Sunday, July 17, 2005

Your Two Cents

Paying taxes? You may or may not know it, you are making a difference abroad. Every dollar or euro you pay in tax, a few cents are going towards development or aid projects abroad. For Canadians, we contribute two cents for every dollar - that is close to $2.2 billion dollars annually. Governmental agencies such as the CIDA (Canadian International Development Agency), USAID, or DFID have mandates to distribute these funds to projects including the one that I was working for in Mozambique. My particular project was one of CIDA's International Youth Internship Programs where I worked as a Market Research Associate for the Mozambique Microfinance Facility. My job was to investigate the peri-urban areas of Maputo and to analyze the financial needs and risks of small businesses in their rural marketplace.

The results? Since I was supported by your tax dollars, I suppose I do have an obligation to report to you that my results state that there is an essential need for these businesses to have access to working capital. The men and women of Maputo search for opportunities to diversify their products, make new purchases of inventory, and make expansions for their business. Sounds like a business in our own home towns, doesn't it?

The huge difference is that a majority of these businesses are run under small budgets (just enough to cover basics and subsistent - as little as $20-$100 to run business) and they face harsh realities of poverty that place their business in a risky predicament (eg. the owner becomes sick or goods are stolen). A smaller group of businesses have past this stage and are able to mitigate risks through financial planning strategies yet struggle due to lack of capital access. They are ready to expand but need a start-up loan to get off them off the ground. Programs such as microfinance comes to play for these entrepreneurs and assist with loans & savings or provide client business training. I'll write more later about the good, the bad and the ugly of these microfinance institutions.

Why did CIDA fund a project like this? Why would Canadians be interested in investing in a microfinance project in Mozambique? A chance to display Canadian expertise in microfinance training and project management? A future possibility of international trade in this country? A chance for a young person to learn about business in Southern Africa who would otherwise never have the opportunity to do? If the last was the objective, goal accomplished and thank you for your two cents.

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