Time for the Almond Tree to Bear Fruit

There are two weeks left in the Almond Tree’s Business Training program. The Almond Tree is the name of the group of people living with HIV who are involved in a business training program at the West Africa AIDS Foundation where I am volunteering. At the end of March, the 15 participants in the program will apply for micro credit loans and start their businesses.

According to a microfinance institution in Ghana working with marginalized people in start up businesses, they have about a 30% chance of success. We’re trying to increase these odds as the participants need this project to work. They want desperately to live economically independent lives. They need to buy medicine, they need to send their children to school, and they need to pay for food and housing.

The one thing that connects the participants of the Almond Tree Project is their HIV status. In many cases they have been rejected by their families and friends. In some cases, their families don’t even know their status. Were they to know, the participants fear their families would banish them from their lives.

One woman, Vida, a thirty-five year old mother, has two children who are also HIV+. Her husband died a few years ago from HIV, leaving her bankrupt. The small amount of money she had went to cover hospital bills and medication. Prior to her husband’s death, she ran a small provisions store from her home. It was enough, she says, to cover monthly expenses. Now she has no savings, so is unable to invest in the inventory she would need to re-start the business. Vida is learning the alphabet and can now recognize the letters from A to H. She’s still working on the sounds of these letters.

One of the reasons many of the businesses of marginalized people fail during the start up phase is the owners have little or no savings. In North America, most people who start businesses know they won’t make a profit for many months. In some cases it can take years to turn a profit. They plan for this situation by both adequately financing their businesses, and making sure they have enough savings to cover their living expenses for an extended period of time.

In Ghana, when banks give out loans to people without savings, the money often goes to day to day living, rather than business expenses. By the end of the second month, the money is gone and the business fails. In practical terms, this scenario makes sense. If a parent is faced with the choice of either feeding a hungry child, or purchasing material for a sewing business, she will feed her child. The business will always rank as a lower priority.

For this reason, well-experienced microfinance institutions try to assess a client’s ability to pay versus their willingness to pay. Most people applying for small loans are willing to pay; they’re often, however, unable to pay. Unfortunately, this assessment has led many financial institutions to refuse marginalized people. Many even refuse to finance start up businesses because the risks are too high.

We have fortunately been able to find a sympathetic microfinance partner to work with on the Almond Tree Project. The organization is called the Ecumenical Church Loan Fund (ECLOF) and operates in many countries around the world. As a Christian organization, it isn’t mandated by profits. The Executive Director, a woman with a decade of experience in microfinance, is especially compassionate. She left a lucrative career as a consultant to work with ECLOF and has a special interest in working with people living with HIV because she knows 90% of all microfinance institutions won’t touch this group of people for fear they will die before paying back their loans.

Most microfinance institutions charge 4% interest per month, or 48% per year. ECLOF will charge our group 1% interest. Most microfinance institutions will provide little more than $100 in working capital per client. ECLOF believes the businesses must be adequately financed to succeed so is willing to provide up to $500 in working capital loans. ECLOF also understands that our participants need to have financial support during the start-up phase of their businesses so they won’t use their loans for day to day living. The organization is working to help us find wage grants for the first 6 weeks of business operation.

Some people have questioned us on our insistence that participants receive a wage grant during the start up phase of their businesses. “This will create dependency,” they say. “They were surviving before they entered the program, so they can survive while starting their businesses.”

What most people don’t realize and I have to admit I also questioned the grant before coming to Ghana, is that without this grant, the businesses will likely fail. Our participants did survive prior to entering the program, but they survived by finding odd jobs day to day. Some sold things like ice blocks and other small provisions; others gardened, washed clothes, or cleaned homes. None of these activities were sustainable, but with them, they scraped by. If we were to ask them to survive in the way they’d survived before, we would be asking them to pull their focus away from their business startup – only a small portion of their energy would go into actually building the business.

ECLOF, while bending rules to work with our group, isn’t totally risk averse. The Executive Director explained that a project officer will accompany each of the business owners to purchase capital equipment. No money for capital purchases will enter the hands of the business owner. This, she explained, ensures the money goes where it is supposed to go, and the businesses have everything they need to run effectively.

Our bakery group has many capital purchases. They need to buy an oven, mixing bowls, pans, and various other pieces of equipment. Their loan is also the largest of all of the businesses. Based on the price they can get for their bread, it would be next to impossible for them to pay back their loan at the normal interest rate. ECLOF has agreed to stretch the loan over a 2 year period (most loan periods are no longer than 5 months), and honour the 1% monthly interest rate. In Accra, landlords also want rent months in advance – sometimes up to two years. The bakery group has found a location that wants them to pay $25/month, for a year and a half in advance. The group is very proud of itself as the members talked the landlord down from $50/month and 2 years rent in advance.

Two years of rent at $25/month may not seem like a lot of money, but the advance rents are huge deterrents for people starting businesses in Ghana. Where most people make about $3/day, saving $500 would take years. It is only through loans, and compassionate microfinance institutions that our group could even dream of running their own bakery.

Once the businesses are running, the owners will make loan payments every two weeks. They will also start saving money. ECLOF will set up a savings account for all participants. It will go to help secure future loans, business expansions, and serve as a contingency fund.

We spoke to the group this week about starting to save money. They were asked to start saving 1,000 cedis per day (about 12 cents). At the end of each week, we would collect the money from them. Saving is a new concept for group, and as the loan officer talked about the benefits of saving, the group became more animated. Meri, a mother of 5 and a member of the bakery group, kept coming out with bursts of enthusiasm. I didn’t understand her statements because she spoke her native language, but to my ears, it sounded like a continuous stream of “Amen.”

On Friday, I went to meet the bakery group for their English and literacy lesson. I had forgotten it was also the day to collect the group’s savings for the week. Addrissu, one of the members hadn’t forgotten. Without my prompting, he proudly handed me five crisp 5,000 cedi bills, one from each of the group members.

As the group gets ready to embark on the start up phase of the business, I watch nervously, keenly aware of the statistics, and the chance of success. Even with wage subsidies, 1% interest rates, and a whole band of cheerleaders, they will struggle. Their challenges are beyond anything I can relate to.

Now that I have come to know the group members, I am confident they have the integrity, and determination to run their own businesses. I am also confident they are willing to pay back their loans. We now need to test their ability.

- Janet