Bill Sands, former Western Bank chair,
and Mike Temali, Neighborhood Development Center CEO
How can Minnesota best tap the
energy, talent and job-creating potential
of low-income entrepeneurs?
A Civic Caucus
Interview March 6, 2015
Dave Broden (vice
chair), Cicely Carr, Randy Johnson, Sallie Kemper (associate
director), Dan Loritz (chair), Paul Ostrow, Bill Sands, Dana
Schroeder (associate director), Clarence Shallbetter, Mike Temali,
According to the former
chair of St. Paul's Western Bank, Bill Sands, society must foster
entrepreneurship, because job creation is as important as having
enough people in the workforce. To that end, the Neighborhood
Development Center (NDC), a nonprofit located in St. Paul, was
founded in 1993, after a University of Minnesota study found that
there were a variety of active and potential entrepreneurs in St.
Paul's Frogtown and Summit-University neighborhoods. Sands recounts
that the NDC was the successor organization to the bank's own
community development corporation, established in 1990.
The NDC developed a 20-week
entrepreneurial class that has become a mainstay of the organization
and has trained 4,700 people over the years. Participants in the
classes must be low-income and are largely recent immigrants or
nonimmigrant people of color. Sands notes that about 25 percent of
the class participants go on to start businesses. As of 2012, there
were 457 NDC-assisted businesses that employed nearly 2,300 people
at an average wage of $12 an hour.
In addition, NDC President Mike Temali
says, the NDC offers micro loans and larger loans to finance small
businesses that can't get loans at banks. It also offers continuing
technical assistance to the entrepreneurs it has trained. NDC
focuses on four inner city neighborhoods in Minneapolis and St.
Paul. Challenges for NDC, he notes, include finding effective ways
to work in the suburbs, forging stronger connections with secondary
and postsecondary educational institutions and increasing
self-sustainable sources of funding.
Bill Sands is former
chair of Western Bank in St. Paul. He began his career in banking
after spending four years in the Navy and completing a graduate
degree. For more than 30 years, he led Western Bank, first as
president and then as chair. He has provided leadership on
groundbreaking efforts in low-income housing developments, small
business development and nonprofit management.
Sands led the effort to create the
Neighborhood Development Center (NDC), an organization that works to
build support for small resident-owned businesses by providing
extensive entrepreneur training. Since its inception, NDC has worked
with eight ethnic communities in more than 25 low-income
Sands has a bachelor of business degree in
accounting from the University of Minnesota's School of Management,
now the Carlson School of Management. He has an MBA degree from the
Wharton School at the University of Pennsylvania.
Mihailo (Mike) Temali is founder,
president and CEO of the Neighborhood Development Center (NDC), a
nonprofit in St. Paul. NDC blends approaches of international
micro-enterprise with domestic community development. In his role
with NDC, Temali develops and manages NDC's network of partnerships,
small business training, lending, technical assistance and business
incubator development programs for inner city, low-income
entrepreneurs. He developed the first-in-the-nation Islamically
acceptable small business finance program.
NDC plays the lead role in development and
management of six business incubators: Mercado Central, Midtown
Global Market and Plaza Verde in Minneapolis and Frogtown
Entrepreneur Center, Old Swedish Bank Building and Frogtown Square
in St. Paul. Temali serves as chief manager of Midtown Global Market
and as chair or co-chair of NDC's five other business incubators. In
addition, he is chair of NEXUS Community Partners, University Dale
Redevelopment Company and Northeast Dale-University LLC.
Temali has a bachelor's degree in
sociology from Macalester College in St. Paul and a master's degree
in public affairs from the Humphrey School of Public Affairs at the
University of Minnesota.
Two other NDC staff members, Training
Coordinator Cicely Carr and Chief Financial Officer and
Trainer Teshite Wako, joined in the discussion.
The Civic Caucus has released
two recent statements on human capital: one in September 2013laying
out the human capital challenges facing the state today and in
coming years and a follow-up paper in
January 2015 offering
recommendations for maintaining a high quality workforce in
Minnesota. The Caucus interviewed Bill Sands and Mike Temali to
learn about the work of the Neighborhood Development Center in
fostering entrepreneurs in low-income neighborhoods to create new
businesses and new jobs.
During the 1980s,
federal legislation made it possible for banks to have community
development corporations (CDCs); similar state legislation
followed. According to former Western Bank chair Bill Sands,
Western Bank created its own CDC in 1990, the Western Initiative for
Neighborhood Development (WIND). WIND served inner-city
neighborhoods in both Minneapolis and St. Paul.
