Report on Microfinance Project in Garowe, Puntland State of Somalia
The microfinance project is situated in Garowe, Puntland State of Somalia and aims at empowering economically local entrepreneurs. Further it is supposed reduce poverty of the participating vendors. With the financial support of UNDP and in loose cooperation with the brand new branch of Salama Bank in Garowe (the second Salama Bank branch in Puntland) Somali Family Services distributed loan to over 140 micro entrepreneurs in Garowe. These were all selling goods needed by the people of Puntland and therefore this project aims at providing not just better living conditions to the beneficiaries, but also to the people of Puntland that are purchasing their goods from improved stores.Furthermore, SFS provided two day financial literacy training, before the loans were distributed to the beneficiaries. This training incorporated some basic economic principles, the formation of a business plan, a number of business skills and provided the opportunity for market women to network as well as learning from each other how to improve their micro-businesses.
Specifically, three different groups of beneficiaries exist. Two of these groups can be considered as micro-entrepreneurs that are mainly market women selling meat, vegetables, fruit and spices. The other groups are entrepreneurs with their own stalls or restaurants selling a larger variety of goods. The latter group consists of 40 beneficiaries that all received 500 USD as their loan and have a repayment schedule of 55 USD each month for 9 months. The first three months the beneficiaries do not have to repay any of the loan amounts.
Similarly, the other two groups (one consists of 30, mostly meat vendors, and the other of 72 beneficiaries that sell mostly fruit and vegetables) received 250 USD and have to repay those loans over the course of one year. Each month the beneficiary is supposed to repay 28 USD. The first three months the beneficiaries did not have to pay back any amount.
In order to have a venue where to safely pay back the loan amounts, beneficiaries have to open an account at the newly established Salama Bank branch in Garowe. This allows for a close relationship between the bank (that is not officially recognized as such by the Puntland government) and the civil society actor Somali Family Services. Further, participants of the micro loan project start having a credit record. This will eventually lead to the potential of borrowing from the financial institutions directly.
As micro-finance particular struggles with finding a substitute for collateral, group dynamics and repayment groups are prudent attempts to circumvent this problem. SFS has therefore grouped all beneficiaries in these three subgroups, which all individually represent a repayment group. From these groups, a small number has been elected to a supervisory body. This body consists of 9 beneficiaries that meet regularly to discuss repayments. The repayment groups provide a substitute for traditional collateral by helping out each other in this subgroup and provide incentives among themselves to repay the loans.
Full report will be posted soon.
- Adventist Development and Relief Agency
- Books For Africa
- Counterpart International
- Diakonia, Sweden
- Education Development Center
- International Labour Organization
- National Endowment for Democracy
- State of Minnesota Department of Human Services
- UN Political Office for Somalia
- United Nations High Commissioner for Refugees
- United Nations Population Fund
- World Movement for Democracy