Small business owners in Yemen seek to recover from difficult 2011

By Faisal Darem in Sanaa
For Al-Shorfa.com
2012-01-31

Small business owners like the woman pictured above are crucial to Yemen's economy, experts say. [Yemen Microfinance Network]

Mahyoub al-Wosabi, an entrepreneur who owned a small restaurant in the al-Hasba neighbourhood in northern Sanaa, lost his business about seven months ago because of sporadic clashes in the area.

"I lost everything and became indebted to the bank that financed my small business," he said.

When his fast-food buffet restaurant closed its doors, the lender took the restaurant's contents to recover the unpaid rent that was almost equal to the value of the loan al-Wosabi received from al-Amal Bank to expand his business.

"I took my children back to our village because I went from being an entrepreneur employing five workers to roaming the streets begging employers to hire me as a carpenter, a construction labourer, or a digger for daily wages. I often work one day and then spend two or three days without work," al-Wosabi said.

Curbing the decline

In response to the losses Yemen's small business sector incurred during the past year, several civil society organisations are seeking to curb the decline through awareness campaigns and by providing support to entrepreneurs.

A December 2011 report from the Yemen Microfinance Network showed that the sector suffered a 20% loss in 2011. The number of small business projects dropped from 60,000, which supported 300,000 families, to 53,000.

The report said the nation's political crisis contributed to major losses in the sector; many owners of small businesses were forced to leave their homes, an acute shortage of basic services emerged, and many entrepreneurs left the labour market.

"The risks and delays in this sector exceeded 15%, when it never exceeded 5% in the worst of years in the past," Sharar al-Muliki, the network's secretary-general, told Al-Shorfa.

Al-Muliki said the network is seeking to expand its activity in 2012 to address the losses incurred by small businesses as a result of the political crisis.

"In late December 2011, the network targeted the general public with awareness campaigns about small businesses and projects, especially in areas where poverty and unemployment rates are high," he said. "We set up tents in public areas for 15 days where we explained the concept of small business and encouraged people to visit financial institutions to apply for loans to start new projects."

The campaign focused on five provinces: Sanaa, Ibb, Taiz, al-Hodeidah, and Aden. Organisers distributed 40,000 brochures and hung banners in high-traffic areas.

Small businesses 'only way' to develop Yemeni economy

"The year 2011 was a difficult year for the country in general and small business in particular," Yousef al-Karimi, CEO of al-Karimi Islamic Microfinance Bank, told Al-Shorfa. "Banking and small business programmes depend on entrepreneurs who were severely affected by the political events and the petroleum and electricity crisis."

Al-Karimi credited small businesses for enabling rapid economic growth in countries such as India, China, and Brazil.

He said small businesses are the "only way" for developing countries like Yemen to combat poverty and unemployment because large projects rely on technology and require large capitalisation.

The Al-Karimi bank plans to finance 4,000 small business projects this year, compared with 800 in the past 18 months. Al-Karimi said the initiative "can only be achieved under safe and stable conditions".

He said the bank will not absolve the owners of the payments, but it will extend a grace period to enable borrowers to resume their activity and catch up on payments in arrears.

Mohammed al-Lai, chairman of the Yemen Microfinance Network and executive director of the al-Amal Microfinance Bank, said small businesses account for 97% of business activity in Yemen, and damage to the sector created an economic disaster.

He said several factors hurt small business owners, the first being that lending dried up and wholesalers suspended credit transactions with retailers. Another factor was the high depletion rate of savings of families and individuals because of high prices and the rising cost of petroleum. The declining economic situation triggered inflation and led to a decline in consumer purchasing power.

"Al-Amal Bank lost 6,000 customers and small businesses in Abyan province alone as a result of the military confrontations, and 350 customers in the al-Hasba region in Sanaa and in Taiz province," al-Lai said.

With regard to small businesses that faltered during last year's political conflicts, al-Lai said they would be re-evaluated and their owners would be compensated to enable them to resume work.

"The amount of compensation will depend on a damage assessment of the business," he said. "Some will be partially compensated while compensation for other businesses will reach 100%."

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