In 1988, Sands said, St. Paul's Planning
District 8, the Summit University area, commissioned a study by the
University of Minnesota's Center for Urban and Regional Affairs (CURA)
that found that 11 percent of the households in the area were
running home-based businesses to supplement their income. The study
also found that these entrepreneurs would be willing to expand their
businesses and create more jobs if they had access to training,
technical assistance and loan funds.
The discovery of a variety of
entrepreneurs in the neighborhood was the catalyst to start the
Neighborhood Development Center (NDC) in 1993 as its own nonprofit
organization outside the bank. Sands said the organization had
to move out of the bank because it had grown and the bank could no
longer support it.
The NDC developed a 20-week
entrepreneurial class that has become a mainstay of the
organization. From 1993 through 2014, the NDC has trained 4,693
people in its entrepreneurial classes. The classes are limited to 10
people, who meet both as a group and individually with the
instructor. "They develop a business plan and NDC works with them,
offering loan funds and technical assistance for as long as they
want help," Sands said. Sometimes a class has as many as 30
Each 20-week program costs about $10,000
to put on and the NDC offers 20 such programs a year. Each
participant is charged $100 for the classes to get "some skin in the
game," Temali said.
On average, Sands said, about 25 percent
of the participants start a business. "When these people are
successful, it generates income, stabilizes the neighborhood,
reduces crime, strengthens families and helps people's self-esteem,"
Participants in the entrepreneurial
classes must be low-income and are largely recent immigrants or
nonimmigrant people of color. NDC President and CEO Mike Temali
noted that 40 percent of the participants are recent immigrants, 40
percent are African American, 16 percent are white and four percent
are Native American. All are low-income, about half extremely
"We need these folks for the regional and
state economy," Temali said.
There's not much of a statistical
difference in the outcomes between immigrants and nonimmigrants
served by the NDC. "Immigrants seem to carry with them the
quality of being entrepreneurial because of the way they got here,"
Temali said. "But the method we've developed of holding training
classes out in people's neighborhoods and then offering customized
lending and ongoing technical assistance to keep participants in
business has been very successful with both groups."
"The idea," he continued, "is that the
energy exists in all these communities. We reach into the
communities through partnerships with community-based organizations
that promote us through networks within their neighborhoods. They
try to pull these folks out of the woodwork." He said people are
sometimes nervous that their business or business idea was in the
underground economy. They're nervous about taking the class and that
they don't speak English. "Yet they have all this talent," he said.
As examples of community partnerships,
Temali noted the NDC has worked for many years with the Northside
Residents Redevelopment Council in North Minneapolis. In Eden
Prairie, NDC works with a Somali organization, the New American
Academy. And the Center works with the Hmong Village on the East
Side of St. Paul. "People trust those community organizations," he
said. "Because we partner with them, people will take the classes,
because they understand that we're not from Immigration Services or
from the regulatory agencies of the city."
NDC participants have a variety of
business ideas. The NDC does not give people their business
ideas, Temali said. People must have a business idea when they come
into the class. NDC Training Coordinator Cicely Carr offered these
examples of recent participants' business ideas: (1) teaching Somali
women how to swim; (2) a variety of restaurant ideas; (3) a
concierge service; (4) cleaning businesses; (5) construction
businesses; (6) food products or catering; and (7) home health care.
Temali said the biggest businesses are in the food industry. He
noted that a $3 million tortilla plant in South Minneapolis that NDC
helped start is now adding another line at the plant. He stated that
NDC works only with for-profit businesses.
When NDC works with the immigrant
population in the entrepreneurial classes, the trainer must be
someone who speaks their language, whether that's Spanish, Somali,
Oromo or Hmong. Entrepreneurship classes are offered in those
four languages and in English. Because of that, Carr said, language
is not a barrier for new immigrants in the classes. She noted that
NDC has also translated its written curriculum into Spanish and
Somali. There are also multicultural classes for nonimmigrants.
Temali noted that NDC does not teach
English as a second language as part of its training. "That has to
be provided elsewhere in the community," he said. "We get folks
started in their own language. But we certainly encourage them to
learn English. We want people to move up the ladder in the business
During the classes, participants
each write a business plan. Carr said the plan includes a
financial statement, a profit-and-loss statement, the business
mission, the demographics of the market and what kind of marketing
the business will do. "By the time the class is over, we'd like them
to have a business plan ready, but we'll still work with them if
they're close," she said. "Sometimes life gets in the way and people
come back years later to finish."
Government can't do the same things a
nonprofit can; it takes a partnership. In response to an
interviewer's comment that cities have a hard time being proactive
in the same way as NDC, Temali said most of the people NDC assists
wouldn't feel comfortable going downtown and into a government
building. He noted that Minneapolis, St. Paul and the state fund the
NDC to some extent. "Government can certainly help both fund and
also shape the work we do," he said. He noted that the federal
government's Small Business Administration has been an active
partner with NDC.
