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Archives for Economic Growth

Microfinance Empowers Entrepreneurs in Tanzania

In a packed and conversation-filled room in northern Tanzania, the wheels of microfinance are spinning – quietly and efficiently, yet furiously. Every week, this group of people owning and running small businesses worth less than $700 comes together in Arusha to make payments on microloans received from Promotion of Rural Initiatives and Development Enterprises Limited (PRIDE), a Tanzanian microfinance institution. Each also deposits earnings into a savings account, in fulfillment of the requirement that borrowers incrementally strengthen their financial position. The U.S. Agency for International Development (USAID), through a 75% bond guarantee, has helped PRIDE maintain and increase microcredit activities.

Microfinance Empowers Entrepreneurs in Tanzania Photo credit: Gregg Rapaport/USAID

When called to the front of the room, borrowers push a small pile of well-worn Tanzanian bills across a table toward three employees. The first counts the money, the second makes a notation or two on a printed spreadsheet, and the third slides change back across the table. These transactions, happening one after another, are banal to watch but breathtaking to consider. This is innovative thinking – applied to small lending – at work. Entrepreneurial but poor Tanzanians, who are shut out of traditional sources of credit, are being empowered (through microcredit loans up to $650) to realize all manner of small business dreams, and lift themselves and their families out of poverty.

In Tanzania, most land is untitled and there is no legal framework allowing “movable assets,” such as livestock, to be used as collateral for accessing loans. Typical bank loan models simply do not work here, but in microfinance…collateral is not necessary. PRIDE counts on good-faith and social cohesion for repayment by making group loans that involve 50 people. Group members work out the specific allocation of funds themselves and are responsible individually and jointly for paying the loan back.  This multi-borrower structure values each entrepreneur’s success, incentivizing more successful entrepreneurs to assist struggling peers, and the intra-group transparency promotes fiscal responsibility by each group member, ensuring high levels of repayment.

How well does it work? In Tanzania, 99% of all PRIDE microloans are repaid.

Martha Mpinga is a Tanzanian entrepreneur who purchases small amounts of African textiles from wholesalers and sells them to retail buyers for a profit. “I started with a loan of 50,000 Tanzanian shillings (approximately $35),” she explains. Once the original was repaid, she qualified for a higher microfinance loan. Martha has repeated this cycle several times as her business expanded. “My loans grew…and now I have a loan of 1 million shillings (approximately $650).” At this loan level, sufficient inventory is maintained and it drives a sustainable business. She pulls richly-patterned wax print cloths, used by local woman to make clothing, from her bag and delivers a convincing sales pitch about their high quality and other decorative uses for such beautiful fabric. The Arusha branch manager, who is standing nearby, ribs Martha that she could avoid next week’s trip to the branch by making a second microloan payment today, using the proceeds from this just completed sale. They laugh, both knowing that the regular repayment meetings which bring Martha together with 49 other entrepreneurs, is essential to the microfinance model.

In November 2010, USAID provided its first guarantee for a microfinance bond issued in sub-Saharan Africa. With USAID’s support, PRIDE secured 15.3-billion Tanzanian shillings ($10 million) from the Tanzanian capital markets.  As a result, access to credit will no longer be just a dream for an estimated 10,000 additional Tanzanian entrepreneurs.

Afghan Partnership Opens Modern Carpet Processing Facility

By: Robert Sauers, USAID Afghanistan.
Originally posted in DipNote the U.S. Department of State Official Blog

Afghan carpet seller

Afghan carpet seller watches pedestrians as he waits for customers in Kabul. October 21, 2007. AP File

The Paiman Atlas Group celebrated the opening of its new modernized carpet processing facility yesterday in Dasht-e Barchi, Kabul. Supported by a public-private partnership facilitated by USAID’s Afghanistan Small and Medium Enterprise Development (ASMED) project, Paiman can now produce up to 100 square meters of carpet per day, a 120 percent increase from its previous capacity.

With revenues of more than $150 million in 2009, carpets are Afghanistan’s leading export. However, the current lack of large-scale processing facilities in Afghanistan results in more than 80 percent of Afghan carpets being shipped to Pakistan for finishing. These carpets are then exported with “Made in Pakistan” labels, resulting in a loss of opportunity for Afghans to capture the full value of their products. With the new machinery, Paiman’s processing complex will enable Afghan carpet producers and traders to export their products directly under the “Made in Afghanistan” label.

