Helping Businesses Succeed
This group of women meet twice a week to weave mats together under the trees. “People laugh when you are going [to market with your mats], but not when you are returning [with money].”
Like in the US, small businesses have a special place in the African economy. It was clear from my visits to Malawi, Kenya, and Uganda that in the rural areas there’s not much employment outside of farming. So I wasn’t at all surprised when I read a study that said that 42% of rural African households had some sort of non-farm enterprise in 2014 (52% in Nigeria; 42% in Uganda; 17% in Malawi). This study,* which used data complied by the World Bank in 2005-2013, included detailed data from three SIA partner countries (Nigeria, Malawi, and Uganda) as well as Ethiopia, Niger, and Tanzania.
Most of these rural non-farm enterprises are family businesses, running some form of trade business. Trade in household goods and foodstuffs are pretty low-risk and easy to start since they don’t require huge equipment costs. These families are still getting most of their income from farming and 91-100%(!) are informal, and operating during the times of the year when farming is less demanding.
Because these families still are focused on farming, if the crop is going well, families in Malawi and Nigeria are not as likely to start new business, using their labor hours in the field. On the other hand, if a recently-educated person returns to rural life, they will probably create their own business, since there are very few opportunities for more formal employment (except perhaps teaching).
The chalkboard menu at Malumbo Theu’s new restaurant. He had been working in South Africa as an undocumented worker and got deported. The SBF grant helped him establish a business (the first restaurant in Manyamula).
Professional services, transportation, and bars and restaurants were the least common types of business activity in Malawi, each representing less than 1% of household enterprises. Though there is demand for these businesses, they require higher start-up costs. This is where SIA’s Small Business Fund (SBF) grants can help out. A few of the new SBF groups we visited in Malawi in July were in this category – including Malumbo Restaurant, Fikani Transportation Services, and FirstSteps Nursery and Day Care. Each owner saw the demand for these services, and SIA grants give them the money to help cover the larger up-front costs.
Importantly, rural non-farm businesses that are started out of opportunity, rather than necessity, are much more productive. Our SBF Needs and Opportunities Assessment, conducted by the local coordinator along with the family receiving the grant, helps foster this success by focusing on the skills of all household members (including women and older youth). They then consider how best to incorporate those opportunities into the new business.
One of the school teachers at the FirstSteps Nursery and Day Care.
Businesses tended to fold, according to the study, because of shocks (such as illness or death) or because of low profitability and lack of finance. While SIA isn’t directly addressing the first challenge, our local SBF local coordinators do provide mentoring to help with marketing products and improving profitability. And several of our SBF communities have savings groups and low-interest loans that help with longer term financing for the businesses.
It was great to read the article and understand the larger picture of rural non-farm enterprises in Africa. I got to see how SIA is integrated into this small family business reality and how we are helping families to have more productive and long-lasting businesses.
*Non-Farm Enterprises in Rural Africa: New Empirical Evidence. by Paula Nagler and Wim Naudé. Available at http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-7066
Children at Nellie’s school recite colors and ABC drills for us. The school started in January with just 7 children and it has already grown to over 50 students!