Background:
The Egyptian Small Enterprise Development Foundation is experiencing fast growth in demand for their services and Muṣṭafā Yāssīn talks about what he sees to be the reasons.
Side A:
Muṣṭafā Yāssīn who works for the Egyptian Small Enterprise Development Foundation, that was founded in 1989, starts the interview by questioning definitions of micro and macro enterprises based on the number of labourers, as a big factory with big machinery might only employ 2-3 people. At the same time, this distinction is important, as the organization is supported by USAID and because they will start doing impact measurement soon. An alternative is to judge their size on the amount of money the enterprises take out in loans. Muṣṭafā contributes to the foundation with his experience from the banking sector and they are expanding rapidly, with seven branches in Greater Cairo already. The key to success is, according to him, the fast and easy loan procedures. These workers go out to the places the foundation operates to find out who needs a loan and tells them about the project. The foundation only finances existing establishments, meaning that the formalities need to be in place. However they finance both the formal and informal sectors, for example, people sowing products at home. There is no guarantee, but the foundation takes banking checks, the beneficiaries sign them and they are given loans in eight to 12 installments. Then interest is calculated and added it to the loan it’s divided in equal installments for 12 months and the loan can be renewed. The repayment rate of this loan is around 97% because the extension officers who are responsible for the collection, and they are given a combination of incentives that depend on their production and collection and salary of 350 LE a month. This means that they can earn up to 800 LE. They are all beginners and graduates and get training in how to approach and convince clients and they also investigate them. They have clients that started with loans of 1500 LE and that now get 20,000, if they need more after this they’re introduced to a bank with a good reference. As their reputation is growing, they get more and more people coming to them.
On the question of whether a handicapped taxi driver could get a loan to adopt his taxi to his circumstances, Muṣṭafā reminds us that they only finance existing businesses. However, he says that these kinds of projects might be possible at a later stage and that new projects are decided on in cooperation with USAID’s appointed consultants at Environmental Quality International, who take care of technical assistance in partnership with the National Cooperative Business Association in America. The transfer of a business from another country to Cairo is brought up and Muṣṭafā again reminds us that they would only be of their concern if they had an existing business.
The start loan from the foundation is called a test loan, as it tests their capability of payment and this would be between 1500 and 5000 LE, depending on the size of the business. Six to eight months after repayment they can renew and get more than the initial amount, as it is very risky to give somebody you don’t know a loan, without any guarantee, failure of repayment leads to problems with the recycling of the fund. Payment delays are fined and if someone fails to pay they can sue, but there is not a big problem with delinquency. The program is made to help the poor so most people are very moderate and in line with this philosophy, bigger requests are always rejected. But these might be referred to social funds, which finance both existing and new projects with between 50 and 100,000 LE. The aim of these loans is to create jobs and help local communities develop their economic activity.
In Imbaba in Giza, they are financing a big portion of commercial projects like supermarkets and boutiques, not only industrial activity. This is easier and more guaranteed as they have income every day, whereas the industry cycle is longer, as you have to manufacture and then sell. USAID gave them a budget of 1,5 million LE for something they called “special project” in order to find solutions to help the industrial sector with developing, gaining productivity, marketing or equipment, in other ways than just financial ones. They study the possibility of a short loan for the products in question, contacting big department stores, or maybe getting a showroom for themselves. Another issue is the quality of the products. On the question about whether they are in touch with similar projects, he mentions the same kind of USAID - funded projects in Alexandria, Port Said, Asyut and Kafr El-Seikh. In addition, they were helping Care, which was trying to imitate their project. They had been thinking of export, helping with marketing abroad, however, this needs a lot of arrangement, and, first of all, quality products.
Side B:
Muṣṭafā goes on to talk about their upcoming evaluation report of 200 sample enterprises, which will give the foundation a better understanding of their methods and their impact on employment and productivity. They will also look into reasons why some drop out of the scheme after two to three months to see whether it is high interest rate, that the period of installments is not long enough, that it is seen as haram in Islam, in order to adjust their policies.
The interest rate on the loans is 17%, as they deposit the collateral fund from USAID in the bank and gets an overdraft with 11% interest. The 6% the foundation take is used to cover expenses like the 80 extension officers and the 150 people overall that work for the foundation. On the question if it’s not better for the people in question to go straight to the bank, he responds that they will ask for a lot of documents, that the bank will not be interested in giving loans of only 1500 to 2000 LE and that it will take a long time, as opposed to their loans which only take two weeks to obtain.
USAID's contribution to the foundation is loan funds worth $7 million which, with recycling, becomes 60 million LE, training costs, the aforementioned “special project” and 3 million LE for fixed assets like their new head office and branches. They are preparing for April 1997 when all the funds will be theirs, meaning that they don’t have to deposit the 7 million, but also that there will be no more funding from the US. Muṣṭafā is interested in the social side of this job and enjoys using all his experience to benefit the country and the economy. Customers had increased sevenfold from April l994 until now and the loans quadrupled, from 15 to 60 million. USAID supported them to improve their computer system a lot in order to store all their records: 21,000 loans, 1100 acting loans. Finally, he states that they are doing a lot and expresses a hope to see good results.
