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FEATURE

Zarina Baloch, a resident of Ramzan Pathan village, bought two goats and a cow with a USAID-supported loan. Photo by USAID/Kaukab Jhumra Smith

USAID Focuses on Entrepreneurship

By Serviam Staff

Self-sufficiency is key to long-term stability operations, and the U.S. Agency for International Development (USAID) has been a pioneer in this effort for decades. One of its many successful programs is the microfinancing effort it ran in El Salvador, as part of the counterinsurgency to defeat the communist Farabundo Marti National Liberation Front (FMLN) guerrillas. That microlending effort made a big difference, enabling tens of thousands of poor people to lift themselves out of desperate poverty and become entrepreneurs.

USAID has continued the entrepreneurial development approach around the world. These examples of USAID programs, provided by the agency, attest to the agency’s successful approach to helping people to help themselves.

Pakistan: Small Loans Bring Income and Independence

When rural residents of Pakistan’s southeastern Sindh province need loans for crops, livestock, or trade, they usually turn to local moneylenders and landowners. Traditional lenders charge at least 100 percent interest and demand a hefty share of profits and repayment in 15 days. So when residents heard of a bank that provided microfinancing—a system that included small loans at low interest, repayment terms of up to a year, and community-created savings accounts—they suspected there was a catch. According to residents, moneylenders played on these suspicions, encouraging them to stay away from the new loans. “They said the bank staff will kidnap you, they will sell you as a slave,” said Qadir Bux of Shaikh Rehan village. Residents were afraid that an official entity like a bank would run off with their savings.

Three years later, no one believes the moneylenders. An $8 million program funded by USAID and run by the government-established Khushhali Bank has disbursed 131,000 loans in three years, across 14 rural districts in Sindh and Balochistan provinces. To be eligible for loans of 3,000 to 10,000 rupees ($50 to $167), community members organize into groups and agree to take responsibility for each other’s repayments. Payments are made quarterly, biannually, or annually for farmers dependent on harvests. Each of the 18,000 community groups saves 10 percent of the loans disbursed in a joint bank account to fund community projects like building a town hall. After paying off one loan, borrowers qualify for a second loan that is 20 percent larger. Residents of several Sindhi villages who completed two loan cycles say their income jumped by 30 percent, thanks to investments in areas including livestock, merchandise for stores, or fertilizer for crops.

Many of the loan recipients have invested in livestock. Before, they could only afford to buy very young animals that they raised for two or three years before selling. Now, they can buy mature livestock and get a faster return on their investment. For instance, Asha Pathan of Ramzan Pathan village bought a cow for 10,000 rupees and sold it for 18,000 during the Muslim festival of Eid. The best part of the program, said Mohram Ali of Khan Mohammed Leekhi village, is the dignity it brings. “You don’t have to ask favors of anyone,” Ali said. “You earn yourself, and pay back the loan yourself.”

Noria Sedequi supervises 25 women at the vegetable dehydration factory in Parwan Province, Afghanistan. Photo by USAID/Jeremy Foster

Afghanistan: Value-Added for Women

Noria Sedequi and her family of 10 lived in exile in Pakistan for eight years during the Taliban regime. They returned to Parwan province, about 60 kilometers north of Kabul, Afghanistan, in 2001. Jobs were scarce, and Noria knew that jobs for women were even more scarce.

Around the same time that Noria’s family returned to Afghanistan, several European countries identified a growing demand for bulk quantities of dehydrated vegetables such as coriander, cabbage, green beans, cauliflower, spinach, carrot, turnip, and zucchini. In January 2005, USAID opened Afghanistan’s first vegetable dehydration factory in the fertile Somali Plains of Parwan province. Noria began working in the factory soon after it opened and was quickly promoted to supervisor, overseeing the work of 25 women.

“I came to the factory earlier than the other workers every morning, and I left later,” Noria explained. “I’m smart and I work hard.” At the factory, Noria knows she has a secure job and a regular monthly salary. She has also learned English, acquired technical skills associated with operating factory machinery, and gained basic business management skills.

