Regaining Independence

Halawiyah is a hardworking 44-year-old woman who runs her own small warung, a small market stall, seven days a week with the help of two workers. She has operated her small business, selling food and other household items, in the Acehnese village of Ajuen Jeumpet since 2002. When the Indian Ocean tsunami struck this part of Indonesia three years ago, she nearly lost everything.

But what came afterward threatened her family's livelihood even more.

Immediately after the tsunami, Halawiyah fled further inland to her home town, which was fortunately not affected by the crushing waves. However, with two children to support, she needed to quickly find a way to restart her business in Ajuen Jeumpet. With 5.6 million Indonesian rupiah (about US $620) left from her savings, she went back to the village and re-opened her warung three months after the tsunami.

Just as she began regaining customers, she was quickly faced with a new challenge. The landlord increased the kiosk's rent by 70 percent, from 5 million Indonesian rupiah (US $555) to 8.5 million Indonesian rupiah (US $945) per year. To make it worse, the owner required a two-year minimum lease on the property. The landlord told her that the rampant inflation in post-tsunami Aceh Province had not only raised prices for goods, but jacked up property rates as well.

Halawiyah felt helpless and was left with no choice but to close her business. She did not have enough money to pay the rent. Then she thought of one last unlikely option: a loan.

"I understand that a bank always asks for collateral when we apply for a loan, and I didn't have it. I don't have a house or any valuable possessions to put as collateral," Halawiyah explained, recalling her conversation with a loan officer. "But because I don't have any choice, I tried my luck and went to the bank anyway. I told the bank that I have been running my business for five years and I know I could pay the loan back."

To her amazement the bank not only followed up with her and offered her a loan, but also gave her helpful advice on managing her money. The community bank that Halawiyah had visited was a participant in Mercy Corps' Financial Access program.

She received a working capital loan for 15 million Indonesian rupiah (US $1,667) and then added funds from her savings to pay the full two year's rent. She was also able to furnish the warung to provide better service and inventory for her customers.

Halawiyah's store is one of 96 small businesses so far that have received loans from banks with the support of Mercy Corps' Loan Guarantee Facility, part of its Financial Access program for tsunami survivors. As most area banks still require at least 100 percent collateral for a loan, Mercy Corps realized that the collateral issue presents a nearly insurmountable challenge for many families who lost their assets during the tsunami.

Mercy Corps initiated a loan guarantee program for these families in May 2005. This program aims to help reestablish small businesses — many of them family-run enterprises and cottage industries — through cooperation with existing commercial and community banks in the area. Mercy Corps shares risk with the bank for potential clients who wish to get a loan but lack collateral.

Currently, the program works through six banks with a total value of nearly 2.5 billion Indonesian rupiah (US $273,778) in disbursed loans. Not only has this Loan Guarantee Facility re-established numerous small businesses, it has also has created jobs for 361 people — including two at Halawiyah's warung.

"The bank has given me a way out of my problems. I will show them that I am committed to my business by repaying my loan promptly," Halawiyah said with a big smile.