The state, Temali said, has an urban
initiative fund through the Department of Employment and Economic
Development (DEED) that has been a good tool for NDC to use for
lending. "We've made hundreds of loans with their money," he said.
And he noted that the City of Minneapolis has a strong small
business loan program that charges two percent interest and partners
with organizations like NDC.
"Minneapolis is doing a lot of good
things," he said. "The regulatory side is certainly endlessly
daunting. Our staff is trained to help guide and negotiate on both
sides of the equation. Recent immigrants don't comprehend all the
regulations, say, for food safety."
Minnesota must foster entrepreneurship,
because job creation is just as important as having enough people in
the workforce. Sands and Temali cautioned that in our legitimate
concern for the sufficiency of human capital in coming years we
should not lose sight of the ongoing need for creating new
opportunities for employment.
The state has stunning gaps between whites
and minorities for wealth and income, incarceration, educational
outcomes and other areas. Temali said the U.S. does a lot more
for immigrants than some other countries. "But we have a lot further
to go and not just for immigrants," he said. "It's also for African
Americans and Native Americans, who are a major answer to the
challenge of where the workforce is going to come from in the
future. I'd argue that they're here, but they're not succeeding
enough in the K-12 system and in postsecondary education. They're
being left behind."
"But I do believe policymakers are slowly
getting around to facing that our tremendous racial disparities in
the state must be worked on at all levels from cradle to grave," he
said. An interviewer commented that addressing human capital
development is the best way and the most effective way to close
NDC uses a neighborhood impact strategy. "We
work in neighborhoods where people start their businesses and they
in turn get more involved and more influential in their
neighborhoods and their schools," Sands said. This results in
stronger, healthier neighborhoods, he added.
A 2013 Wilder Research evaluation of NDC
shows its impact on the community:
As of 2012, there were 457 NDC-assisted businesses that
employed 2,285 people at an average wage of $12 an hour. That
figure does not include the business owners.
The employees come primarily from the neighborhoods of the
Employees of NDC-assisted businesses pay approximately $2.2
million in state income taxes annually.
These 457 NDC-assisted businesses contribute more than $3.2
million in state income taxes annually.
NDC assists an average of 267 entrepreneurs each year.
The estimated ratio of dollars returned to the neighborhood
per dollar of NDC spending is 28:1.
As of 2012, there were 65 NDC-assisted
businesses in the Frogtown neighborhood alone (within a one-mile
radius of the intersection of Dale and University) and they employed
576 people, with a $5 million payroll.
The Wilder evaluation analyzed NDC's
Cost per job developed was $4,941. "That is a pretty
cost-effective number for job creation," Temali said.
Cost per entrepreneur served was $4,230.
Cost per current business served was $24,706.
NDC spending has a high rate of return on
investment. A 2009 return-on-investment (ROI) analysis by Peter
Heegaard concluded that NDC spending has an annual ROI of 65 percent
in terms of taxes paid by the NDC-assisted businesses and their
There is a multiplier effect of 2.4 for
every job created by NDC's entrepreneurs. That means, Temali
explained, that for every one job NDC's entrepreneurs create, 2.4
more jobs are created by that one employee spending his or her
money. A consultant for the St. Paul Foundation calculated the
NDC's heaviest focus is in four
neighborhoods in Minneapolis and St. Paul. Those neighborhoods
include, in Minneapolis, the near North Side; the Phillips,
Powderhorn and Central neighborhoods; and in St. Paul, the Frogtown
and Summit-University neighborhoods and the East Side. "We dedicate
80 percent of our resources to those four neighborhoods," Temali
NDC has three big business incubators in
South Minneapolis: the Midtown Global Market, Mercado Central and
Plaza Verde. "That's been a huge concentration of our work," he
said. NDC bought, redeveloped, owns, and manages the buildings and
trains, finances and continues to provide technical assistance to
the tenants in the buildings.
Temali said NDC is now switching its
concentration more to the East Side of St. Paul and the Northside of
Minneapolis, because the Center has had less impact there. "We want
to ramp those programs up," he said.
Working in the suburbs has been more
challenging. Temali said NDC is doing some training in Brooklyn
Park, but "we've struggled with suburban work, because we're very
place-based. We know how the places work in the inner city, because
we're from there. You have a Lake Street and Chicago or a University
and Dale. You don't have that in Eden Prairie or in Brooklyn Park. A
lot of our approach has been to concentrate the outcomes physically
so they become catalytic and visually impressive. Twenty or 30
Latino businesses at Lake Street and Chicago pop out at people and
they see that Latinos can be business owners, employers and
taxpayers. It's harder to figure out how to do that in Eden Prairie,
Brooklyn Center or Brooklyn Park."
