Iraq
The CHF International Approach
p03 Introduction
p05 CHAPTER I The Community Action Program
p13 CHAPTER II The Access to Credit Services Initiative
p19 CHAPTER III Iraq Middle Market Development Foundation
Iraq
The CHF International Approach
October 2008
N
TURKEY
Al Mawsil
CYPRUS
Irbil
LEBANON
SYRIA
ISRAEL
Kirkuk
IRAQ
Baghdad
IRAN
An Najaf
JORDAN
An Nasiriyah
Al Basrah
KUWAIT
SAUDI ARABIA
BAHRAIN
QATAR
Basic Facts on Iraq
Population
UNITED ARAB EMIRATES
28,221,180 (July 2008 estimate)
Area
169,234 square miles (slightly larger than the state of California)
Government structure
A constitutional federal parliamentary republic. The nation is divided
into 18 governorates (provinces).
Capital city
Baghdad
Iraq’s history dates back to ancient Mesopotamia. After being un-
History
der Turkish control for several centuries, in 1920 it was declared a
League of Nations mandate under the administration of the United
Kingdom. Iraq achieved full independence in 1932. Saddam Hussein
ruled the country from 1979 until 2003.
O
Introduction
The Challenge
CHF International began working in Iraq in June 2003, just two
months after the end of Saddam Hussein’s government. The Iraqi
people were facing a host of challenges in rebuilding the political,
social, and economic institutions of their society in recovering
from years of conflict.
The Response
CHF International undertook three major projects in Iraq:
Community Action Program At the request of USAID, CHF
began working in three governorates (provinces) in southern and
central Iraq on the Community Action Program (CAP). The goal of
International created the Access to Credit Services Initiative (ACSI),
a major development finance program whereby Iraqi entrepreneurs
and home-owners had access to the loans necessary to expand their
businesses or improve their living conditions.
CAP was to undertake rebuilding projects to establish a sound and
Iraq Middle Market Development Foundation In 2004,
sustainable physical and economic infrastructure that would have a
the Overseas Private Investment Corporation (OPIC) saw a market
substantial impact upon conditions in Iraq.
gap in the finance industry in Iraq. Middle Market Enterprises – com-
Access to Credit Services Initiative Owners of small to
panies larger than SMEs – were also being excluded from traditional
medium-sized enterprises (SME) and home-owners had traditionally
loans and were hitting a glass ceiling. CHF International worked with
been excluded from mainstream loans and other services, and had
OPIC to set up the Iraq Middle Market Development Foundation
to turn to local moneylenders who often charged prohibitively high
(IMMDF) to give out loans of up to $5,000,000 to growing enter-
interest rates. With the aim of stimulating the Iraqi economy, CHF
prises that showed promise in the recovering Iraqi economy.
Iraq The CHF International Approach — 4
The Legacy of
the CHF International Approach
In the five years since CHF International began operating in Iraq, its
projects have achieved great successes.
Under CAP, hundreds of community-based, community-driven,
infrastructure and economic development projects have been
implemented by CHF International.
ACSI has become the largest development finance program
in Iraq, providing between 70 and 80% of the small loans
granted in the country with an exceptional repayment rate averaging 99%. By the end of August 2008, ACSI had provided
more than 59,000 loans, with a total value of more than $130
million, and had created thousands of jobs.
IMMDF has loaned, at the end of August 2008, over $68 million to
33 private Iraqi enterprises, also creating thousands of jobs.
absolute center of CHF’s approach is the principle that every project
must be demand-led, community-driven and community-owned.
98% of CHF’s Iraq-based staff is Iraqi, giving the organization an
Iraqi face and Iraqi sense of pride, accomplishment and ownership.
And the sense of ownership extends to the community projects under CAP. Every project undertaken is the priority and decision of the
community. The community is involved in planning and funding the
project, in overseeing the work done by local contractors, and the
community must sign-off on the contract before anyone is paid. In
order to achieve this, CHF uses a democratic methodology of discussion, voting for community representatives and decision making.
Not only does this increase the likelihood of Iraqi buy-in to the projects and thus increase their sustainability, it also introduces on the
grass-roots level the experience of the democratic process. CHF
International hopes that this will help to build capacity in Iraq for
But there is an integral element of the CHF International approach
long-term, sustainable community participation in government—the
that goes beyond statistics and quantitative measurement. At the
building blocks of democracy.