Noria’s family is supportive of her work at the factory. She and her father, a guard at a local hospital, provide the family’s only sources of income.

In addition to opening up jobs for women such as Noria, the project provided 1,200 local farmers with vegetable seeds and fertilizer and contracted them to supply the factory with fresh produce. The factory hired 96 laborers to clean, weigh, dice, sort, and test the quality of vegetables; operate drying machinery; and package dehydrated vegetables for export. The factory has quickly gained a good reputation—in fact, importers in the United Kingdom and Germany are now including dehydrated vegetables from Afghanistan’s first dehydration factory in some of their most popular products.

Moldova: Helping At-Risk Women Become Independent

Oxana Arabadji shows off a pair of the high-end shoes she sells at her store in Comrat, Moldova. Photo by Svetlana Panaitova/Comrat Support Center

When Oxana Arabadji and her husband separated, she needed to find work outside of the home. Having married at age 18, she had no work experience and couldn’t find employment.

Desperate to support her children, she joined the estimated 40 percent of working-age Moldovans who work abroad. Leaving her children with her mother, she took a housekeeping position in Turkey. After two years, she saved enough money to return home.

Grateful to be reunited with her family, Oxana was determined to find work in Moldova. She had an idea to start her own business, but didn’t know where to begin.

Then she heard about the USAID Regional Support Center (RSC) for women at risk that had opened in the nearby town of Comrat. She seized the opportunity to participate in the center’s free courses and attended a two-day training session entitled, “Am I an Entrepreneur?”

Together with the RSC staff, Oxana developed a business plan to import and sell footwear. She used her savings to buy a kiosk with a large glass display window and rented a space at the local market. She then took out $5,000 in loans to purchase seasonal footwear. With her business underway, Oxana is successfully making her loan payments on schedule and receives continued support from RSC staff members to solve management challenges.

Thanks to the USAID Regional Support Center, Oxana is now a self-sufficient businesswoman. She earns enough money to support her family, and anticipates that she will be able to increase her income significantly as she expands her customer base and pays off her loans. Moreover, she is reunited with her children, and her family’s quality of life has greatly improved.

Guatemala: Experiment Turns Garbage into Electricity

Open landfills are more than an affront to one’s senses. Improperly managed, they can also result in grave environmental consequences and create health problems for people living for miles around. Open landfills are one of the principal sources of methane, a highly flammable gas that is 21 times more damaging to the environment than carbon dioxide. The Guatemala City landfill emits such great quantities of methane gas that it literally catches fire several times a year, resulting in deaths and considerable destruction of property.

USAID conducted studies to see whether methane gas from the Guatemala City landfill could be captured and converted into electricity. It found that the emissions from that dump are about 56 percent methane—higher than in any other Central American country. Working with the U.S. Environmental Protection Agency, the owner of the landfill, multinational companies, and municipal leaders, USAID conducted a test to see just how much electricity the dump could generate. Three test wells were dug and connected through a network of tubing to a pump that extracts the methane, which is then burned by a large torch.

The burning gas will propel a turbine that creates electricity—and makes garbage a valuable commodity. The torch now gives off a flame so clear that only its shadow on the ground is visible. This source of electricity meets a triple standard: it is more economical to produce than other energy sources, it reduces pollution, and it creates a safer, healthier environment for local residents. The Guatemala landfill may set the example for others in the Central America region.

Dominican Republic: Mango Farmer Entrepreneurs

Some of Latin America’s finest mangos are grown in the Dominican Republic. Yet for decades they were sold only domestically, often grown in backyards or abandoned plots, and exported only as an industrial pulp, selling at lower prices than fresh fruit. Although the U.S. market was nearby, the competition and regulations appeared too daunting to tackle. Mango farmers had no organized association, lacked a clear business strategy, and had little government support.

In 2005, USAID helped create a mango “industry cluster,” bringing together farmers, suppliers, exporters, transport companies, and government bodies. USAID assisted them in gaining entry to the U.S. market, helping to set goals and overcome obstacles. A major hurdle was meeting U.S. phytosanitary requirements and ensuring that all exports were pest-free. Since this required a lot of collaboration among all parties, similar efforts had failed before. USAID also introduced new pruning and packaging methods and worked closely with the U.S. agencies that provided final approval to import the mangos.

