The GroFin blog page showcases GroFin entrepreneur success and provides insights on how they have grown their businesses into successful SMEs.

Syrian refugee entrepreneur gets vital support to sustain manufacturing business

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When Basil Qassab fled from Syria to Jordan to ensure the safety of his family, he was left unemployed for nearly two years. It was 2011, and only the beginning of the crippling conflict that still drags on today. A decade later, nearly 670,000 registered Syrian refugees still reside in Jordan. Most still live under the poverty line, according to the UNCHR.

As Syrians were not yet granted work permits when Basil arrived in the country, he knew he had to become an entrepreneur if he were to survive. Ala’a Sabha, a Jordanian who was to become Basil’s business partner, first introduced him to the world of paper cup manufacturing. Ala’a and his brother were already running a successful printing business and recognised the opportunity to start manufacturing paper cups in Jordan.

“He had studied the market and I found the opportunity very promising. I decided to take on the challenge – especially since I didn’t have any other job opportunity at the time,” Basil says. 

The partners started producing paper cups with two machines in 2013. Today the business, Al Haramein, produces a wide range of paper cups for hot and cold beverages at a facility with 32 production machines. Last year, the Nomou Jordan Fund (NJF) provided Al Haramein with financing to expand even further. The business was growing rapidly, sales were increasing, and it started exporting to neighbouring Saudi Arabia. Then COVID-19 struck.  

Strict domestic lockdowns, the global economic slowdown, trade disruptions, and the suspension of international travel have placed severe pressure on Jordan’s economy and businesses like Al Haramein. According to the country’s Department of Statistics, GDP growth slowed to 1.3% in annual terms during the first quarter and then contracted by 3.6% in the second. The manufacturing sector also contracted by 5.3% in the second quarter.  

Lockdown measures forced Al Haramein to close its factory for two weeks and it could only operate at minimal production capacity for almost three months. Coupled with border closures which affected exports, these measures severely impacted Al Haramein’s sales. The business also struggled to collect outstanding payments from its clients.

“The pandemic affected us in many ways including reduced mobility of employees and production halts. Sales and exports declined, while expenses associated with shipping and maintenance increased,” Basil explains. 

The NJF granted Al Haramein a 3-month concession on its loan repayments to overcome the gap in its cashflow.

“This concession helped us balance our cash inflows and outflows more effectively in these difficult market conditions and to return to near-normal cash flow management in a shorter period,” Basil says.   

GroFin Jordan’s advice to Al Haramein, in combination with the payment concession, helped the partners to better manage their cashflow. The business could maintain sufficient inventory levels without falling behind on its commitments to others. GroFin advised Al Haramein to switch to online transactions wherever possible online and to improve its ESG practices and health and safety measures amidst the pandemic.  

Despite their challenges, it was important for the entrepreneurs to maintain their 75 employees. Ahmad Hamdan has been working as warehouse keeper at Al Haramein for two years. He supports seven people including his young children, mother, and sisters and says many people in his community have lost their jobs.

“I am very thankful that I was able to continue working and receive my salary especially as I have many commitments and I am the sole provider for my family.” 

Basil says the emotional support GroFin provided them was also invaluable.“I was overwhelmed with feelings of anxiety and stress. GroFin followed up with us regularly to make sure we are addressing all key issues. We felt we had a real partner and not just a financier. We felt that we were not alone in our fight against the tough economic conditions.”  

Kenya client Watervale Investments receives intensive COVID-19 support

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The COVID-19 pandemic has wreaked havoc on economies around the globe – and the small business sector is taking the biggest hit by far. As a result, small businesses have seen their income all but disappear, while also facing increased input costs. Many have been left struggling to cover operational costs, including salaries. Businesses had to innovate to survive.

GroFin’s response to the pandemic was to provide intensive business support to its clients, including Watervale Investments in Kenya which employs 215 people. Watervale Investments, trading as Moko Home and Living, manufactures mattresses and furniture. Watervale offerings include low-cost, zero-waste cushions made from by-products of European foam factories. These are distributed through Moko’s partner network of over 150 micro-enterprises operating across Kenya which in turn retail Moko products to serve the end customers.

