Liberia’s Micro entrepreneurs
lessons from Liberia continued
… give jobs to others and train the youth in the neighborhood.
The conversations and surveys surfaced that many of these ventures could easily grow (“A small investment could triple my income” … Hawa) and that the families had plans and visions of doing better but had shelved those plans, primarily because there was no way to finance their growth. In asking about micro-loans or credit, they shared what most economists know. You can’t expect to competitively grow a venture if your primary source of capital is debt. We also discovered that families in Liberia had previously had bad experiences with mico-loans and now most joined what they call a Susu. These are self-organized group savings circles where each person regularly puts in an agreed amount and then each member gets their turn to use the entire pot. Most cultures have savings circles which are referred to by different names. Because families were concerned that we were bringing in another micro-loan program we had to assure them that what we were proposing to test were equity-like investments, direct cash investments, that they would pay back by helping others.
In 2019 with only a $60,000 grant from the Imago Dei Fund, we decided to test an equity investment system that would provide seed and staged funding to grow the efforts we were seeing. Our goal was to learn whether the entrepreneurship of residents could grow the economy from the ground up. We also wanted to investigate whether the return on our investment could be that participants in turn invest and help others, thus paying our investment forward. We concentrated on enrolling participants in just two areas in Liberia, Paynesville and Buchanan, where we could monitor the impact at a city or district level. For instance, Buchanan has only about 5,000 households. If we invested in 500 households, our baseline information indicates a ripple impact on at least 3 other families. In such a concentrated area we will then be able to measure the broader impact on the community as a whole.
Baseline:
In late 2019 we enrolled 100 households (approximately 700 adults and children) in those areas and began surveys to better understand their circumstances. Multiple surveys established our baseline data. What we found is that at start up 95% of the families were participating in a Susu, 93% were already sharing their meager earnings with others more impoverished, often in rural areas, 33% were getting small remittances (cash) from friends outside of Liberia, and 62% were employing others, creating 89 part time jobs. The average monthly revenues of their ventures was $134/month. After business expenses their take home or profit was $38 per month or about $1.28 per day -- extreme poverty. After looking at rent and food costs, etc. it was clear that you could not survive on $1.28 per day. What we learned is that these households form strong bonds (Average households sizes are 7+ members) where every adult works or does business and they share income and expenses to survive. Scarcity has led to a strong sense of mutuality.
Progress thru July:
Seed capital stage: In early March of this year, we invested $100 into each of the enrolled families to spend as they chose. About 40% shared up to half of our investment with other family members so they could expand their ventures, fulfilling the pay it forward concept immediately. And more amazing, just in March, average business revenues jumped an average of 110% to $285/month. Then Covid hit and the country went into lockdown early April, where people had to stay home most of the day. Incomes went down but you saw families sharing and helping each other much more. Our families distributed rice, masks and washing stations voluntarily thus again paying it forward. Then in June the lockdown started to lift and by July business revenues were back up to an average of $256/month. Hawa, who initially explained to us why revenues could jump so quickly grew her business from $47 per month to $260 per month, a 455% increase. We continued to learn from the families that the rapid growth was that without capital most of the families had to purchase the goods they sold on credit, purchasing small quantities at retail prices which only allowed for a slight mark up for profit. But with the CII capital investment Hawa, who sells pad locks for instance, was able to buy them in bulk, wholesale, with cash not credit. This lowered her cost of goods by at least 20%. She was then able to lower the price she sold each lock for, increased her sales and thus increased the amount she could use to support her family. With those funds she is helping her sisters to also expand their ventures.
Lastly, by the end of July these small ventures had created 149 jobs for others, a 67% increase in jobs just as the largest corporate employer in Liberia, Firestone, has been cutting jobs. It appears possible that small investments, not loans or credit, can be leveraged and shared by participants to upgrade the broader economy.
Staged funding: Many of the ventures we have seen in our sample can grow significantly if they can access growing levels of investment, just as good ventures can in our country. CII will be working with a group of advisors to develop what might be higher levels of investment and how to vet those efforts. Below are two ventures that can grow substantially.
Elijah has skills in technology and the possibility of getting investments led him to focus on growing his computer business, making copies, repairs, teaching, etc. During the baseline studies his sales averaged about $50 per month. In March he got our investment, used his personal savings, and by July 2020, his sales grew 686% to $385. There is very strong interest in technology, even in the most impoverished regions, and Elijah hopes to develop the first computer hub in the city of Buchanan.
Otis makes concrete blocks in a small lot by his house. Concrete blocks are used for building homes, etc. and by July Otis grew his sales from $360 per month to $1,700, creating 6 jobs. He needs more land and a truck to deliver the blocks, then he can become a significant company in Liberia.
The best solutions are those that come from the people themselves.