People coming through the NDC
entrepreneurial training classes are trying to provide for their
families. Chief Financial Officer and Trainer Teshite Wako said
many people trained through NDC have hired family members in their
businesses, providing jobs and security for them. "The family is a
major conduit to the jobs," observed an interviewer.
NDC has decided to start working in other
major cities. Sands said Temali is now doing the same work with
an agency in Detroit.
NDC has recently become a satellite Small
Business Development Center (SBDC) through the Small Business
Administration (SBA). The SBDCs are financed through a
partnership of SBA federal funding, state and local government
funding, and private-sector resources
uses SBA money for microloans of $25,000 or less and for larger
loans up to $250,000. The microloans can be as small as $500, Temali
Connections between NDC and educational
institutions are only sporadic. Temali said those connections
are not as institutionalized as NDC would like. He said the
entrepreneurial training course has been certified by Metro State
University, so graduates of the course can earn credit there. NDC
has taught its classes in Brooklyn Park in conjunction with North
Hennepin Community College. Temali has been trying to get St. Paul
College to consider a joint operation in NDC's next real estate
project at the corner of University and Dale. "Their demographics
are so similar that we could be a good feeder system for them," he
said, noting that in NDC's entrepreneurial classes, trainers try to
educate the participants about community colleges and to demystify
NDC doesn't currently go into high schools
to speak about entrepreneurship. But Temali raised the
possibility of creating a cadre of speakers of the entrepreneurs
themselves to speak to young people. "Our entrepreneurs are great
speakers," he said. "It would be very powerful. If you're an
entrepreneur, you're a born schmoozer. And there's something
inherently appealing about entrepreneurs to kids who don't like
school so much."
NDC has four main sources of income:
1) Earned income, which comes
from fee-for-service contracts with the cities of St.
Paul and Minneapolis
and with Hennepin County, from interest on loans and from
2) Individual contributions;
3) Corporations and foundations, the
largest source of income; and
4) Government revenue, a small source
"We see great potential for earned income
and individual contributions to grow and to move us toward
self-sufficiency to support our mission," Wako said.
Temali said NDC's public sources of
income, including the fee-for-service contracts, amount to 17 or 18
percent of the total budget. He noted that NDC is asking the
Legislature for $1 million to shore up the incubators, start a new
one and to go to rural Minnesota to teach capacity-building.
NDC has an operating budget of $2.5
million. It has a very diverse workforce of 25 employees, Sands
said. Temali pointed out that each of NDC's six business incubators
has its own budget. The Global Market alone has a $1 million
NDC's loan funds are set off separately,
he said. They come from grants or loans from foundations.
"Foundations are looking more and more at lending money to groups
like ours," Temali said. "They call it program-related investment,
or PRI. The St. Paul Foundation's $1 million loan comes with a 1½
percent interest rate and we have to guarantee they'll get their
money back. They couple the PRI loan with a $300,000 grant. We put
$100,000 of that into a loan loss reserve."
One hundred percent of the businesses NDC
finances are nonbankable. "If somebody can get a loan from a
bank, we'll bring them to a bank," Temali said. In the last two
years, he said, NDC's loan loss has been five or six percent.
Historically, it's been more like eight percent. "It's starting to
come down lower, because we're starting to make larger loans and
none of them have become problematic yet," he said.
NDC is a Community Development Financial
Institute (CDFI) and has received some U.S. Treasury funds to
capitalize its loan fund. Opportunity Finance Network, an
association of CDFIs, has developed a bank examiner operation that
has recently examined, but not yet reported on, NDC's operations.
Temali said the Center expects a low ranking on the safety and
soundness measure, since it focuses on "high-risk, low-income,
inner-city, Mom-and-Pop deals." There is also a mission impact
People who own businesses are seen as
leaders in their community. "People respect them," Temali said.
"We need these entrepreneurs to channel that respect to get on the
board of the PTA or their church and to use the management skills
they're learning in their businesses in a positive way as community
leaders. To ask that of these low-income people brings tears to
their eyes. Nobody's ever asked them to be leaders and they've never
before thought of themselves that way." The process becomes
transformative not only for the individual but for the family and
the community as well.
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Interview Group
includes persons of varying political persuasions,
reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill
Frenzel, Paul Gilje (executive director), Dwight Johnson, Randy Johnson, Sallie
Kemper, Ted Kolderie,
Dan Loritz (chair),
Tim McDonald, Bruce Mooty, John Mooty, Jim Olson, Paul Ostrow, Wayne
Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmerman