Basra Hussein Hersi, a mother of six, had to close her small shop last year in Gacan Libaax village, in the Somaliland capital Hargeisa, when she ran into losses.
“The little money I made from the shop daily was used to pay the family bills. I didn’t save any money for the continuity of the shop,” she said.
Nobody she knew could lend her any money. The banks in Somaliland offered minimum loans of $1,000 with repayment rates of at least $200 a month, which was an impossible target for her.
“I would have taken a loan from the bank if the repayment plan were $50 a month because I can afford that. My shop is not in the market, I sell here in the village, so $200 is a lot,” she said.
Basra and her family have been relying on her husband’s small income as a security guard and some support from Basra’s mother, who rented out two rooms to help her daughter and grandchildren after the shop closed last October.
They had to move to her brother’s house in December after she and her husband failed to pay their rent.
A study published in June by charity Oxfam found that prohibitive bank loan requirements are a major factor in the collapse of small businesses in Somaliland. Most businesses are run by women, who provide for their families from their income. But as well as the high rates, the local banks prefer to lend money to men rather than women.
The researchers interviewed 144 women in Hargeisa, Burao and Borama, whose small businesses closed last year due to financial problems. All but five of them said that they had wanted a loan but the bank charges were unaffordable.
Nimo Ali Ahmed, a mother of 11, provided for her family selling goat meat. She used to slaughter two goats a day to sell in her neighbourhood but was forced to shut down after the price of goats rose to two million Somaliland shillings ($230).
Nimo learnt about bank loans in May after a friend of hers took a loan. She is now contemplating applying for a loan herself to restart her business.
“I have never taken a bank loan, but I am thinking of trying it now. The process is long, and I am not too sure if I will be lucky enough to get it,” she said.
Oxfam’s head of communications and media, Abdiaziz Ali Adani, told Radio Ergo that the lack of investment opportunities for small businesses has exacerbated poverty as women are mostly the sole breadwinners of their families in Somalia.
“Most women prefer the rotating group savings scheme over bank loans. They are easier to access as you can join the group and contribute money. Some groups collect as little as $10,” he said.
Abdiaziz urged the banks to lower their interest rates on loans and to ease the application requirements so that more women can turn to bank loans when their businesses are failing and need investment.