AEC offers relief to small businesses during COVID-19

By Olive Ashimwe, Regional Refugee Director for the African Entrepreneur Collective (AEC)
Employment, livelihoods & entrepreneurship

AEC offers relief to small businesses during COVID-19

By Olive Ashimwe, Regional Refugee Director for the African Entrepreneur Collective (AEC)
17 June 2021

Pacifique, Burundian refugee, living in Nyamata, Rwanda

The Pledge

In 2019, African Entrepreneur Collective (AEC) made a private sector pledge at the Global Refugee Forum to support 35,000 refugee and host community entrepreneurs in five countries by 2024. In line with their belief that investing in refugee and host communities is a catalytic driver of private sector development, AEC committed to provide business development support services and access to low-cost financing.

The Pivot

Shortly after making the pledge, the COVID-19 pandemic brought the world to a halt. Overnight, movement restrictions caused supply chain disruptions, inventory shortages, skyrocketing prices of basic goods, and food security concerns. AEC was actively supporting 14,000 businesses that were either immediately shut down because they were not considered essential services or faced difficulties due to high costs and customers being unable to pay.

“Shortly after COVID-19 came, my business was in big trouble,” says Claude, a Congolese refugee living in Rwanda, who sells food and other household products. “Because of movement restrictions, it was impossible to leave the camp to purchase inventory. I only had the items remaining on my shelves to sell, and my customers, who regularly bought food on credit, couldn’t pay their debts. I had no money, my shop ran out of stock, but my customers still needed daily food. I didn’t know what to do.”

Within weeks, AEC’s business development services, access to finance, and work to facilitate market linkages for refugees and hosts had to go digital. AEC teams across eight camp-based and urban locations in Rwanda and Kenya were motivated to do more, knowing that the economic effects of the pandemic would be devastating to refugee and hosting communities who often lived in isolated areas, at the end of a very long supply chain. AEC shifted in-person trainings to virtual modules, delivered to feature phones through “interactive voice response” technology. Every week, AEC business lessons were sent to more than 10,000 entrepreneurs, with an 80 per cent pick-up rate.

Danny, a young entrepreneur living in one of Rwanda’s six refugee-hosting districts, had finally taken the leap of faith and opened a restaurant in early 2020. “Now that I was running my very own start-up, I was excited to join the AEC program and get the training to improve my business skills.”  When in-person gatherings stopped, Danny worried that he had made a mistake and that he wouldn’t receive the support he needed. “I was surprised when I got a message saying that I would start getting business lessons on my cell phone.”

Recognizing that refugee-led businesses would require similar economic stimulus support, AEC partnered with the IKEA Foundation and the Mastercard Foundation to give USD 2.5M in one-time cash grants to more than 4,000 businesses. These grants helped thousands of businesses and families to recover from the economic impacts of the COVID-19 pandemic.

The Impact

The impact of AEC’s COVID-19 relief support to entrepreneurs has been immense. As of early 2021, 98 per cent of businesses that were closed have reopened. Two-thirds of recipients have returned their operations to pre-COVID revenue and employee levels.

Pacifique, a refugee from Burundi living in an urban area, was operating a pharmacy on the main road of one of Rwanda’s secondary cities. She received an AEC relief grant of nearly USD 2,000 to purchase soaps, sanitizers, and masks. The grant filled a need for the community and helped Pacifique keep her shop open when supplier prices had increased.

As businesses like Pacifique's have recovered, they have been able to absorb additional growth capital from AEC. Over the last year, AEC has disbursed more than 1,400 loans and Shariah-compliant financing. Despite the ongoing challenges of COVID-19, these investments have a 100 per cent repayment rate.

A year after giving out the COVID-19 grants, AEC surveyed 100 clients who had received USD 500 grants. Forty-two per cent responded that they make enough money from their businesses to cover their household needs, and 48 per cent reported that they would be willing to voluntarily give up their monthly stipends for one-time cash incentives or larger investments.

The Proof

Refugee entrepreneurs are incredibly resilient. They outperform expectations and have proven that they can leverage assistance towards durable solutions. When given the opportunity to contribute and the tools to succeed, the refugee and host community generate enough wealth to enable at least 50 per cent of the refugee participants to live without financial assistance.

As the world celebrates World Refugee Day this year, AEC is celebrating the hundreds of entrepreneurs who jumped into action when COVID-19 hit. In a bid to protect their families and communities, they responded to their market’s pressing needs and provided critical services to heal their communities. As practitioners and governments work towards refugee self-reliance, entrepreneurs will pave the way. This year, we also celebrate the thousands of refugees who took the challenge from in-person learning to digital learning for the sake of developing skills and accessing much-needed tools to grow their businesses and shine.

The Prospects and Promise

In addition to its current commitments, AEC is accelerating its expansion.

In 2021, they launched operations in Garissa, Kenya, which is the closest town to the Dadaab Refugee Complex, where they will support more than 1,000 host community businesses. This year will also sees the opening of two locations in refugee-hosting communities in Ethiopia. AEC has also pledged that 75 per cent of refugee households in Rwanda will benefit from AEC investments in the coming years.

With the support of UNHCR, national and local governments, donors, and investors, even more can be done.

“I sincerely thank you,” says Irene, a Congolese refugee living in Kenya’s Kalobeyei Integrated Settlements. “You helped my business when I needed it the most. You listened to my worries and showed that you cared. That made all the difference for me and my family.”

By 2024, AEC wants not only to reach its 35,000-entrepreneur pledge, but also to significantly increase its reach and improve the lives of more than 200,000 people across 5 countries. AEC’s work and that of the enterprises, working together every day in their communities, once again demonstrate that refugee-hosting communities truly can be viable economic markets and are ready for increased private sector investments.