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الموقع تحت الإنشاء

النسخة التجريبية من موقع النهضة العربية (أرض)

Naqsh (5): Al Nahda Women: Lending Programs and Entrepreneurship Between a Rock and a Hard Place”, By Dr. Menan Sidqi Hattab


For years, the idea of funding entrepreneurial projects has been pursued by local and international organizations and financing entities working in the field of economic empowerment, in order to provide support to start-ups and entrepreneurs of youth and women, through the provision of non-refundable, free of charge grants, or loans with interest and specific repayment terms. Another area of support for this category has also emerged through the tendency of investment companies and official institutions to invest in startup and entrepreneurial ideas that have been promoted as social entrepreneurship projects, especially those focusing on the technology and smart applications sector, following the Western pattern, and the idea of acquisition and quick profits for everyone. This sponsorship pattern has been prevalent for years, with a tendency by young people to expand these ideas and the sector in Jordan and the Arab region. However, there are now reports about the failure or discontinuation of some of these projects, including the recent news about the breakdown of local startup company (Jamalon). On the global level, many of these companies struggled during and after the Covid pandemic, which triggered a discussion about the issue with the members of Al Nahda Women Network, and the writing of this article.

Within the “Naqsh” interactive platform, we asked the members of Al Nahda network -which was founded and launched by ARDD- the new question of “Naqsh”, in order to discuss and share their practical experiences and draw lessons on the best way to ensure accomplishing  project objectives: Is it funding small and entrepreneurial projects through soft loans and women’s loans, or through non-refundable grants, whether conditional or unconditional? The members were also asked to give suggestions about revisiting the idea of grants, which may be safer for the beneficiaries as they would be relieved from the burden of repayment and its legal consequences. Furthermore, there was the question about the likelihood of sustaining these projects, despite the dependency on these loans and turning them into a means of profit for organizations, individuals, and microenterprise initiatives, without serious intentions about sustaining them.

Despite the diversity of opinions and ideas that were presented, they were generally agreed upon by the members of the network taking part in the discussion, as the participants were either the founders and heads of local NGOs for many years, led projects to support youth and entrepreneurial ideas, or are academics. The discussion kicked off with an attempt to analyze the reasons behind the failure of the startup Jamalon, an online bookselling website founded in 2010 as a Jordanian company that sells books from anywhere. The website included over ten million titles and was considered a success story, as it was created by siblings who initially relied on very limited financial resources for a viable, sustainable, and widespread idea, and went on to turn their small dream into a huge project whose reputation extended to many countries. Jamalon was initially successful, expanding and attracting new funds from important and reputable sponsors at every stage. Yet, it ended up sustaining losses that threatened with discontinuation. Unfortunately, this is not the first entrepreneurial project that fails, and it won’t be the last.

Some participants agreed that Jamalon was a commercial investment project whose failure was due to poor management, as it was a high-risk investment, especially when young investors seek to expand their projects and increase the value of their investments in an unstable market. The owners of Jamalon not only missed the opportunity to be acquired by a multinational company like Amazon, but also lost the millions of dollars they had obtained in the second round of funding, in an ill-advised expansion of the project with the aim of attracting the acquisition by Amazon and drawing attention to themselves. This adventure was not the first of its kind in the Arab world, with astronomical sums of money as well, such as the Jawaker application, Maktoob website , and others.

The participants agreed that the term “grant” is completely different from the terms “investment” and “loan, as grants are non-refundable funds provided to people, organizations, or institutions under specific conditions and with an extended repayment period, while an investment is a purely business decision pertaining to a specific project. Some institutions in Jordan offer small loans on concessional terms, without any interest or legal obligations that guarantee the commitment to repay the loan over a long period. However, the members expressed the opinion that there is a need to reconsider lending mechanisms and standards, by providing safe facilities for both parties, as well as intensive training programs that precede the lending process on issues of loan management and marketing mechanisms, in addition to close follow-up and continuous supervision by the executing agency.

