Recycling Wood into Income

Indonesia, February 7, 2005

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    Yusri begins to build pallets as part of a new business initiative started with the assistance of Mercy Corps. The agency distributed tools and nails to assist local people to start their own enterprises making pallets. Photo: Cassandra Nelson/Mercy Corps Photo:

Crouched on the ground where the wreckage and foundation of his destroyed home is still visible, Yusri clutches a hammer and energetically hammers together a series of boards. One of the thousands of people in Banda Aceh who lost their homes and many family members in the tsunami, he is hard at work building - but it is not his home he is rebuilding, at least not yet.

“I am building pallets to sell,” says Yusri, a former farmer whose harvest was wiped out by the tsunami. “This project is helping me to earn money, so I can buy food and materials for shelter and other basic items for my family.”

As part of an income-generating program for people who lost their livelihoods in the disaster, Mercy Corps is assisting communities in identifying and launching opportunistic entrepreneurial endeavors that will provide income through the sale of needed products and services.

In the devastated village of Mierek Lam Reudep in Banda Aceh, a group of 23 men have formed a business group to make pallets. The laborers are using recycled lumber, collected from the debris of the tsunami, to construct pallets for use by aid agencies and organizations in the warehousing of food and other relief items.

According to Peter Stevenson, a Mercy Corps Program Manager working in Aceh, organizations such as the World Food Program have been purchasing pallets at approximately $10 each from outside of Aceh. Agencies have expressed the need for more pallets and are interested in local procurement.

“Clearly there is a need for pallets in Aceh, and the abundance of lumber in the debris from the tsunami provides most of the raw materials that would otherwise need to be put into landfill or dumped somewhere,” says Stevenson. “Although this may not be sustainable in the long-term, it is an opportunistic entrepreneurial endeavor that will provide income in the short-term as these communities start to re-establish their livelihoods.”

Through a cash-for-work program, Mercy Corps initially provided tools and assistance to 200 workers to start up pallet making. But Mercy Corps is working to transition cash-for-work initiatives into entrepreneurial opportunities. Now, the participants in this pallet-making program have agreed to be paid by the piece and will organize the activity as a business enterprise. Mercy Corps anticipates the groups can produce 300 pallets per week and sell them at $9 each for four weeks. This should net them $10,400 in profits.

“This is not a cash-for-work program, it is a business,” says Stevenson. “People who have decided to participate in the pallet making groups are entrepreneurial and were self-selecting. They took a risk of making sample pallets at no wage to get started.”

Still, Mercy Corps does provide these entrepreneurs some financial assistance as they start to build their new business. The participants will continue to receive their basic cash-for-work daily wage until they get their first sales order, but after that they are expected to run it as a business and use part of the profits to buy their own materials, such as nails.

Mercy Corps will support these new endeavors by helping the participants define their future business approach and link the business groups with buyers, such as the World Food Program. But in the end, it is a business that the participants will be responsible for running.

At a meeting with the pallet making group in Meirek Lam Reudep, Stevenson discusses the business opportunity with the new participants as the Mercy Corps team distributes tools and supplies to get them started.

“All the profits will go to the group and be shared by the group,” advises Stevenson. “You are your own independent business and do not work for Mercy Corps. You are free to sell to who ever you want and set your prices.”

For the participants of the Mercy Corps program, these terms are familiar and appreciated. Yusri, a former farmer, is used to running his own business and financial affairs.

“This business approach gives us the freedom to earn as much as possible through hard-work,” says Yusri. “It is much better than being limited by a set daily wage.”

These Mercy Corps business start-up meetings are currently being conducted in three villages in Banda Aceh, with plans to expand to additional communities. New business endeavors such as brick making are also being assessed. Based on the high turn-out of participants and energetic responses, it looks like it is a model that will prove successful in Aceh.