GroFin’s investment in Watervale goes back to 2017 when the company needed funds to meet working capital needs to purchase raw materials required to expand its operations.

GroFin Kenya assisted the business by giving cash flow management and social media training, as well as training and implementation of COVID-19 infection control measures. Training in COVID-19 infection control measures and implementation of ESG policies have improved the company’s workplace safety for all employees. Watervale shifted all B2C sales and marketing activities to digital channels to make up for reduced retail showroom activity. Its digital sales grew from 50% pre-COVID to 70% of all sales during the COVID period.

COVID-19 has also affected the cost of raw materials which was on the high. Luckily, the company had diversified its supplier base before COVID, especially for imported raw materials, to ensure that Watervale is not dependent on a single country or supplier. This has been extremely beneficial for Watervale and it has been able to adjust its sourcing dynamically and minimise supply interruptions during the lockdown.

In an effort to reduce cost and improve performance, Watervale has innovated to use steam as a utility.

The rationale was that this would reduce the steam cost of our factory since we would only pay for steam used and that an expert service provider would have the responsibility for maintaining the boiler to avoid downtimes. – Eric Kouskalis, Director of Watervale Investments

By switching from diesel-powered boiler to biofuel, Watervale is making a huge step toward reducing its carbon footprint.

GroFin introduced Watervale to the Challenge Fund for Youth Employment that is seeking to co-invest in innovative private sector-led initiatives. Watervale’s application has been submitted and is being reviewed by the investors. With this new investment in perspective, the business wants to launch new products soon.

We have grown the business successfully over the past two years providing sofas and mattresses. We have developed concepts for dozens of new home furniture products, and we are working to secure the financing and build our internal capabilities to bring them to market at scale. – Eric Kouskalis

Helping Fountain Gate Academy to improve private education in Tanzania

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Founded in 2007, Fountain Gate Academy started its activities with a nursery and primary school in Dar-es-Salam. As the founder, Japhet Makao saw an opportunity he introduced a day-care service as well.

GroFin’s intervention helped the school to improve its finance department by implementing appropriate accounting software and assisted in hiring qualified staff for the department. The management information system (MIS) for the school has improved in terms of pupil academic data including results, progress, and financial reporting. MIS for the academic records is now available on a centralised school database using the reliable school software package.

Since several parents had moved to Dodoma, Japhet seized the opportunity to start a new branch there. GroFin helped the entrepreneur to formalise the land ownership of the Dodoma campus. The school also managed to get the Certificate of Right of Occupancy at the Dodoma Campus in the name of Fountain Gate Academy. As part of GroFin’s business support, we helped the school improve its architectural dining drawing to be ready for the construction of a high-quality dining hall. GroFin also recommended putting up an ICT laboratory so that students can learn ICT at a young age.

Since COVID-19 struck, all schools had to close their doors, leaving Fountain Gate without revenues from March 2020 to July 2020. Japhet explains that most parents are still in arrears on the payments for the period though they are trying to ensure payment for the new terms is paid. Fountain Gate continued salary payments to the staff during the school closure which had a significant impact on its operating cash flow. With guidance from GroFin, Fountain Gate managed to reduce unnecessary operating expenses, freeze salary staff increment, establish all health recommended infrastructure for COVID-19 precaution before reopening of schools.

“My dream for the future is to establish a special talent school and expand Fountain Gate footprint to other regions of Morogoro and Arusha,” – Japhet Makao, Founder of Fountain Gate Academy

Enabling innovation at Uganda manufacturing client Bestever Paper

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As a start-up, it is often challenging to start and grow a business. With a solid own contribution, Abuhbaker Luzinda – the Managing Director and founder of Bestever Paper Industries approached GroFin Uganda in 2014 for working capital needs to start production. The company manufactures quality eco-friendly polypropylene (PP) products.

The business was performing well and there was a need to expand, therefore Abuhbaker solicited GroFin’s help again in 2017 for another round of financing to purchase a third production line. This significantly improved the business’ capacity and enabled Bestever to innovate by adding the production of ropes using waste from bag production.