CHAPTER
I
The Community
Action Program
Building Local Infrastructure—and Grassroots Democracy Too
CHF International began operating in Iraq in June 2003. With fund-
With each new community, one of the first steps has been to help the
ing from the U.S. Agency for International Development (USAID), CHF
residents have an election to choose representatives for a community
initiated its efforts in three governorates in southern and central Iraq:
association or “community action group”. The elected members of the
Babil, Karbala, and Najaf. These governorates had suffered from de-
association discuss and then decide on the types of infrastructure and
cades of oppression, conflict, poverty, and systematic neglect, leaving
economic development projects that are needed to rejuvenate their lo-
the area’s infrastructure in an advanced state of decay.
cal economy and to improve schools, clinics, and other facilities and
To help deal with those dire conditions, USAID asked CHF to implement the Community Action Program (CAP) in those three governorates. For the first 90 days of CAP, the goal was to carry out
services for area residents. Later steps include implementing a chosen
project, and finally handing over responsibility for maintaining the completed project, usually to the local authorities.
rebuilding projects that would have a quick impact on those governorates. However, there was another key objective for that early
period: to allow local communities to conceptualize and design their
own reconstruction activities. That form of local community involvement—and of local democracy—was a revolutionary change.
It was hoped that this small, initial step toward civic engagement
would lead to changes in attitudes that would serve as the first step
in the establishment of the democratic process.
Community Priorities
Local communities have chosen a wide range of economic and infrastructure development activities. One large group of projects has
involved building or renovating schools. Also common have been
projects to build or repair roads and bridges. A number of projects
have aimed at improving health conditions and services, such as by
constructing local health clinics, providing safe drinking water, and
A Participatory Process
developing systems for dealing with sewage and with solid waste.
Other efforts have concentrated on boosting people’s incomes. All
In those first three months, as well as over the subsequent years of CAP,
of these priorities were chosen by the local communities through a
the new form of citizen involvement followed a systematic process.
participatory, democratic process.
iraq The CHF International Approach — 6
Community Revitalization through
a Grassroots Participatory Process
An Unsystematic Environment
But this was not a process that came easily in Iraq. Having local Iraqi
communities take on real decision-making authority was a dramatic
change from the way that local communities and the national government had previously interacted. Under the previous government,
says Denis Dragovic, the CHF International country director for Iraq,
“Iraq was very much a state socialist system. The central government would allocate funds. It wasn’t the community saying, ‘We
need this.’ The communities weren’t expressing themselves. It was
the central government imposing its decisions.”
“Conducting of community meetings was a previously non-existent skill in South Iraq at that time,’ says Bruce Parmelee, CHF
International Regional Director for the Middle East in 2003. “The
most frequent difficulty we encountered was the steaming anger
The community-driven development approach that CHF International has applied
that was present in so many of these communities after decades
with the Community Action Program (CAP) in Iraq builds on a methodology called
of neglect. People were not only poor and hampered in their daily
“Participatory Action for Community Enhancement” (PACE). While CHF International
began applying that name to its approach in the 1990s, the process builds on core
beliefs that have guided CHF’s work since the organization was established in 1952.
The systematic steps of the PACE process bring individuals together across ethnic,
political, and religious barriers to achieve a common goal for the benefit of the
lives by inferior and unmaintained infrastructure but it became
apparent that they had never had a forum in which to express
their needs or vent their frustrations at their conditions. So the
challenge was dual-pronged: training the staff in CAP methodol-
community. At the same time, the process instills democratic ideals and practices
ogy and training the communities in how to get things done in an
that will contribute to a peaceful, economically secure future.
organized forum. You had to let them vent before you could get
Having people work together toward a common goal ensures that the community as a whole will feel accountable for the program. Through the participation
process, decisions are made about which projects are a priority. In this way, com-
them to the business at hand. It was also 110-120 degrees outside
so that added to the complexity.”
munity members have a vested interest in completing the planned projects, and
Although a challenge, Parmelee found that skepticism could be
they feel a sense of ownership over what they have built.
transformed into the greatest enthusiasm: “Once you got to the
point of getting them to realize that they had to choose community
A CHF International innovation – the 25% Match
The average amount that CAP has put into its local community projects
labor costs – a match in kind, usually, rather than in currency. This was
has been around $35,000, according to John Lister, CHF International’s Iraq
an essential innovation in CHF’s strategy to ensure community buy-in and
regional director. With each CAP project, the communities themselves must
long-term sustainability. Where projects are entirely paid for by external
also make an investment in the project. “In that way,” says Lister, “communities have more of a stake in the project.”
funding there is less local pride and the community is less likely to identify
with the project. But when the community has been an integral and sub-
CHF decided that communities had to supply a 25% match of the total
stantial investor in the project, it is CHF International’s experience that the
amount of the CAP grant. This could be supplied in terms of land, supplies,
project will be maintained in the long-term.
