UN Office for the Coordination of Humanitarian Affairs
IRAQ: Businesses ready for new cash
BAGHDAD, 10 March 2005 (IRIN) - Omar Abdul Hassan wasn't sure what to make of it when three US military vehicles pulled up in front of his 'Happy House Furniture' factory in the Rasheed neighbourhood of the Iraqi capital a couple of weeks ago.
A man hopped out of the back of one of the trucks and started asking him questions about his business, Hassan told IRIN. Then, the man offered him a loan to help him buy a bigger factory and hire more employees.
It was all a little overwhelming, Hassan said, as he watched over 20 workers standing out on the road smoothing lacquer onto headboards and cabinets in the warm March sun. US soldiers often bring bad news with them or they are targets for bombs. The neighbourhood can be a tough one - many people there don't like the US forces, he said.
But then he started thinking about the offer - up to US $50,000 that can be paid back over 10 years.
Almost none of the banks in Iraq are operational at the moment given the current instability. Virtually all international aid agencies have pulled out of the country or handle their work from neighbouring Jordan following a continuing diet of kidnappings and car bombings.
Those aid agency workers still in Iraq hardly ever travel around in the central part of the country and live in the heavily fortified "green zone" where most US Embassy workers and Iraq's interim government operate from.
Three Middle Eastern banks, which want to set up in Iraq were approved more than six months ago by US advisers, but none have opened their doors. Making things more complicated, paying interest on loans is not allowed in the Muslim religion.
Hassan decided that it sounded like a good deal. He's working out how much he wants to receive so that the payback terms still allow the business to make money.
Gordon Studebaker, the man who visited Hassan, is working on spreading capitalism across Iraq, one business at a time. One-time "fees" can be charged to business owners instead of interest, the International Executive Service Corps worker told IRIN. Successful businesses will then have a chance to grow and hire more people, he said.
IESC is under the umbrella of the Volunteers for Economic Growth Alliance, a group of non-profit agencies which will receive $35 million from the US Agency for International Development (USAID) to give businesses like 'Happy House Furniture' micro-credit loans. The money is expected to be distributed in the next couple of months.
"The needs are really great," Studebaker explained. "A business might get a new piece of equipment, or a supplier of new products. Then it starts paying back the loan."
Payback rates are usually very high in developing countries such as Iraq, according to Studebaker, up to 99 percent. As an incentive, once a business pays back one loan, it can get another one.
The furniture business is booming, mostly as a result of demand from young people who now have jobs and enough money to get married and move into their own houses, Hassan explained. He calculates that with a loan he can expand to 60 employees and import more wood to build the fancy bedroom sets for which his shop is famous.
"We want to add modern machines for woodwork that doesn't require special craftsmanship," he added. "There's so much unemployment in Iraq. We can definitely hire at least 40 more people."
Studebaker is working with banks to get them going again. He also works with some local aid agencies which learn how to do the work of financial institutions as part of the programme. So far, Studebaker has found tens of potential clients, from bakeries to metal fabricators, music shops to poultry processing plants.
At a bottling plant, the owner said he already had 12 investors to help him bottle imitation Coke and 7-Up, Studebaker said. The soft drinks factory owner asked for help buying a bigger building so he can expand the operation.
"Business owners are not as greedy as everyone thinks they would be," Mark Visocky, head of USAID's private-sector development projects, told IRIN. "Their response is usually pretty considered, even though it seems like free money."
But showing just how unstable the security environment is, Studebaker said Ramadi, about 80 km west of Baghdad in the insurgent-heavy "Sunni Triangle", is not ready for economic development.
Plenty of businesses might be able to grow there, but when he tried to talk to businesses, owners started closing down the street as soon as they saw him coming.
"When the Marines saw that, they grabbed me and we ran," Studebaker said. "I don't think they're ready yet."
Theme(s): (IRIN) Economy, (IRIN) Governance
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