14,000 Young Women in Mozambique Could Receive 100,000 Meticais for Business

For a young woman in Mozambique trying to start a business, the difference between having an idea and actually opening the doors can come down to something as simple as having enough money to buy stock or equipment. A new programme backed by the World Bank is expected to provide about 14,000 girls and young women with grants of 100,000 meticais each, following entrepreneurship training.

That would put as much as 1.4 billion meticais into the hands of young entrepreneurs. The businesses involved are likely to be small. Someone might use the money to buy a sewing machine and fabric. Another person could buy a freezer and start selling frozen food. A poultry farmer could buy chickens and feed. A retailer could use the money to buy stock for a small shop.

Someone who already knows how to cook could put the money into equipment and ingredients and start taking catering orders. The grant is large enough to get some of these businesses moving, but not large enough to leave much room for expensive mistakes. If someone spends most of the money on equipment, there may be little left to buy stock. If too much goes into rent or setting up a shop, there may not be enough working capital to keep the business going.

That makes the first few months important. A small retailer needs to sell stock quickly enough to buy more. A poultry farmer needs to sell birds before the next round of feed has to be paid for. A tailor needs customers coming through the door after buying the machine. The grant does not solve those problems. It simply gives the owner something they may not have had before: capital to start.

What can 100,000 meticais buy?

It depends on the business. For a tailor, the biggest expense could be the sewing machine. The rest could go towards fabric, thread and other materials. For a food business, the money could be split between equipment, ingredients and packaging. A poultry operation would need to account for birds, feed and housing.

A small retailer could put much of the grant into inventory, although keeping some cash aside for transport and other running costs would also matter. For a beauty business, the spending could be concentrated on equipment and products. There are also opportunities in small scale farming, mobile services and other businesses where the initial setup costs are relatively low. The common factor is that these are businesses where the owner can start with a small operation and increase the size as sales grow.

The bigger issue is keeping the business alive

The first purchase is easy to see. The second and third months are harder. Once the grant has been spent, the business has to pay for itself. That means the owner needs to know what each product costs, what customers are prepared to pay and how much money needs to be kept in the business. This is particularly important for businesses with thin margins. A retailer may sell 10,000 meticais worth of goods and think the business is doing well. But if most of that money is needed to replace the stock, very little is actually available as income.

The same applies to farming and food businesses, where input costs can take up a large part of the selling price. This is where the entrepreneurship training attached to the programme could matter. The recipients are not simply being handed money and left to work things out. The training is intended to prepare them to run the businesses they establish with the grants.

But even good bookkeeping cannot create customers. A business still needs somewhere to sell, people willing to buy and enough demand to keep sales coming.

What happens when the business needs more money?

This could determine whether the programme produces a group of lasting businesses or a large number of short lived ones. A successful tailor may need another machine. A growing poultry operation may need a bigger structure. A food producer may need better equipment. A retailer whose stock sells quickly may need more money to buy larger quantities. At that point, the original 100,000 meticais is no longer enough. The owner will need to use profits, borrow money or find another source of finance. That is why the real story will not end when the grants are paid. If thousands of recipients are still trading a year later, buying from suppliers and earning income, the programme will have achieved something much more useful than simply distributing money.

For now, 14,000 young women are being given a chance to put money into a business of their own. For some, 100,000 meticais may be the machine they could never afford, the stock they could never buy or the first production cycle they could never finance. The next question is whether the businesses can generate enough cash to pay for the second one.