7 — CHAPTER I The Community Action Program
Another CHF International Innovation—Community Sign-Off
It is a requirement of CHF International that before any contrac-
munity buy-in, involvement and responsibility, the project is far
tor gets paid, the community association group must sign-off
more likely to be sustained in the long term, and is less likely to
on the work. This is done to ensure that the work is satisfactory
be targeted for vandalism or other violence.
to the recipients and that the community accepts it. With com-
members they trusted to represent them in establishing commu-
between a community association and government officials. For ex-
nity priorities, they would begin to identify with the process and
ample, an association may have to convince government officials
things would begin to gel. They were accustomed to disappoint-
to provide ongoing budget funds for a teacher for a newly built
ment and quite skeptical that projects would ever be implemented,
school, or to allocate moneys to keep the community’s new drink-
so we moved quickly to get to the implementation process – then
ing-water supply system operating properly. Association members
the change in attitudes was something to behold! They were proud
unaccustomed to pushing government officials to take local input
to be involved and seldom required encouragement to remain in-
into consideration may need training and guidance from CAP staff
volved. They sometimes even drove the locally chosen Iraqi contrac-
members until the community association representatives become
tor crazy with the intensity of their oversight and their unrelenting
used to their new role.
demand for perfection!”
After the first project is completed, the community association can
work on additional projects in their area. An association can also
The CAP process
join with other, nearby associations to form a “regional community
One key to making a CAP local project successful in a new communi-
implemented in two or more communities.
ty has been a careful following through of the process. The first step
is for the CAP staff to make contact with persons in the new community, which is followed by a communitywide meeting to choose
between 8 and 12 persons to serve on the community association.
The association then has meetings to identify possible projects, and
to prioritize them. Once the association decides upon undertaking
one project, community representatives meet with project engineers
and local officials and the project is begun. After it is completed, the
project becomes the responsibility of the local, provincial or central
government for its maintenance and long-term sustainability. That
particular step, however, may involve some difficult negotiations
association cluster committee,” to consider projects that could be
Throughout the 11-step process, CAP employees work with the
community associations to build their members’ skills, so they better serve the needs of local residents. All the associations receive
initial training in such topics as community mobilization, democratic
meeting methods, and project identification. As the community associations have advanced, they have received training on assessing
community needs and resources; project design; leadership, communication, and advocacy; problem analysis; conflict mitigation;
economic development; and the organization and management of
nongovernmental organizations (NGOs).
iraq The CHF International Approach — 8
Dealing with Security Threats
Highlights of CHF International’s
involvement in the first two
phases of CAP (from May 2003 to June 2008)
During the first several years of implementing CAP, CHF International
encountered numerous obstacles that put a premium on highly
creative problem-solving. One of the biggest challenges was the
periodically unstable security situation. In some areas that had initially been calm, violence grew substantially. For many organizations with a large number of expatriate employees, protecting this
staff became an expensive burden that took away from the groups’
intended focus on rebuilding the Iraqi economy and promoting democracy in the country.
In contrast, CHF International has worked hard to have a very high
proportion of Iraqi staff members. “We have an Iraqi staff, an Iraqi
face to our work,” points out Lister. In addition, through the standard CAP process of identifying and then working on an ongoing
basis with local community representatives, CHF has been able to
maintain its presence in unsettled areas. The community members
and locally hired guards provide vital information needed to keep
CHF staff safe and to prevent damage to CAP projects. And the buyin from local communities has exponentially decreased the risk of
CHF-initiated projects being exposed to violence and vandalism.
Developing Iraqi Employees’ Skills
$55.4 million - the value of CHF’s USAID funded CAP projects
639 community associations formed and trained in the CAP process
845 projects completed
90,000 Iraqis actively participated in democratic activities and processes
11.3 million Iraqis directly benefited from CHF CAP projects
Another challenge that CHF International faced in the early days of
(51% women)
been priorities during the previous regime. Consequently, CHF had
implementing CAP was finding Iraqi employees with the necessary
background in areas such as economic development, community
development, or even social work. None of those professions had
to recruit staff based on such factors as their knowledge of the local
community, their motivation to assist their fellow citizens, and their
awareness of their communities’ infrastructure and social needs.
