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Citigroup, YMCA help companies struck by war
Grants are designed to help recipients of micro-credit to get back in business
By Lysandra Ohrstrom
Daily Star staff
Friday, March 30, 2007

BEIRUT: Citigroup and the YMCA awarded over $54,000 worth of grants on Thursday to 37 Lebanese micro-entrepreneurs whose businesses suffered "severe setbacks" as a result of last summer's war. To contribute to the recovery of small businesses that sustained the most damaged by the hostilities, the eligibility criteria of grant recipients shifted for the second annual Citigroup Micro-Entrepreneurship Awards, said Marwan Mikhael, a representative of Economy Minister Sami Haddad.

"We are aware that the financial repercussions of the war were huge, so we hope the grants will be a starting point for businesses across Lebanon to recover, and will work as incentives for owners to revive operations," Mikhael said at Thursday's awards ceremony at the Metropolitan Hotel.

Lacking the collateral and steady employment necessary to secure a conventional loan, most micro-credit recipients are deemed "unbankable" by mainstream financial institutions, and are generally concentrated in "informal" economic sectors, such as street vendors, small grocers, craftsmen, hairdressers, and farmers. Most employ fewer than four workers. To cover the heightened risk of default, micro-credit recipients are charged inflated interest rates of between 12 and 22 percent, 2 to 6 percent higher than those accompanying conventional banking loans, for credit amounts ranging from as little as $50 to a few thousand dollars.

As such, micro-credit recipients are particularly vulnerable to economic slumps.

The LL82 million worth of grants was distributed among the clients of seven micro-credit institutions - the Association for Rural Development, the Association for Professional Support, Al-Majmoua, Makhzoumi Foundation, Caritas Lebanon, the Haramoun Welfare Association, and CHF Ameen - based on the volume of losses sustained by each business, the size of its labor force, and the recipient's social situation.

Al-Majmoua, the second largest micro-finance institution in Lebanon based on the volume of loans granted, received an LL8 million grant from Citigroup this year, which was distributed among four female and three male business owners located in the Bekaa Valley, Dahiyeh, and Southern Lebanon. Benificiaries included two grocers, a hairdresser, and two farmers.

Al-Majmoua identified 150 of its 6,700 clients who sustained the most severe direct losses from the war, and Citigroup's evaluation team ultimately determined seven beneficiaries and the amount of each grant, business development manager Alia Farhat told The Daily Star.

"The requirements from Citigroup were people whose businesses were partially or completely destroyed, and there was a vulnerability component, meaning the household income and the number of children," Farhat said.

"The donations they received can be used however they want, but the idea is that they use funding to re-launch operations," she said when asked whether any conditions are attached to the grants.

"Most of the businesses have been totally inoperational since the war, and a couple were able to resume limited operations."

Most of Al-Majmoua's clients took a "huge hit" after the war and many are still on "shaky ground," said Farhat. About 1,200 have been unable to make scheduled loan capital or interest repayments in 2007 and nearly 300 businesses lost all their equipment.

So far, Al-Majmoua has been able to replace lost machinery for 150 of those businesses. 

"We are helping them through rescheduling loans and refinancing, but a few were so desperate we had to write off the loans all together," she said. "They deserve these grants."