate and flexible repayment terms and conditions. This is essential in business development.
We have also seen that the development of small businesses can be improved if the community development corporations control the negative externalities inherent in a business. Externality cannot be quantified in monetary terms and hence difficult to measure. A good business helps to equate social marginal cost and social marginal benefit.
Community development corporations are celebrated in the protection of local producers. This is through the banning of importation of products into the community if the products are produced within the community jurisdiction. Protection of local producers results in the development of small businesses in the community. Well developed infrastructure and clean environment plays a key role in the development of small businesses. Infrastructure and clean environment are the responsibilities of community development corporations.
References
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Prevo, D. J. (2009). Bank Community Development Corporation Investments in Community Economic Development. California: University of Southern California.