To build the new local staff members’ skills, CHF had those
persons regularly participate in training sessions. This capacity-building included conflict mitigation and advocacy skills for
community facilitators and technical skills for administrative and
engineering staff. Staff members also received computer training
and English language instruction. That ongoing training helped
9 — CHAPTER I The Community Action Program
CAP SUCCESS STORIES
Solid Waste Removal in Babil
Domestic solid wastes are a serious problem neg-
fumes and gases emitted would badly pollute the
atively affecting the environment of many cities
air and environment.
within Iraq and the surrounding area. The management of solid wastes requires mechanized
The Solid Waste project was highly praised by city
technologies that involve high running costs.
officials and enabled the community to learn to
To assist the residents of Babil, CHF initiated a sol-
city. The City manager stressed the idea that a
id waste management project and constructed a
recycling process should be applied to the solid
new solid waste management facility. Prior to con-
waste so that it will not degenerate and pollute
struction, solid wastes would accumulate in the
the soil and air. The beneficiaries from this proj-
open areas in the city. After several days or weeks,
ect exceeded 42,500 people. In addition, 1,350
heaps of solid wastes would be burned and the
jobs were created.
respect the environment and feel proud of their
Vocational Training Courses in Hilla and Najaf
One of the priorities for CHF is to provide employment
ees had a rudimentary knowledge of electrical installa-
opportunities to young people, and thus to alleviate
tions, they were keen to develop their skills further and
the despair of unemployment. The provision of an elec-
to learn modern techniques. The majority of the trainees
trician’s training course in Hilla and Najaf is part of the
were new to this vocation, and were enthusiastic about
continuing efforts of CHF to offer skills training to the
the opportunity being offered to them.
unemployed.
On completion of the training course, some of the
Twenty-four participants in the course were chosen from
participants hoped to open their own electrical
different areas of the governorate by ten members of
workshop, while others planned to start an electrical
local community associations. While some of the train-
equipment shop.
Road Paving Links a Village to Services
Over the years, living conditions in the village of Al-
bers first contacted the residents of Al-Makhfar.
Makhfar, in the governorate of Babil, had declined.
Later, at a communitywide meeting, the villag-
The main reason for that was the increasing deterio-
ers elected a community association to represent
ration of the road between Al-Makhfar and neighbor-
them. The association identified the rehabilitation
ing villages and the connections from there on to the
and paving of the village’s main road as the resi-
city of Hilla, is the capital of Babil. The road to Al-
dents’ immediate priority.
Makhfar was in such disrepair that during the rainy
season, due to the difficult journey over the crumbling muddy route, ambulances would often fail to
Work on the project began in November, 2003, and
was completed in March, 2004. The tasks included
respond to emergency calls from the village.
the rehabilitation and paving of the 1-mile road link-
In early August 2003, CHF International staff mem-
renovation of the main road leading on to Hilla.
ing Al-Makhfar with the nearby villages, as well as
iraq The CHF International Approach — 10
Success in a Highly Volatile Area of Iraq
For years after the end of the Saddam Hussein regime, the governorate of Anbar, in western Iraq, was one of the most
violent areas of the country, making it extremely difficult for non-Iraqi organizations to carry out development projects
there. In the fall of 2006, however, it appeared that things might be changing course, when a federation of tribes in the
governorate formed a united front against the Al Qaeda in Mesopotamia group.
While things improved over the following months there were ongoing difficulties: Municipal services and local governments remained weak and years of fighting had damaged much of Ramadi, the capital of Anbar.
Given those ongoing challenges, it was not surprising that some organizations carrying out CAP activities had trouble
in the governorate. When one such organization left, although unsure of how conditions would evolve there, CHF
International agreed, at the request of the U.S. Agency for International Development, to take over the CAP operations
in the unsettled governorate.
Finding CHF staff willing to move to the governorate was a challenge. In a meeting of CHF senior Iraqi staff, none
of the men there offered to take on the task. To the men’s surprise, two female Iraqi CHF employees said they would
go to Anbar.
After they arrived in Anbar, the two women followed many of the CHF procedures developed in other areas of Iraq. The
women met with tribal leaders and government officials to introduce CHF and its CAP activities. With help from a tribal
chief, CHF secured approval to set up its first Anbar office, in the town of Hit, in August, 2007. Local staff were hired,
and CHF began the process of implementing CAP activities.
Over the next year, CHF set up CAP offices in four other cities of Anbar and carried out more than 100 projects with
local communities. The projects included setting up systems to distribute clean drinking water, building and renovating
schools, establishing health centers, providing electricity services, and setting up vocational training programs.
11 — CHAPTER I The Community Action Program
CHF make a smooth transition during the period when security
conditions deteriorated and the organization sought to replace
The Legacy of the Community
Action Program
non-Iraqi staff members with Iraqis who had shown they could
handle more responsibilities.
Overcoming Local
Communities’ Reluctance
A further major challenge for CHF International appeared in the
first two years of CAP’s implementation. Some local community
Through CAP, CHF has implemented hundreds of community-based,
community-driven projects in Iraq. CAP has shown that these grassroots infrastructure projects can be one of the most effective ways
to help achieve reconstruction goals in the volatile setting of Iraq.
