Building Businesses for Sudan’s Poorest

April 4, 2013

  • In Sudan, the microfinance industry is growing at a healthy pace
  • Sudan has incorporated microfinance lending into its poverty reduction plan
  • Over 480,000 people, including small business owners, have access to credit at market rates

Kassala City, Kassala State, April 4, 2013- Mohammed Abdel Ati Alhusein proudly stands in front of his brick home in Kassala, a bustling market town nestled below mountains along the border between Sudan and Eritrea as he instructs four workers to carefully place wet cement bricks on molding wood planks. The light-colored bricks will bake in the hot sun and be used to build houses like his own. At 28, Mohammed runs a flourishing business. A self-made entrepreneur in a country trying to rebuild itself, he also sells bricks to Sudanese builders all across the region as well as in the nearby states of Gedarif and Halfa.  

For at least two generations Mohammed’s family has tilled the land as farmers in the state of Kassala, a region in eastern Sudan. But farming was never what Mohammed had in mind for himself. “Since he was a child, Mohammed always liked talking about factories and building things,” his mother says. “Unlike all of his brothers, he knew how to farm but was just never interested in farming,” she adds.

In the past, Mohammed would have had no choice but to take up farming in order to make a living wage. But today, thanks to the Multi Donor Trust Fund-National (MDTF-N) Sudan Microfinance Development Facility Project, a  program that provides credit to small and medium sized businesses in underserved areas of Sudan, the young man was able to launch his own business and do what he does best: build houses and help reconstruct his country. 

In his early 20s, seeking a trade that would capture his imagination, Mohammed travelled to Saudi Arabia, a country bustling with construction. There, he saw workers making cement bricks with the help of a small machine that required simple mechanics and saved enough money to buy his first machine. Back home, he applied for a microloan and was able to purchase two more brick-making machines to scale up his production capacity. His business took off by word of mouth. “When a well-built house is constructed in a neighborhood, people ask where the bricks come from. My profit has increased by 20% since I first began,” he says.


Microfinance for the masses

Mohammed’s loan was provided with support from the Multi Donor Trust Fund National (MDTF-N) Sudan Microfinance Project that encourages the government and private sector to develop affordable financial services such as credit and savings programs for poor entrepreneurs in war-affected areas of Sudan. The project serves Sudanese in marginalized parts of western, eastern and northern Sudan, as well as the urban working poor.

Limited access to credit and the absence of affordable credit are the primary reasons small companies don’t get off the ground in Sudan. In 2013, Sudan was ranks 167 out of 185 countries by the World Bank’s Doing Business Report (2010) based on the ease of getting credit. 

Most of the poor Sudanese in urban settings cannot afford the fees banks charge for loans. Consequently, they borrow from other business owners, or traders, who are willing to be repaid in cash or in kind. “People are easily exploited,” says Esam Habish, business development manager of the Sudan Microfinance Development Facility (SMDF), an umbrella organization for the smaller loan providers established with help from MDTF-N. Too often, greedy loaners change the terms of the loan to their advantage, he explains.

Like commercial banks, microfinance institutions (MFIs) are independent and provide loans to small entrepreneurs such as Mohammed Abdel Ati Alhusein. Today, twelve MFIs are registered by the government in Sudan and offer loans at market rates. “These loans allow people to fulfill their dreams,” says Abd Elmagid Mohammedean, director of the Social Development Foundation, the oldest MFI in Sudan, whose organization has provided $126million SDG in loans and other services to 650,000 small and medium-sized entrepreneurs over the six-year period of 2006-2012.

Each MFI is overseen by a board of directors whose members are chosen from the surrounding community. Would be entrepreneurs submit a proposal and a financial history to the MFI. According to Abd Elmagid Mohammedean, the procedure is very simple, and most people are approved by the MFI board. Once approved for a loan, aspiring business owners receive financial management training and learn how to create business plans to allow them to sustainably grow their business. 

A huge market

Microfinance is not new to Sudan. The government’s Central Bank of Sudan (CBS) championed microfinance as a poverty alleviation tool and has dedicated significant resources for loans and credit to small and medium-sized businesses such as Mohammed’s brick making business. A few years ago the government passed a requirement that all commercial banks set aside 12% of their resources for microfinance loans.  “I have never seen a county so committed to microfinance as Sudan,” says Task Team Leader Andres F. Garcia, Economist and Country Sector Coordinator with the World Bank. “The microfinance sector is growing in Sudan and it seems to be a healthy sector compared to other countries where the sector grows and then begins to drop,” he adds.    

As of today, the MDTF-N project has supported the microfinance sector, which as disbursed loans to over 380,000 households in Sudan. The microfinance providers supported by the project gave a total of 8,253 active loans, with nearly half benefiting women. 

In the state of Khartoum, the demand for microfinance is extremely high. According to a recent survey conducted in urban areas, 1.5 million people (21% of the total population) expressed interest for such loans. Yet, 72 percent of the micro entrepreneurs surveyed said they had no access to formal or informal credit services.

In Sudan, small-scale industries account for 93% of the manufacturing industry, and small entrepreneurs provide two-thirds of household needs for the majority of Sudanese households, according to the World Bank. The formal financial sector only serves a tiny proportion of these entrepreneurs, thus pointing to the existence of a huge untapped market.

Jadallah Zein, a fisherman located in Kashm Elgirba-Kassala, says the microfinance loan he received to purchase his own boat, has enabled him to catch almost three times as much fish. “At first, we used to rent boats for fishing and it was really draining our income,” Jadallah says. “Before I received the loan, I used to catch one basket full of fish and now I catch two to three baskets a day, and these are all sold,” he says.

 Back in the city of Kassala, Mohammed says his family is now at peace with his decision to become a brick maker rather than a farmer. “I am so happy to be back to Sudan and work among my family and community,” He says. “I was looking for a trade that I could do in my hometown. Now my older brother and I are partners and even my father is very excited about our work.”

The Sudan Microfinance Development Facility Project is one of 15 projects funded by the Multi-Donor Trust Fund-National (MDTF-N). The MDTF-N is a means for countries to contribute to the reconstruction and development needs of war-torn areas of Sudan. The MDTF-N ends on December 30, 2013.