Paiman is a partnership of six Afghan carpet producers and exporters whose vision is to create domestic processing and finishing services for Afghan carpets. The new carpet finishing complex will help Paiman export Afghan carpets directly through Turkey to U.S. and European Union customers and will encourage other Afghan producers and exporters to explore direct export opportunities.

Speaking at the event, Deputy Minister of Commerce Ailaqi remarked that Afghanistan’s “carpet industry is the outcome of hard work, creativity and art of Afghans with endless dedication and a rich history that creates jobs for more than two million men and women. It is a great source of income for people and for the country.” Paiman Chief Executive Officer Hasmatullah Haidar, and representatives from the Afghanistan Investment Support Agency, Export Promotion Agency of Afghanistan, Afghanistan Chamber of Commerce and Industry, and the Afghan Carpet Exports Guild also attended the opening celebration.

Through its ASMED project, USAID seeks to improve private sector productivity and increase employment opportunities in Afghanistan. The project encourages the development of Afghan businesses through support for capacity building, technology transfer, and investment, including public-private partnerships.

Embracing Innovation in Haiti: USAID’s Haiti Mobile Money Initiative

One of the hallmarks of the U.S. Government’s fresh approach to development in Haiti is making better use of innovative private sector ideas to solve tough development challenges.

So when one third of Haiti’s bank branches were destroyed in the earthquake a year ago, we looked for ways to overcome one of the primary obstacles to economic growth in the country: poor access to affordable financial services.  But instead of building more banks or installing ATMs, the U.S. Agency for International Development partnered with the Bill and Melinda Gates Foundation to set up a $10 million incentive fund to jump start the provision of banking services to Haitians through their mobile phones.

Maarten Boute, CEO of Digicel Haiti (left), is joined at the podium by Scotia Bank’s Maxime Charles. Photo Credit: Kendra Helmer/USAID

In the short term, the Haitian Mobile Money Initiative will enable Haitians, 40% of whom own a mobile phone, to communicate, send, receive and store money on their devices.

The Government of Haiti and the private sector have enthusiastically embraced the mobile money initiative. The Central Bank of Haiti has already issued new directives on mobile banking.  And yesterday, USAID and the Gates Foundation awarded Digicel $2.5 million for being the first telecommunications company to develop a competitive mobile money service in Haiti.

The project has already significantly increased the number of Haitians with access to banking services, and it has the potential to provide universal access thanks to the increasing penetration of cell phones in the country. By helping Haiti leapfrog the limits of the physical infrastructure of banking, mobile banking is putting financial power literally into Haitian hands.

Click here to view photos of the press event.

Micro Entrepreneurs, Big Dreams

In most ways, Khanum Bibi is an ordinary Punjabi wife in Lahore, Pakistan—the country’s second largest metropolitan area. Married 25 years, she and her husband Nisar have raised a son and five daughters in a small village on the outskirts of the city relying on his income as a day laborer and her work making and embellishing ladies garments with beads at home.

One of Bibi’s daughters at work embellishing a shalwar. Photo Credit: USAID/Pakistan

The family squeaked by until hard times struck last year. In the heart of an economic downturn, Nisar was injured in a street accident and could no longer work. Trapped economically, the couple agreed that Bibi should take the unusual step of venturing out of the house and proposed to her neighbors to sell the garments together to get better deals from market vendors.

At just the right moment a USAID program offered to train her on product design and development, use of raw materials, market demand, and pricing arrangements. The next month, Bibi left her daughters to work at home and became a sales agent – an entrepreneur.

“I have had a difficult life,” Bibi said, wiping a tear with her headscarf. “But I feel a tremendous responsibility for my family since my husband’s injury. My becoming a sales agent has improved our condition, and also my confidence. Now that I have this opportunity, I want to maximize it.”

This USAID program will increase the incomes of at least 120,000 micro entrepreneurs like Bibi by developing the capabilities of indigenous organizations and local private and public sector partners working with micro entrepreneurs and small enterprises to significantly build their businesses.

As for Bibi, she consults with her husband Nihar on all important business decisions, and maintains her established role in the family setting as she breaks down some of Pakistan’s social barriers and rigid social traditions.

“My husband didn’t give me the right to work,” Bibi said. “I earned it. Today we make joint decisions, and the people in our village understand. USAID has given me new ideas and approaches I never would have considered.”