Completed projects have been sustainable over the long term because
local residents have been involved in the efforts from start to finish.
members in the governorates where CHF operated were reluctant to
This local involvement has included decision-making process by
work with outside groups. They feared the consequences of associ-
the community association and the use of local labor and materi-
ating with foreign organizations such as CHF International.
als. It has also involved the important CHF innovations of the 25%
To meet this challenge, CHF International built on the support
it had developed with the first community associations that had
been organized. The existing associations helped introduce the
CAP strategy to new communities, explained CHF’s methodology
and vouched for CHF’s reliability and integrity. Having Iraqi-to-
community match and the associations signing-off on all projects.
And the communities predominantly interact with CHF’s Iraqi staff.
The projects completed have been maintained locally and have not
faced the same security risks that many top-down or expatriatestaffed projects have faced.
Iraqi contact made it much easier to implement the grassroots
CAP has also helped to create employment and, whether it has
CAP projects in new communities.
come from building more roads so farmers can bring their produce
to market or from establishing vocational training centers to give
young Iraqis better employment prospects, the economic value of
CAP has been profound. But an even more important legacy may
be the long-term effect of absorbing the CAP methodology and of
using that methodology to improve the effectiveness of grassroots
organizations – and to building long-term democracy in Iraq.
iraq The CHF International Approach — 12
Special Funds Assist Victims of War Violence
Some of those who have suffered the most from the ongoing armed conflict in Iraq have been civilians who have had
a family member killed or injured unintentionally or who have had a home damaged or destroyed because of military
action by coalition forces. The U.S. Department of Defense and the U.S. Department of State provide cash payments to
compensate those victims.
A special activity under the Community Action Program (CAP) can also help such victims, but with an added feature:
CHF staff work with families to assess what they need in order to recover, and then they assist the affected persons in
satisfying those needs. “We’re providing them with planned support to help them reestablish their lives,” says Denis
Dragovic, the CHF International country director for Iraq. “We may ask, ‘You’ve lost the breadwinner of your family.
How can we help you make a living?’”
That assistance can take various forms. CHF may help the family obtain medical care for an injured person, repair a
damaged home, set up a small business to provide ongoing income, or provide training needed to improve an individual’s employment prospects.
The funds for these special CAP activities come from the Marla Ruzicka Iraqi War Victims Fund. The fund is named in
honor of Marla Ruzicka, an American human rights advocate who had worked in Afghanistan and Iraq and was killed
by a roadside bomb in Baghdad in 2005.
One 13-member extended Iraqi family received help from the Marla Fund after Hashim, a 20-year-old farmer and
main breadwinner for the family, was accidentally shot and killed by multinational forces. Hashim had relied on
traditional methods of farming, but he had dreamed of making his relatively barren land more fertile. Through
the Marla Fund, CHF supported the construction of a greenhouse for Hashim’s family. The structure uses modern
methods of cultivation and irrigation. According to Hashim’s mother, “The Marla Fund realized his dream and,
through it, I feel like he is still alive.”
Another Iraqi family that CAP helped had lost three brothers in a military action in June, 2003. While driving to the city
of Najaf to look for employment as day laborers, all three were killed when an American patrol opened fire on their
car. All the brothers were married and had children, and their deaths put severe financial strains on the other family
members. After conferring with the family, CHF staff members decided to build a small store and stock it with goods,
in order to help the family rebuild their income. The finished store has given the family the hope that the brothers’
children will be able to continue their schooling up through high school and even to university.
CHAPTER
II
The Access to
Credit Services Initiative
Financing a Better World for the Iraqi People
Despite their large number, small Iraqi businesses have generally
work quickly and to get money into the market as grants. We want-
been excluded from loans and other services offered by the formal
ed to charge interest on the loans, to help make this sustainable on
banking sector, due to the entrepreneurs’ low incomes. As is typical
a long-term basis. If we didn’t charge interest, we could undermine
with many countries, Iraq has an informal, market-driven system to
the future of the Iraqi financial sector.” If the loan program had not
deliver credit through moneylenders, family, friends, and suppliers.
been planned to eventually become self-sustaining, Tilock points
That system, however, cannot reach many potential borrowers, and
out, it could have faded away, leaving lower-income Iraqis once
the loans that are made are often prohibitively expensive, with an-
again with limited access to affordable financing.
nual interest rates as high as 300 percent.
Tilock and other CHF staff members presented their concept to CPA
CHF International has more than a dozen years of experience set-
officials, who responded by asking for a more complete proposal.
ting up and running successful microfinance programs in developing
That proposal was soon approved.
countries and nations making a transition to democracy. Despite
that track record, establishing a small-loan program in Iraq presented special challenges.