On the other hand, loans provided with high interest rates are particularly burdensome for women; as they are often used to pay off family debts and expenses or are seized by the husband. One of the participants recalled the phenomenon of female debtors, which, in her opinion, was created by legislations that were biased in favor of the banking sector and lending institutions, who in turn took advantage of women from poor and vulnerable environments who lacked the knowledge, decision-making abilities, and awareness of the legal risks associated with those loans in the event of non-payment, all under the pretext of women’s economic empowerment. The motive behind applying for the loan is often not the woman’s need for it, but rather the pressure by the husband or the family, which could amount to threats. Meanwhile, grants are usually provided to those suffering from abject poverty in order to improve their quality of life. But these grants require guidance and follow-up as well to prevent the exploitation of beneficiaries. There is also the higher level of financing provided by the private sector, which usually aims to invest in young people’s potential and adopt their innovative ideas and projects. One participant suggested promoting the group lending approach, which could have a positive impact in terms of increasing efforts, expertise, and reducing risk. Whatever the type of lending program, its main objective should obviously be contributing to the development of projects, and not to be an additional burden on the creditors or the beneficiaries.

Regarding the challenges related to lending mechanisms, one participant pointed out that what concerns donors, especially institutions or community organizations (i.e. civil society organizations and non-governmental organizations), is providing grants to the beneficiaries of their projects and initiatives without financial commitments or strict guarantees that ensure commitment and accomplishing the project’s goals. Hence, she stressed the need to set some conditions for the grant recipients. Concessional loans, which require follow-up and technical support from the project sponsor, are usually seen as safer and more secure, and they are thought to reduce the number of submitted proposals and entrepreneurial ideas by those who copy them from others rather than having their own ideas. She also suggested forming committees to decide on the right person and project to receive the funding, and the possibility of converting it from a loan to a grant, or to keep it as a loan, for it is not fair to narrow down the options of young people to either being an entrepreneur or being unemployed.

It should be noted here that the situation has changed after the Covid pandemic, because most sponsors are moving to limit funding, whether as non-refundable grants or in the form of soft loans. One participant explained that non-refundable grants can become a barrier for the women or organizations benefiting from them, due to the possibility of project failure. Therefore, she suggested that loans should be provided within the frame of a certain mechanism and specified conditions, and with a low profit margin, as well as providing guarantees to ensure repayment within the specified period. The financing entity may also require the beneficiary to cover a part of the funding amount, and set a penalty clause in the event of project failure. Moreover, she noted that the current economic conditions have contributed to the rise of private home projects, especially as the licensing procedures have become easier than before.

In this regard, we should point out that some of grants or loans, especially those provided to women in the governorates, the Jordan Valley, and the underprivileged areas of the Capital, serve to finance projects whose main goal is “empowering women”, a commonly used slogan that is attractive to sponsors. Yet, their projects often turn a low profit, after paying off all the operating costs and expenses of the project, which reflects negatively on the salaries or the meager bonuses received by the workers, in addition to the difficulty of sustaining these projects due to the nature of the product, the weakness of the surrounding market, the cost of transportation, and the lack of non-commercial marketing platforms. As a result of the above, the main objective of funding, which is to empower women workers, is not achieved. On the contrary, they enter a vicious circle of failure and despair in an unprotected labor market where they are exploited for a wage that barely covers their transportation costs, without improving their skills in any way, which completely undermines the idea of empowerment and the slogan that have been reduced to nothing but empty rhetoric.

