Get blog posts by email
Jumpstarting Africa’s Small Businesses
In 2009, the proportion of people in Sub Saharan Africa living on less than $1.25 a day was just below 50 percent – the highest of any region in the world. For an individual lacking a formal education and living in a rural area in Africa with little infrastructure to provide access to outside employment, starting a small business is the best way to earn a living. Yet, according to the humanitarian organization Care, less than 10 percent of the more than 300 million economically active individuals in Sub Saharan Africa have access to formal financial services.
Starting a business requires a small loan or grant that traditional banks typically do not provide to people living in extreme poverty. The reasons vary, but banks point to the fact that the poor lack collateral, savings, and are too far from their offices.
Aid for Africa members are helping the poorest of the poor in Sub Saharan Africa, particularly women, start their own businesses. Our members are using a variety of microfinance initiatives, which include small loans, grants, and savings instruments. For women, often the main providers of food, health care and education for their families, these services are critical.
The BOMA Project, which works in Northern Kenya, provides start-up grants of $150 to small business groups made up of three women each who typically own kiosks selling food and basic household supplies. The key to the program is BOMA’s work with local village mentors – community leaders and role models who already have professional experience. For two years, mentors help the groups write business plans and learn record-keeping, marketing, and other valuable skills. BOMA has launched 720 income-generating businesses that have changed the lives of some 2,700 adults and more than 14,000 children.
BOMA’s model was designed by staff at Village Enterprise Fund, another Aid for Africa member. Since 1987, Village Enterprise has helped create 23,000 small businesses. Village Enterprise estimates that every new business created through its grant and mentoring program is associated with about 18 additional meals a day, five more children attending school, and an increase in the value of livestock of about $500.
In rural Uganda, Kenya, and Tanzania, Women’s Microfinance Initiative provides small loans to women’s groups already established in rural communities. WMI works with these groups to ensure they are able to repay their loans for two years while achieving their business goals. The women then build on their success to secure favorable loan terms from institutional banks to help further grow their businesses. As of January 2012, WMI had made more than 4,300 loans to women in some 300 villages.
Whether it is a widow who needs to expand her second-hand clothing business or a woman who wants to buy a goat for milk production, Aid for Africa’s members are providing Africa’s poorest with the tools to succeed as entrepreneurs. Aid for Africa will be highlighting some of the women and men who have benefited from the microfinance efforts of our members in future blogs.