Gaining Local Acceptance
Some of the officials in the Coalition Provisional Authority (CPA)
CHF focused its ACSI efforts initially on Karbala and Najaf, two of the
doubted the wisdom of a loan program targeting small businesses.
three governorates where the organization was implementing its CAP
Instead, they thought the recovery would go faster if the small en-
projects. Along with other portions of southern Iraq, the residents
terprises just received grants that did not have to be repaid.
of Karbala and Najaf are mainly members of the Shi’a sect of Islam.
While that type of assistance might achieve short-term goals, CHF
saw the need to focus on other, longer-term considerations as well.
Kimberly Tilock, a CHF staff member who spearheaded the effort to
establish a small-loan program in Iraq, explains: “Our vision was to
Here, the central government had failed to provide or maintain basic
services, including electricity, water and sewage systems, roads, irrigation canals, and health and education services. Further damage
was done during the military action to oust the government.
help people rebuild their lives, and also to help Iraq rebuild its finan-
Karbala and Najaf, the capitals of their respective governorates, are
cial sector. After a crisis, many groups providing assistance want to
the most important centers of Shi’ism in Iraq. The special religious
iraq The CHF International Approach — 14
character of southern Iraq was a key consideration in the CHF market
study for the proposed loan program. “We knew that if we got buyin from the religious leaders, that would help us work in the communities,” says Tilock. CHF International’s staff worked closely with
A Global Demand for Ongoing
Access to Microfinance
the local Ayatollah in Najaf to ensure that the not-for-profit based
loan system was acceptable under Sharia law. The Ayatollah issued a
fatwa declaring that so long as the profits of the loans did not accrue
to one individual that it was acceptable. In addition, it was decided
that rather than charging interest over the period of the loan, an upfront fee covering the ACSI’s running costs was to be assessed and
deducted from the amount dispensed to the borrower.
With authoritative buy-in and a locally-acceptable structure in place,
ACSI was ready to make its first loan. That went to Lela, a 40-yearold woman in Najaf whose husband had divorced her, taken her gold
savings, and left her alone to support their two children. After the
divorce, Lela had set up a tailoring and sewing business to provide
income for her family. Over time, she bought several more sewing
machines and hired two women to help her. In addition, she began
offering sewing classes for young girls, to give them a means of sup-
Some 70 percent of the world’s poorest people live in developing countries. In
those nations, the provision of “microfinance”—loans ranging from $50 up to
$2,000—can make a tremendous difference in people’s lives. These small loans
can provide an opportunity to set up or expand a small business, foster self-
porting themselves financially in the future. With a $1,200 ACSI loan,
Lela expanded her business, buying two more sewing machines.
After setting up ACSI offices in Najaf and Karbala, operations ex-
reliance, and can help entrepreneurs build the skills to properly manage their
panded later in 2003 to Baghdad, and other governorates were
businesses.
added later. When first starting operations in a new governorate,
In Iraq and most other nations, the demand for microfinance greatly exceeds the
ACSI employees apply many of the same techniques initially used in
available supply of credit. That is despite the fact that experience from around
Najaf and Karbala. A key step, according to Ahmad Lamaa, director
the world has shown that poorer people are a good risk, with very high loan
of business and operations for ACSI, is to reach out to local commu-
repayment rates. A key reason for that, according to Kimberly Tilock, is the bor-
nity, political, and religious leaders. “We explain,” he says, “what
rowers’ expectation that, in the future, they will want to access a second, third,
or fourth loan, to continue expanding their business and building financial security for their families. Tilock played a key role in establishing the ACSI program
in Iraq. Her assessment of borrowers in that country could well apply to small
business operators around the world: “They repay the loans because they want
the service to stay around.”
we do, what our goals are, what our loan products are, and how we
can improve the lives of the people in their area.”
As ACSI’s reputation has grown over the years, getting started in
new areas has become easier. “People have contacted us,” says
Lamaa, “and asked us to open an office in their area. Now we have
community support all over Iraq.”
When ACSI began its operations, it offered two types of loans, one
for existing small businesses and one to renovate or improve a home.
The loans for housing were especially important in the early months
15 — CHAPTER II The Access to Credit Services Initiative
ACSI SUCCESS STORIES
Batoul Husain Ali – expanding a sewing business
Batoul Husain Ali is a mother of four children in
purchase of a high specification industrial sew-
Anbar. Her husband works for the Electricity Di-
ing machine. She also purchased a generator to
rectorate but, after many years of economic and
operate the sewing machine and to enable her
sectarian turmoil in Iraq, they found it difficult to
home to have air conditioning – an essential for
cope financially. Batoul decided to help her fam-
her children when power cuts in temperatures of
ily in these difficult circumstances by sewing and
120 degrees are common.
selling children and women’s clothing.