Returning to the question posed by “Naqsh”, which revolves around the comparison between loans that entail repayment, and grants that are provided without conditions on profit or repayment, but rather for motivation and capacity building. And, also, the comparison between the involvement of investors who raise hope among young people or push towards expanding the project, but often fail to tolerate the risks, which results in a missed opportunity for everyone. In a realistic analytical view of the different forms of lending and their consequences, we find that loans, albeit safe loans, prove hard to pay off for the majority of beneficiaries, and therefore a few small projects succeed, while large projects fail. As for the grants that do not require repayment, they have also created a kind of dependency for some of the beneficiaries, despite having encouraged a small segment of investors and young entrepreneurs to try and come up with new project ideas. But the problem lies in “enlarging or expanding” the project for a personal commercial purpose, that is, selling it to a foreign investor for millions of dollars -which only a small percentage of projects manage to do. Hence, the owner may be completely reluctant to think about investing in productive projects that could benefit the community and the country in general, or to reestablish those projects.

When talking about grant and loan programs, it is necessary to talk about the entrepreneurs themselves, and to support them in order to turn their ideas into real and sustainable projects, especially since the field of entrepreneurship is almost the only opportunity available to young people now, given the narrow labor market. This requires them to choose innovative projects and avoid repeating traditional projects. It is true that there are many challenges facing the success of a project, but a large-scale expansion, especially in the initial stages, often leads to failure. Hence, due to the economic situation and the high unemployment rates among young people in particular, and in order to sustain emerging ideas and entrepreneurial projects, as well as avoiding competition from large projects, support should be provided by the private sector, and partnerships should be created.

Young entrepreneurs face many challenges and reasons for failure, some of which are related to young people themselves in terms of their commitment to their ideas and developing them, as due to the availability of multiple funding sources, some young entrepreneurs or people with new ideas either resort to changing the idea of their project to be in line with the sector supported by the fund, or continue to move from one opportunity to another. The result is that the idea remains theoretical, changes, or ends when the funding runs out. In addition to that, there is the conclusion made by one of the participants that young entrepreneurs are saturated with the training programs and repeated topics offered by various funding programs, which renders them of little to no benefit to them. Moreover, some startup projects fail because the society is simply not prepared for them yet. It is noteworthy that the government -following a Western trend- tends to support the funding of technology projects related to software and application development, while the community institutions themselves that provide grants and loans and sponsor the projects of young entrepreneurs still have a lot to learn about this type of projects, in addition to the lack of clarity in the policies and guidelines in this sector, the complicated procedures, and the multiplicity of authorities, which also hinders the registration and sustainability of projects.

In conclusion, the subject remains thorny and controversial. Through studies I have conducted on the subject of lending in its various forms and the effects thereof, which began academically more than 23 years ago, and from my follow-up supervision of a group of women entrepreneurs a few years ago, I can say that I have noticed a real weakness in the programs aimed at women and the majority of entrepreneurial projects, in addition to the absence of an effective protection system to preserve property rights for entrepreneurial projects, the lack of real sustainability, the challenge of existing and new taxes, the multiplicity of authorities, the fragmentation of efforts, and the lack of specialization, among other challenges.

Taking another analytical look at the example of the Jamalon investment experience, which could apply to many startup projects and the way some young entrepreneurs think, the most important thing at the social and national levels is that the Jamalon project abandoned its main objective that made it an entrepreneurial project in the first place, which is to provide and sell books to Arab readers on a large scale, as, for example, it did not take into account when designing the project and its expansion the sharp economic disparity between Arab countries in purchasing power, unemployment rates, and the cost of life, which made the service offered by the project limited to countries and social groups able to afford the high costs, as the cost and shipping charges vary between Arab countries. Thus, the project fell through, both socially and culturally, failing to achieve its stated goal of reaching the widest range of customers.

There is no doubt that the loss of the Jamalon project is a loss for everyone, but it may give a lesson to entrepreneurs and those with project ideas in general that they have a moral responsibility towards their society and their nation, and that their contributions must be represented in their role in transforming the national economy from a rentier economy to a production economy that ensures the sustainability, well-being, and stability of society, providing a guarantee for future generations and making a much needed contribution to national development, while affirming that it is not a mere luxury.