By Hanna Rhodin
How do you go about starting a business when you lack the education or financial means? The answers often depend on the region, country, or city you live in. In early 2015 I traveled to Beira, Mozambique to volunteer with Care for Life, an NGO working with a holistic approach to assisting families in low-income communities. Part of this approach was to enable individuals to take charge of their own livelihood by establishing a small family business. This included their work with starting associations and mutual businesses — the latter being a 10-step process which many do not know how to undertake.
Registering a business should not take more than a few weeks (or, in more developed countries, a few days), yet during the two months I was working with these associations the process proved to take longer than that. For various reasons, several did not complete it and were still working on it as I completed my time there.
In Beira I got to see for myself firsthand the struggles, but also the aspiration people had with, and for, entrepreneurial undertakings. During a meeting a man shared his story about how he saved up money to buy a minivan which he intended to use for transportation services. When the van was purchased and he was ready to start his business, he was unable to do so as he had not accounted for costs toward gas for the vehicle and salary for a driver; his business never saw the light of day.
Another woman lost her husband and was left with their eight children. Not knowing what to do, she took a loan from the bank; unable to pay it back in time, she came to an agreement with the bank which resulted in driving her away from her children for half a year in order to get out of debt. Today, she runs a small business on the side of a busy street selling second-hand clothes.
A third man would talk to me about his ideas of starting a shipping company, a corner shop, and a chicken farm. The latter two which he excitedly did. However, the road there was not without bumps as he once went unemployed for months while his wife would braid hair for a living. While in the informal sector, all of these serve as examples that the need for information and education can be crucial to give people the tools to take charge of their own financial security.
Studies from Mozambique’s labor market from 2014 show that the formal sector consists of only about 700,000 jobs, out of a labor force of 11.6 million workers. The need for private enterprises is evident. USAID writes that findings show that one of the reasons for so many individuals and businesses to not enter the formal market are the costs involved. For smaller businesses it is implied that they simply cannot afford it for the sake of their “survival.”
Another reason I witnessed is the financial management side. Many individuals and families did not separate the business and the family money, and saving money had at first seemed like a foreign concept. At CIPE, we have witnessed many obstacles in the business environment in developing countries. These can be anything from the cost of registering a business, the need to pay bribes to receive government services, market access, as well as lack of connections and status.
While the obstacles can be overwhelming for a lone business owner, starting a business with others as a part of an association can be an easier way of entering the formal market and puts less weight on each individual’s shoulder. I met men and women of all ages, people with more successful business experiences, illiterate people, unemployed youth, and others that were looking for support among others rather than their own family. By creating a business association, the knowledgebase is larger, there are more people that can put their heads and hands towards the business and by complementing each other’s strength and weaknesses – they can build a stronger foundation. The different associations I worked with in Beira, each containing about 10-20 members, all had different ideas of what journey to embark on; ranging from starting a communal garden to raising chickens. One of these associations, mainly consisting of women, were contagiously smiling and optimistic about their future project of selling refreshments in the local neighborhoods.
At this level, a lot of what goes into the training is basic aspects of business management and guiding the members of each association so they can best manage their enterprises. Knowledge and tools offered are, but not limited to, how to: conduct market research, financial management and administration, create a budget, price products and services, and create job descriptions. In other words, it is a way to highlight what you have to think about when you start a small private enterprise. Together, the knowledgebase is not only larger, but the support from one another can strengthen the group as well as each individual.
Associations take many different forms. Here, at CIPE, we work both with established business associations as well as newly created ones, some organizations have more experience and others are new to this way of working together. It is important to remember that every association has to start somewhere and it is important to remember that associations can have many different functions based on need and progress.
Hanna Rhodin is an Intern for Global Programs at CIPE.