Small Loans Help Women and Small Firms Make a Profit

CAIRO -- In the busy streets of this crowded city, Mousad M. Assad, 55, runs a small business making metal molds for cutting shoe soles out of thick leather hides. He sells the molds to shoe factories, many of which are located nearby, up small staircases off the narrow streets of Cairo.

His business is booming these days. His handful of workers are busy at their tools all day since he expanded production and bought additional supplies by using a small business loan offered under a U.S. aid program.

"I got two loans," said Assad as one of his workers sawed a metal bar for a new mold. "The first was for 3,000 [Egyptian] pounds (about $500) and the second was for 6,000 pounds. I had no trouble paying them off."

To help small business owners such as Assad, and to help even less-well-off people such as Ghada Gharib, 38, who now sells beaded jewelry in the market nearby, USAID has offered small loans that are not normally available to Egyptians from commercial banks.

Gharib used to be very poor and she made a living for her family by selling things door to door. She borrowed only 200 pounds -- $34 - through the U.S.-funded loan program and now has a small table set up in the market to display the many beaded necklaces and other items she has made.

"Now I own this," she said with simple pride as passersby stopped to examine her wares. As she spoke, she continued to use her needle and thread to create more jewelry for sale. She makes payments of only 20 pounds a week -- $3.40 - as she pays off her fourth loan.

"The loans went up from 200 to 300 to 400 to 500 pounds," said Gharib, whose husband is too ill to work.

"The money came from America. I benefit because I can make a profit. I used the loan to buy materials I use in my embroidery. My mother also took a loan that she used for beadwork and sewing; my sister too."

Now she has two paid helpers. To make a head cover from beads, she pays 5.5 pounds for materials and 3 pounds to the helpers. Then she sells the piece for 12.5 pounds.

She's using some of her profits to send her daughter to school - the cost is 200 pounds a year.

Assad said he has increased production of shoe molds by 25 percent thanks to the small loans. And he plans to ask for a new loan of 9,000 pounds next. "As a rule, they let us ask for 50 percent more on the next loan," he said.

"In Egypt, the banks don't give loans without collateral and they ask for a high rate of interest," he said.

USAID began offering low interest micro-loans to small businesses in the late 1980s and has issued more than 1.3 million such loans worth a total of $600 million to more than 240,000 borrowers - mostly women. Less than 3 percent defaulted.

An increase in funding for these small loan programs is expected to more than double the number of borrowers to 600,000 by 2007 and triple the value of active loans to $160 million.