Initially, Bestever used to pack ropes in bags, and this was quite bulky. As a result, the ropes occupied a lot of storage space and made transportation expensive. Bestever became the first to introduce new packaging for ropes in Uganda where it packs the ropes in rolls. This made them significantly less bulky which freed up some storage space as well as reduced transportation costs for Bestever and its clients.

“Our ropes are stronger and preferred in the market. We initially used to buy sewing yarns, but we started making them for both our consumption and sale to our competitors. This too has increased our revenue streams and improved our profit margins,” – Abuhbaker Luzinda, Managing Director and founder of Bestever Paper Industries

By the time of GroFin’s second investment, Bestever has further diversified their product line from two to six products which include laminated bags, shopping bags, sewing yarns, among others. As part of GroFin’s support to the business, we recommended to Bestever to open regional distribution centres to increase local demand. Upon advice of  its GroFin Uganda Investment Manager, Bestever installed a management system to link production to the inventory and its financial accounts. This has, subsequently, increased the productivity and efficiency of the business. With no revenue in 2014 when GroFin first invested in the business, it had achieved a turnover of USD 6.8m in 2019.

However, with the impact of COVID-19, Bestever Paper has seen its turnover decline by USD 1m in 2020. The ban on public transport, as a measure to curb the spread of COVID-19, has made it difficult for manufacturing businesses like Bestever Paper to continue production. One of the conditions imposed by the government to manufacturing company owners was to accommodate all their staff at the factory premises since public and private transports were banned. Given the fact that Bestever Paper employs 363 permanent staff, it could not accommodate all the employees at the factory. Consequently, Abuhbaker decided to completely close its operations.

Abuhbaker explained that this has resulted in a decline in demand.

“We export about 30% of our production but due to closure of borders with neighbouring countries, especially Burundi which is the destination for over 80% of our exports, we saw a sharp decline in revenue for April and May. Local demand also significantly reduced.”

Despite these challenges, the future still looks bright for Bestever. “Our dream is to be the largest preferred producer of quality polypropylene products. Our target is to hit USD 10m turnover by 2022,” says a proud Abuhbaker.

Realising the dreams of a fashionista entrepreneur in Tanzania

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Binti Africa, a textile manufacturing business located in Dar es Salam, is specialised in corporate uniforms, African print attire, handbags, and other accessories. The business was incorporated in 2011 by fashionista entrepreneur, Johari Sadiq, and employs 15 people.

Johari approached GroFin in 2016 for working capital needs and to set a new factory with modern machinery.

“My dream is to become the leading supplier of uniforms to the private and government agencies. Also, to export the African attires to foreign markets and probably having my boutique stores in some of the fashion cities such as Johannesburg,” – Johari Sadiq, Owner of Binti Africa

GroFin’s business support to Binti Africa has been to ensure the business has a proper financial management system in place: Binti’s financial records, cash flow management and internal control have all improved by adopting the right accounting software. GroFin also assisted Binti to put in place a project management team for the construction of their workshop. The workshop is large enough now to accommodate the entire production process in an upmarket location. Besides, GroFin has ensured that Johari put in place a succession plan.

Finally, one of GroFin’s major interventions has been to assist Johari in getting a reliable supplier for a state-of-the-art machine and reliable fabric suppliers at a better price from India and Bangladesh. The new procured machine allows for quick finishing and better quality of uniforms and Binti can display a wider variety of collections. Johari has now started online sales for her African attires and is exploring new market segments (school uniforms) as per advice from her GroFin Tanzania Investment Manager to diversify the market and reduce concentration risks on the corporate uniform line.

All in all, Binti’s liquidity and cash flow have drastically improved, and the income base has widened because Johari is no longer dependant solely on tenders for corporate wear. She has machines that have fewer breakdowns and produce higher quality outputs, with fewer rejects, and more options.