Today, everyone involved in the nascent mango export industry is working together, and their next goal is to expand to high-end niche markets. They’re no longer farmers or distributors; they’re entrepreneurs who are working jointly to develop a sector-wide business strategy and reduce costs. Also, private investors are investing in treatment facilities for mangos. Pruning techniques introduced by USAID are doubling yields, improving fruit quality and lowering costs. In 2005, they earned $2 million from exports to Europe and $300,000 from exports to the United States. In 2006, they intend to double their U.S. sales. For the mango cluster, now known as PROMANGO, this is only the beginning.

Dominican Republic: Building an Eco-Tourism Enterprise

The 27 Charcos National Monument is a series of waterfalls along the Damajagua River in Llanos de Perez, a small town near the northern Dominican shore. Tourists would visit the environmental wonder on their own or with inexperienced guides. As a result, a natural treasure was being polluted and mismanaged and a golden opportunity for generating tourism revenue was being squandered. A local group of guides, the Damajagua River Guide Association, lacked the legal authority, know-how, and funds to turn the site into a successful eco-tourism enterprise. But they knew that if they could solve these problems, it would mean more income for the community and safer visits for tourists, who frequently injured themselves on the way to the waterfalls.

USAID worked with the association to create an effective river management and guide training plan. With backing from USAID and a concrete plan of action, the project gained support from the local government and residents, who would themselves benefit from the initiative if it was a success. Municipal authorities donated machinery to build safer trails to the waterfalls, while Peace Corps volunteers trained the guides how to safely manage and lead groups of tourists to the river.

In November 2005, the Damajagua River Guide Association gained the legal status it sought. The environmental ministry granted the association the power to establish a system of rules and regulations to protect both the monument and tourists. Under the agreement, guides must be trained regularly in both visitor safety and environmental sensitivity. Tourists now pay a fee to visit the river, which brings higher pay to the guides. Profits from the fees are used for local development projects. With a professionally run and safe eco-tourism site, everyone benefits—tourists, local guides, and even the river.

Ethiopia: Helping Small Coffee Farmers Compete

Ethiopian coffee tasters hone their skills during a Coffee Corps Advanced Cuppers Training Seminar. Photo by Gerry LaRu, Coffee Quality Institute

Small farmers have found it increasingly difficult to survive in today’s fiercely competitive coffee market. Structural changes in the industry have resulted in an oversupply of coffee and historically low prices for growers; many farmers cannot even cover production costs, given current prices. Although premium prices are available for quality beans, growing quality coffee isn’t easy. It requires careful attention to conditions, harvesting practices, and processing techniques. A mistake anywhere along the line can result in imperfections that will keep coffee from meeting increasingly stringent quality standards.

In 2003, USAID and the Coffee Quality Institute created the Coffee Corps to match industry experts with farmers struggling to move into the quality coffee market. More than 40 volunteers were recruited to help small producers and cooperatives in 15 countries in Asia, Africa, and Latin America address a wide range of problems. After they apply for assistance, cooperatives and producers work with technicians to clearly define their problems and identify appropriate experts who will volunteer their time to help. Since Coffee Corps volunteers are well-placed within the industry, they provide insight into evolving market demands and a direct link to international buyers.

Results: In East Africa, experts worked with government, business, and producer representatives to develop a common understanding of coffee quality across the region. They also provided advanced “cupping” training, honing the skills of more than 100 expert coffee tasters. In Guatemala, Coffee Corps worked with the Guatemalan National Coffee Association, ANACAFE, to train 200 producers in organic coffee production and marketing. In Zambia, producers were taught to expand shade coffee production and improve environmental management of their farms. In Latin America, Coffee Corps has helped implement the Q-Auction program, which sells quality coffee in quantities that interest major retail buyers and integrates producers into the supply chain. Q-Auction has already sold about 500,000 pounds of coffee at prices ranging from 28 to 121 percent above the industry standard price.

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From the July/August 2008 issue of Serviam.