Photo Credit: USAID/Albania   With a $3,000 loan from USAID’s micro-lending program, PSHM, Maliq Manuka, his son pictured here, purchased equipment to support their small shop where they make custom furniture. Since beginning operations in April, PSHM has disbursed over $87,000 to over 50 clients in Peshkopi.

USAID Tackles Poverty by Financing Small Businesses

Micro-Lending Reaches Northeast
USAID Tackles Poverty by Financing Small Businesses

June 24, 2005 | Peshkopi, Albania

5:30 a.m. Xhafer Loca begins the day setting up his small stand on the main boulevard of Peshkopi. For the last 10 years, this retired pensioner has made a living by selling packages of potato chips, cookies, chewing gum, and cigarettes.

“I worked as a laborer for 40 years,” said Loca, a member of the Roma, aka Gypsy, community, “my pension was just too small to live on, and so I decided to begin this business.”

Although poverty is widespread throughout Albania, Loca lives in the poorest district, Diber in northeastern Albania, where over 40 percent of the population subsists on less than $2 a day. As a Roma, Loca belongs to the very poorest of this segment where levels of unemployment are chronically high.

In March 2005, Loca applied for and received a $500 loan from the USAID-funded micro-lending NGO, Partneri Shqiptar në Mikrokredi (PSHM), in order to buy more products and refurbish his stand.

PSHM’s micro-lending operation began in 1999 in Tirana as part of the USAID economic growth program focused on supporting the development of micro-, small and medium enterprises in Albania. Private small and medium enterprises account for 99 percent of the private businesses in Albania and over 56 percent of total employment in the private sector. Since 1999, PSHM has disbursed over $30 million in loans, expanded operations to 13 branches nationwide, and serviced over 14,000 clients—many of whom are the poorest in Albania.

“The Peshkopi market has a strong business culture, but has very limited access to financial services and particularly business credit,” explained Jim Reiff, Executive Director of PSHM.

Since opening for business in Peshkopi, the PSHM office has disbursed 53 loans worth $87,000. The majority of PSHM clients are using loans—ranging from $500 to $1500, to increase inventory or purchase equipment. For first-time borrowers like Loca, the small loan amounts are manageable for the size of their businesses and for their ability to repay. The office in Peshkopi celebrated its official opening June 24, 2005.

“We felt PSHM could make an impact and contribute to building Peshkopi so that all residents have the opportunity to transform their lives and communities,” explained Reiff.

Additionally, PSHM has focused on extending services to women with small enterprises; women comprise 51% of the active client portfolio, the average loan size amounts to $2,200. In Peshkopi, 41 of the 53 clients are women.

One such woman is Muzafere Zuna, co-owner of a used clothing shop on the first floor of a dilapidated apartment building. “I don’t know where the clothes come from—I’m just happy to have them,” said Zuna standing in front of her most recent shipment of summer clothing and ladies handbags. Zuna’s expertise in selling clothes is based on 15 years of employment in the Communist era state-owned shop.

“It’s never easy, but times are better,” explained Zuna, “I can make my own decisions now.”
Muzafere and her husband, Alti, used all of their savings on the construction of the shop; painting the walls and buying display tables. They decided to take a loan so they could increase the supply of their merchandise. They received $1,500 in April.

“The quality of the merchandise is better and sells faster,” she explained.
PSHM has issued loans to almost every sector of the Albanian economy: 32 percent in trade, 18 percent in service and transport, 23 percent in production and 27 percent in agriculture. PSHM provides services in more than 80 percent of Albania, with a portfolio of more than 5,000 active clients.

“The demand in Peshkopi is high,” stated Fatime Meta, 35, one of five loan
officers in the new Peshkopi office on the eve of their official opening, “Last night I stayed till 8:30 to approve forty more files.” 

“Although we are a new office, we have not had any difficulties with repayment—people understand that we are an institution outside the government and the purpose of the loan is for improving their businesses, not for purchasing vehicles,” she said. With his loan, Loca started to sell packages of juice at his stand and hopes in three or four months to be able to make further item additions. He also he intends to build a cover to protect him from the sun.

“Till the day I close my eyes, I will be here selling these items,” stated Loca, “Now I can have more money for my business and give more to my children.”

PSHM, a member of Opportunity International Network and supported by USAID, is an institution that provides the capital and financial needs of the Albanian entrepreneurs. PSHM continues to expand into all regions of the country and will celebrate the official opening of operations in Kukes in the coming weeks.