The 16 Days Campaign to End Violence Against Women: From 25 November to 10 December, USAID will post a blog each day that aims to prove a single point: The human race cannot progress when half of the world population lives without the same rights and respect afforded to its male counterpart. If you are moved by what you read and want to share, we’ve made it easy for you. Click here to find out how.

USAID Surpasses Private Sector Credit Milestone

USAID’s Development Credit Authority recently surpassed a $2 billion milestone of private sector credit mobilized in developing countries. USAID uses partial loan guarantees to encourage local banks to invest locally in sectors ranging from health to clean energy to infrastructure.

Workers sort rubble in Port-au-Prince, Haiti, on August 6, 2010. Photo source: Kendra Helmer/USAID

The two billionth dollar was made available from a new partnership with two banks in Haiti for small and medium businesses. Since Haiti’s devastating earthquake, established businesses lost most, if not all, of their property and equipment. Without these assets, small and medium enterprises no longer have the collateral needed to obtain loans to rebuild their businesses. The DCA guarantee will substitute as collateral for borrowers, enabling two local banks to lend up to $20 million of their funds to help businesses rebuild.

Follow USAID’s Development Credit Authority on Twitter and on Facebook.

USAID in the News

The Minneapolis Star Tribune published an article on Dean Atwood, who was a top USAID administrator during President Clinton’s administration, and his new position as chairman of the Organization for Economic Cooperation and Development’s Development Assistance Committee.

The Washington Post’s Career Coach wrote about how many different backgrounds and skills can be utilized through employment at USAID.

 

From the Field

In Mali, we will hold a launch ceremony for a new Maternal and Newborn Health collaboration framework.  Mali has been selected as one of the countries for the implementation of the joint Organisation of The Islamic Conference (OIC)-US Government ”Reaching Every Mother and Baby in the OIC with Emergency Care” strategy. USAID has been designated to lead this effort for the US Government.

In Egypt, we will celebrate forty-five new scholarships for young Egyptian students to obtain degrees from Egyptian private universities in fields of studies that are important to Egypt’s current and future development. The Leadership Opportunities Transforming University Students (LOTUS) program aims at identifying and empowering young women and men who have demonstrated academic excellence, leadership and involvement in their communities.  The program will help develop and nurture the recipients’ leadership potentials, skills and commitment to community and country so that they are prepared to become future leaders and advocates for development in local communities.

In Tanzania, it is Swahili Fashion Week.  On the last day of fashion week, USAID/COMPETE (East Africa Competitiveness and Trade Expansion Program) will organize a merchandising workshop to provide an element of training/guidance for what it takes to go commercial, and what the global market is looking for.

USAID Seizes Development Opportunities in Ukraine

I arrived in Ukraine on Columbus Day to discuss challenges in Ukraine and how our programs are addressing those issues, as well as to visit our projects to see the real impact American aid has on the ground.

On Tuesday we met with the U.S. Embassy, USAID Mission, and implementing organizations in Kyiv to discuss our programs in Ukraine, the upcoming municipal elections, and financial reform programs. Since regional issues have long torn Ukraine’s regions apart, it was interesting to see those areas where Ukrainians had common perspectives – particularly on the devastating impact of the global economic crisis (which caused Ukraine’s GDP growth to fall from +8 percent in 2007 to -15 per cent in 2009).

Roberta Mahoney and others discuss the results of the USAID Municipal Heating Reform project with city and hospital officials. Photo Credit: USAID/Ukraine

I then traveled to Crimea accompanied by the USAID Mission Director, Janina Jaruzelski, State’s Coordinator of U.S. Assistance to Europe & Eurasia (ACE), Dan Rosenblum, and several other State, USAID, and Embassy staff.

On our first morning in Crimea, we visited a number of hospitals that have received some 2,800 pieces (filling 96 trucks!) of medical equipment from a project of ACE’s Humanitarian Affairs section.

In the afternoon, we met a cross-section of young leaders in Crimea’s NGO community working to address issues from minority and prisoner rights to the media and the rights of persons with disabilities.  The group, which received leadership training through the USAID Ukrainian Strengthening Civil Society Organizations (UNITER) project, was remarkably perceptive about their capacity to influence policy and politics, the need to represent and motivate their members, and the real need to focus in sustained and creative ways on financial sustainability.

Thursday took us to a different Crimean city, Yevpatoria, where we met with the dynamic mayor about his comprehensive plan for the revitalization of the city’s economy. We then visited another hospital, this time from the outside, and watched as Ukrainian workers retrofitted the exterior of the hospital’s walls and attics with insulation with assistance from the USAID Municipal Heating Reform (MHR) project, which is also working in four other towns in Crimea.

