Encouraging entrepreneurship in rural areas

Dubai: Bakhita Ahmad Younis, a 38-year-old housewife in Assuit, Upper Egypt, was finding it increasingly difficult to keep on top of household expenses on the minuscule pension drawn by her retired 68-year-old husband, Faraj Abu Zeid Faraj, a wood craftsman.

After years of barely getting by, she then decided to take on the additional responsibility of creating an income stream on her own. She asked her husband to teach her the intricacies of his trade so that she could start her own business in making decorative wooden household objects and kitchen utensils.

Having gained the skills needed to start her wood craftsmanship business, Younis said finding enough capital to buy equipment and materials was a big obstacle. She found the interest rates of 22 to 25 per cent annually from commercial banks too high for a start-up. She also could not provide the mandatory collateral guarantees.

Looking for easier terms

Younis was eventually able to obtain a micro-loan of 5,000 Egyptian pounds (Dh3,115) from the Community Development Association of Al Ganayem (CDAA) at an interest rate of 14 per cent. With this, she was able to purchase an electric wood-carving machine, raw timber and production tools such as brushes, paint, smoothing sheets and coating additives.

"The loan ensured my success; I found it quite hard applying for a loan with the government," said Younis. "In order to encourage small businesses like mine, the terms need to be easier."

Younis began selling her product on the local market. From this start up she made an average of 1,200 pounds (Dh747) a month. "As the business grows, we will be able to give work to some unemployed youngsters in the neighbourhood and produce more goods for the market," said Younis.

After the success of her business, Younis and her family will now try to access the wider national market and, possibly, even neighbouring markets such as Jordan.

Not unique

Younis's case is not unique by a long stretch. She comes from an area where almost two-thirds live in poverty and where earning enough to make ends meet is a distant dream for most. Youth unemployment remains worryingly high and 50 million jobs must be created in the next ten years to meet the rapidly growing demand.

According to a recent report issued by the International Fund for Agricultural Development (IFAD), the largest percentage increase in the ranks of the hungry between 2008 to 2009 were in the Middle East and North Africa region. This steadily growing crisis —frequently cited as one of the main reasons for the uprisings across the Middle East — is characterised by growing food insecurity and rising unemployment.

In many cases, it's only entrepreneurship that offers prospects to young people with no formal education or agricultural land to till. However, the path is not easy.

In Egypt, worker skills and education are among the top five constraints in business. Such enterprises are stunted by a lack of access to a micro-finance system, underdeveloped local markets and marketing infrastructure, such as transport, storage and grading facilities.

Micro-credit schemes

Al Ghanayem is one of ten localities in Assiut Governorate where newly introduced micro-credit schemes and small loans are in high demand. The CDAA has already extended over 2.7 million Egyptian pounds in micro-loans to 651 of the poorest in the rural areas.

Yet twice as many other people are on the waiting-list for micro and small loans, according to Fatnaa Ahmad Abbas, the CDAA's programme manager.

To encourage job creation, Middle East governments are working to expand free trade agreements with the EU and US to develop export-oriented agriculture geared towards higher value commodities. The most notable examples are found in Turkey, Jordan, Egypt and Albania.

According to IFAD, young people constitute about 20 per cent of the total Near East, North Africa (NENA) region.