Nevertheless, when COVID-19 struck, Binti Africa was severely affected just like any other small business in Tanzania. The impact of the pandemic on the business has caused severe liquidity problem and delay in the delivery of raw materials. Soon enough, Binti Africa could not meet its obligations towards its clients, causing the business to close the production department and provide compulsory leave to its employees.

To curb the impact of COVID-19 on the business, Binti started shifts to observe social distancing. Johari had to keep regular contact with her corporate clients as well as suppliers and add up freight cost to speed up the delivery of raw materials.

GroFin Rwanda supports SME clients to mitigate COVID-19 impact

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GroFin Rwanda, a specialist impact-driven SME financier, is providing extensive support to its SME clients in different countries to help them mitigate the effects of COVID-19 on their businesses.

GroFin clients in Rwanda, Ivory Coast, Senegal, and Ghana are also benefitting from €5,2 million in funding from the Investing for Employment (IFE) facility. GroFin is partnering with IFE, which is a subsidiary of the German Development Bank (KfW) and forms an integral part of the German Government’s Special Initiative on Training and Employment (“Invest for Jobs”).

Under the Invest for Jobs brand, the German Federal Ministry for Economic Cooperation and Development (BMZ) offers a package of measures to support investment activities that have a high impact on employment in Africa, of which IFE is one key pillar

GroFin is a multinational, private developmental finance institution committed to the successful development of SMEs to create sustainable wealth, employment, and economic growth. It provides funding to the underserved market of small and growing businesses that often struggle to access funding from traditional financiers.

Rwandan entrepreneurs have received 40% of the total €5,2 million in funding and these local beneficiaries have commended GroFin for its support in aiding their recovery, enabling them to sustain their operations, and to protect employment.

Wilson Gafurama, managing director of GroFin client RGL Security, explained that some of its business activities were halted due to COVID-19, while some of its clients failed to pay their debts to the company. He thanked GroFin for interventions that helped the company to return to normalcy. RGL has over 3000 employees.

“Some clients halted their operations due to the COVID-19 pandemic. We used to work with 400 institutions, including gaming companies. Some suspended their activities without clearing payments,” he said.

GroFin assisted RGL by conducting an assessment to gauge the impact of COVID-19 on the business and enabled it to access IFE grant funding to pay its employees for two months.

“It is in this context that GroFin came to us and analysed our business. In November, they provided two-month salaries for our employees,” Gafurama noted.

Dr Ubarijoro Sowaf, managing director of Ubuzima Polyclinic, says his business has enjoyed a good partnership with GroFin for the past eight years and benefitted from deepened support during the COVID-19 pandemic.

Wenceslas Habamungu, managing director and owner of Ecoplastic, a recycling business producing plastic bags in Mageragere in Nyarugenge district, says GroFin has helped the company in the areas of business advisory and training.

“Working with GroFin has tangible and mutual benefits. Unlike some banks, GroFin never abandons its clients and continues equipping you with soft skills and tangible support until your business is successful and sustainable,” he said.

Christian Bugabo, the Investment Executive who heads up GroFin Rwanda, says the funding provided through GroFin’s partnership with KfW is aligned with national efforts to support economic recovery amidst the COVID-19 pandemic.

Bugabo says GroFin will continue to walk with beneficiaries on their journey to regain growth. “We are optimistic that their operations will progress further. GroFin will sustain closer collaboration with beneficiary companies and provide all the necessary support for their businesses to thrive,” he reiterated.

Headquartered in Mauritius, GroFin offers financing and support to SMEs in 14 countries in Africa and the Middle East. It is supported by 34 international finance institutions, development organisations, and private funders who have committed nearly $535 million in capital.

GroFin has been operating in Rwanda for 13 years – since 2007. To date, it has invested $24 million to support 56 entrepreneurs in the country. This paved the way for the creation of 4033 jobs, of 32% of which are held by women and 75% of which are held by unskilled or semi-skilled workers.

GroFin provides loans ranging between $100,000 (over Rwf 98 million) and $1,5 million (over Rwf 1,4 billion) to help them increase profitability, create jobs, and contribute to national economic development.

This article was originally published by Igihe.