Batoul’s good relationship with her neighbors
After her initial modest success, Batoul looked
and experience meant that she was able to
to expand her work and heard about the Access
identify their needs and provide clothes suit-
to Credit Services Initiative. CHF International
able for the local environment quickly. She also
awarded Batoul a loan of $1000 for a period of
expanded her business into curtains, headwear
ten months to develop her business through the
and bedsheets.
A Blacksmith Helping His Disabled Children
Muhammed, a blacksmith in the city of Hilla, had
chairs for the others. He was also able to buy a system
dreamed of providing a better life for his family, in-
to purify the drinking water in the family’s home.
cluding his three sons who have been disabled since
birth. In early 2004, he borrowed $2,000 from ACSI to
expand his blacksmithing business. He used a second
loan, for $2,200 to open a second branch of his enterprise, to be managed by one of his sons. With the family’s increasing income, Muhammed was able to send
one of his sons for treatment in Iran, and to buy wheel-
With a third loan, for $2,000, Muhammed increased
his inventory and bought a mobile welding machine
for his business. As the earnings from the business
grew even greater, Muhammed was able to add two
rooms and a bathroom to the family’s home and to
furnish the house with beds, a refrigerator, a freezer,
a washing machine, and other items.
Dealing with the Aftermath of an Earlier War
During the war that raged between Iraq and Iran in
In 2003, Sabeen applied for a $500 loan from ACSI,
the 1980s, the husband of Sabeen, a wife and mother
to be repaid over the next 10 months. She purchased
of five, was taken prisoner. To make up for the family’s
a new sewing machine, fabric, and a refrigerator for
lost income, Sabeen started working on an old sewing
her dairy products. Sabeen expanded her home-based
machine, producing clothing to sell. She also began
business into a minimarket, offering a variety of goods
preparing an assortment of dairy products to offer for
in addition to her homemade dairy products.
sale. Sabeen’s husband was eventually released and
returned home, but he continued to experience physical and psychological difficulties due to the hardships
of his captivity.
With second loan from ACSI, for $1,000, Sabeen helped
one of her sons to establish his own small shop, where
he sells his mother’s fresh products, and she also bought
more fabric to use in producing traditional clothing.
iraq The CHF International Approach — 16
CHF’s 20 Years of Experience in Small and Medium Financing
For the last 20 years, CHF International has served as a leading provider of
By improving access to financial services for persons who are unserved or
financial services in developing countries and in nations making the tran-
are underserved by the formal financial markets, CHF International is:
sition to democracy. Over that period, CHF has distributed more than $415
million in loans, five times the value of its outstanding loan portfolio, and
pioneered new loan products, such as home renovation and improvement
loans for low-income communities, including in Iraq.
creating jobs
improving living standards for borrowers and their families
contributing to local and regional economic development
bringing private and commercial capital into low-income markets
CHF currently oversees lending operations in 11 countries, in Africa, Asia,
Europe, Latin America, and the Middle East. CHF’s microfinance initiatives
maintain a 98 percent repayment record.
and years following the change of government. According to Lamaa:
shut down their entire operations in Iraq and pulled out all their foreign
“People needed to have adequate housing for their families before
employees following attacks on their offices or the kidnapping or killing
they could focus on working at a job or running a business.”
of staff members.
In 2008, to supplement the financing for existing businesses, ACSI
When they joined ACSI, few of the Iraqi employees had experi-
began offering loans to establish completely new businesses.
ence in the banking sector. The lack of that specific experience,
however, was not necessarily a shortcoming, according to Lamaa.
“Microfinance is new in Iraq,” he says. “Even if you have a financial
Building a Program with an Iraqi Face
ACSI now has more than 300 employees. Over 98 percent of ACSI
background, you may not be a good loan officer. You need to be
hard-working and have connections in the community.”
employees are Iraqi. In contrast to some other groups that have tried
A number of the new loan officers were engineers. One was a vet-
operating in Iraq with a higher proportion of expatriate staff, ACSI has
erinarian, and another was an English teacher. “We hired young
found it easier to continue its work in areas of the country that have
people who were hopeful and optimistic,” says Tilock. “We trained
experienced ongoing conflict. Unlike ACSI, some organizations have
them, and together we built a market for microfinance.”
17 — CHAPTER II The Access to Credit Services Initiative
The Legacy of ACSI
One of the most exceptional successes of ACSI is the repayment
rate among borrowers. According to the Grameen Foundation,
By the end of August, 2008, ACSI had 14 offices in Iraq across
repayment rates of microfinance loans are usually between 95-
10 governorates. Nine of the 10 governorates are in the southern
98%, considerably higher than credit card or student loan re-
part of Iraq, and one is in the Kurdish area of northern Iraq. ACSI
payments in the USA. ACSI’s repayment rate is an exceptional
had provided more than 59,000 loans to Iraqis, with a total value
99%. This demonstrates the appetite for long-term sustainable
of more than $130 million. ACSI is now the largest microfinance
economic development in Iraq and the commitment of the Iraqi
program in Iraq, providing between 70 and 80 percent of the small
people to making it work.
loans granted in the country.