The hospital will be able to increase heat generating efficiency in this cold region from roughly 64 to 99 percent, which will save the hospital money and improve conservation of critical resources.  Such a dramatic reduction in energy waste is one example of the positive impact MHR can have on Global Climate Change.

The highlight of the day, however, still lay ahead: meeting with NGOs and businesses devoted to promoting Crimea to the rest of the world!  We discussed the opportunities and challenges of promoting Crimean tourism with a significant representation of Crimean tourism businesses.

During a tour of the city’s oldest neighborhoods, we learned that Yevpatoria’s last multi-domed mosque was designed by Sinan, the greatest architect of the Ottoman Empire, who took inspiration from the domes of Haghia Sophia in Istanbul in creating Yevpatoria’s impressive Turkish-style mosque.  Sinan had also designed many other Istanbul mosques.

Yevpatoria is home to the Qaraim, an ancient community closely linked to Judaism that is arguably the smallest ethnic group on earth, numbering some 2,000 individuals.  During the Russian Civil War, Mr. Duvan, the town’s mayor and one of the most illustrious members of the Qaraim community who had fled the Russian Revolution for exile in France, sent a shipload of wheat to the city to help his former citizens survive.

One last stop remained — the one stop business center. Hailed as a success by the business community, citizens, and the government, the office brings all the actors together under one roof to significantly reduce the time it takes to register a new business and limit opportunities for bribery and corruption during the process. It was a fitting end to a successful visit, as we came away assured of the capacity of Crimeans to establish businesses to share the beauty, history, and bounty of the peninsula with the world, while providing hope and jobs for its citizens.

In all we’ve had a very successful visit, gaining exposure and insight to the breadth of the USAID’s program and accomplishments and the challenges that remain in Ukraine, from democracy and governance to health, energy, and the economy.

Picture of the Week: Women Increasing Incomes in Guatemala

Women preparing vegetables at San Judas, Guatemala.Women preparing vegetables at San Judas packing plant to sell to grocery stores in Guatemala. The San Judas company is participating in a USAID Global Development Alliance program with partners Wal-Mart, Mercy Corps, and Fundación AGIL. Photo is from Eduardo Smith/ PrensaLibre 2008.

Cultural Festival in Haiti Kicks Off USAID’s New Development Projects and Promotes Civic Pride

Funky beats and roaring laughter echoed through Cap Haitien’s town square as local dancers, poets, comedians, and musicians performed at the city’s cultural festival over the weekend. Thousands of Haitians attending the festival danced, sang and laughed as performances stretched into the wee hours of the morning.

USAID cohosted the two-day festival with local authorities to boost civic pride and mark a renewed focus on economic growth in Cap Haitien.  The festival fell on a holiday dedicated to King Henri Christophe, Cap Haitien’s most well-known historical figure, and featured some of Haiti’s most popular performers.  Kompa band Tropicana, comedian Jesifra and dance troop Dahomey were among the audience favorites.

Despite a heavy storm that flooded the streets, Haitians rushed into the town square as the rain let up and the water receded.  Locals called the festival Cap Haitien’s biggest event in recent memory and estimated that three to four thousand residents attended.

Some Haitians set up shop on the square’s perimeter to sell steaming food, frosty drinks and hand-made crafts.  Others climbed trees or sat atop cars to get a better view of the stage.

The hopeful tenor of the audience showed Haitians’ resilience in spite of their hardships. Extreme poverty was commonplace for Cap Haitien residents even before the earthquake nine months ago.  The northern port city lies far outside the range of the earthquake, but many Haitians sought refuge in Cap Haitien after their homes were destroyed in and around Port-au-Prince.  As a result, Cap Haitien’s population swelled in the disaster’s aftermath, straining the city’s already sparse resources.

The Government of Haiti and international community see an opportunity to reinvest in Cap Haitien. A number of USAID projects are already in the works.  USAID partner, Development Alternatives Inc., is implementing many of those projects including cash-for-work programs that provide short-term employment for women, agriculture projects that boost incomes from farming, and infrastructure projects that increase the number of students attending school.

I arrived in Haiti just two days before the cultural festival, and the weekend-long celebration shaped my first impression of the country.  I witnessed many struggles in Haiti, but I also witnessed proud, hopeful Haitians working hard to overcome these challenges.

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