Saturday, May 1st, 9am
Small Enterprise Program (SEP) Program, Monrovia
My first program visit was to BRAC’s SEP or Small Enterprise Program. We visited about 5 or so businesses. The businesses were all located in a market area close to BRAC’s branch office. James, a Liberian, was the Credit Officer and served as our host. Unlike the Microfinance program, the SME program is a mix of male and female borrowers and loans are made to individuals, as opposed to the group lending that is common in microfinance. Just as the borrowers are mixed male/female the Credit Officers are also a mix of men and women.
All borrowers we met were enthusiastic about BRAC’s support and had a clear view that BRAC’s loan made a meaningful impact on their business. Though it was obvious that these borrowers were better off than the Microfinance borrowers we would see the following day, they were clearly poor under most western definitions. One borrower in fact lived in the back of the store with his family.
All, but one, of the SEP businesses were retail store fronts. It was great to see these borrowers/business owners so overwhelmingly positive about their prospects and about the contribution BRAC’s loan made to their business. The devastation of 25 years of civil conflict and brutal dictatorship did not diminish the business owners’ enthusiasm for the present and hope for the future. I saw in these five business owners a microcosm of the true potential for Liberia and the contribution BRAC can make to Liberia’s development.
Though the businesses were retail stores, the products sold were fairly diverse. Common themes among all the businesses were that all goods were imported (from as far away as China), most seem to be renting their store space and all were enthusiastic about the contribution BRAC made to their business. All businesses were registered and were tax payers, which was a bit surprising as I expected more of the businesses to be informal given the nascent state of Liberia’s development.
The most common product sold was rice. Of all the stores visited none sold country rice (ie Liberian Rice) and all sold imported rice. Other goods ranged from plastic ware, dishes, wigs, washboards – yes washboards.
I asked where they acquired their goods from and sources ranged from Guinea to Togo to Ivory Coast to China. And the storeowners always seemed to travel to the source. I asked one woman who traveled to China why she didn’t phone her order in rather than spend the money to travel to get the merchandise. Her answer was that she wanted to make sure they shipped the right merchandise and that it was good quality. Clearly these store owners understood about running a business. Given the traveling cost and likely common locations for much of the merchandise, I wondered whether BRAC could organize their clients and work with them to coordinate purchases to take advantage of economies of scale. For example, rice and plastic ware were available in several of the businesses and BRAC could potentially bring volume discounts to their clients by acting as a sourcing conduit.
Overall these businesses were run by sharp business people. If one wonders whether these shop owners extend credit, a sign in one store answered the question. One shop owner had a sign that read, “No credit today, come back tomorrow.” I naively asked what happens when they come back tomorrow. “The sign will still be there,” he replied. No fool, he.
One business that stood out was a makeshift gas station owned by a women. She stored the gas in a large cement tank and piped the gas from big cement tank to a smaller delivery tank which then siphoned into a bucket. This modest makeshift business would be competing with the fancy new Total gas stations, including western style convenience store.
Borrowers generally seemed to be happy with the terms of their loans. The only comment borrowers made on the loan terms, was the forced savings – they didn’t like the fact that BRAC retained a part of the loan as savings. One borrower also suggested disbursing loan in hard currency since they have to convert Liberian Dollars to hard currency in order to buy the merchandise.
Credit Officers are paid a fixed salary with raises based on credit performance. BRAC’s underwriting for the SEP program seems come down to four factors:
1) Borrower inventory
2) Borrower business
3) Guarantor Credit
4) Guarantor collateral
Further, for each SEP loan BRAC requires a guarantor. The SEP clients we met had guarantors ranging from relatives to landlords to business partners. In addition to checking the credit of the guarantor BRAC will generally look at deeds and titles for property owned by the guarantor.
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