Kimberly Tilock looks back with pride on what a small number of
The impact that the ACSI loans have made on the lives of individual
foreign staff and hundreds of Iraqi employees have accomplishment
Iraqi families has been striking. ACSI has provided affordable small
since ACSI was launched in 2003: “At the start, we said to the Iraqi
loans to Iraqis who would likely have had no other access to credit.
staff, ‘This is an Iraqi program. You have a stake in its success.’
The borrowers have used the financing to expand their businesses
Now, they feel a sense of ownership. They’re proud of the program’s
and improve their homes. That, in turn, has helped improve the local
accomplishments.”
economy in hundreds of communities across Iraq.
CHAPTER III
Iraq Middle Market
Development Foundation
Filling the Market Gap—Middle Market Loans
for Growing Enterprises in Iraq
One of CHF International’s primary objectives is to provide demand-
IMMDF
led development. Rather than intervene from above, CHF works
with the communities to provide the development that they need
IMMDF, set up in 2004, is an independent non-profit corporation,
and want. And in 2004 it became clear that there was a gap in the
funded by OPIC, that operates solely in Iraq. The organization’s goal
financial market in Iraq.
is to stimulate employment growth and the reconstruction of Iraq
by providing loans to businesses that would not otherwise be able
Iraqi banks traditionally gave larger loans based on collateral.
to secure financing on reasonable terms.
Unless the loan applicant had substantial resources which he or she
could borrow against, a loan was unavailable. And while short term
Loans have been made across the whole of Iraq to a wide portfolio
loans for home and small business owners were covered by ACSI,
of businesses including to those in the manufacturing, technology,
there was a void of loans for the middle-market. This meant that
construction and agriculture industries. Most borrowers use IMMDF
growing enterprises that had moved beyond the microloan level had
capital to upgrade or expand their operations by purchasing new
no access to larger loans. Unless a loan-system based on cash-flow
equipment, building new facilities and financing raw materials.
was established, they would find themselves at a glass ceiling.
In 2004, the Overseas Private Investment Corporation (OPIC) requested proposals for developing a financial entity to meet this
need and CHF International responded. Because of its experience
and successes in Iraq, the Middle East, and in development finance
in challenging settings, CHF was chosen by OPIC to create the corporation that would fill the market gap. The result was the Iraq
Middle Market Development Foundation – IMMDF.
Operating from offices in five cities of Iraq, IMMDF offers three
products:
Middle Market Enterprise (MME) Loans The first loan product
IMMDF offered is the highly successful Middle Market Enterprise
loans. The value of these varies from $500,000 to $5,000,000 to
be repaid over five years. This product was launched with a $23.5
million grant, where OPIC augments any IMMDF loan by providing
four times the loan amount in addition.
iraq The CHF International Approach — 20
Small and Medium-Sized Enterprise (SME) Loans The second
A Unique Innovation
loan product is designed for smaller companies and provides loans
of $35,000 to $500,000, repaid over four years.
Since its creation, IMMDF has loaned over $68 million to 33 private Iraqi enterprises and has created thousands of jobs in Iraq. As
Agribusiness The third loan product is part of the second SME
the longest-serving and only not-for-profit middle market lending
stream, but is dedicated specifically to agricultural businesses.
corporation in Iraq, IMMDF fulfils an important role in creating eco-
IMMDF offers loans of up to $1 million in the areas of, for example,
nomic development, job creation and social stability.
dairy, cold storage, grain processing, fish farms and slaughterhouses. These and the SME loans were set up with an $8 million grant,
where OPIC augments funding by a ratio of two to one.
Success Story
Jadge poultry is an Iraqi company which has benefited from a $5 million loan toward
the construction and running of the largest and most modern poultry operation in
the country. By spring 2008, Jadge’s annual production reached over 1.3 million day
old ‘parent chicks’ for sale to other Iraqi poultry companies, over 1.3 million broiler
chickens, 375,000 table eggs, and 12,000 metric tons of specially sanitized and
enriched feed. Jadge operates the highest bio-security standards in the region.
The loan has created over 100 new jobs in Iraqi Kurdistan and has provided an
economical, nutritious food source for the citizens of Iraq.
8601 Georgia Avenue, Suite 800
Silver Spring, MD 20910
Tel: 301.587.4700 • Fax: 301.587.7315
[email protected] • www.chfinternational.org