Shadi lived in Europe for over a decade. But when she decided to open her restaurant, she knew she had to return home to northern Iraq. “ISIS destroyed Kurdistan’s economy and increased the unemployment rate. That gave me the incentive to go back and to challenge myself, as a woman, to establish a business even though I am surrounded by men.”
Shadi is Shabak, one of the minority groups persecuted by ISIS when the group seized control of northern Iraq in 2014. After ISIS was expelled from the country in 2017, she returned to the city of Erbil to establish La Dolce Vita. Located in the city’s affluent business district, the restaurant serves high-end traditional Arabic and Kurdish food as well as western dishes. Three years later, Shadi remains the only female business owner among the 20 restaurants in the area. “I am proud to compete [with them] and to serve fine traditional Iraqi cuisine,” she says.
But when COVID-19 took hold in Iraq, Shadi faced her biggest business challenge yet. Lockdown measures imposed in Erbil in mid-March 2020 forced La Dolce Vita to close and like other bars and restaurants in the city, it could not fully reopen until September. This was a devasting blow to the business, which was left with no revenue for six months. Shadi struggled to cover costs like rent, electricity, and salaries. She was forced to retrench five employees and to cut the salaries of her remaining staff, which includes displaced Syrian nationals, by 50%.
The business was given a lifeline when it received financing through NII’s COVID-19 SME Support Programme. This loan allowed La Dolce Vita to cover salaries, rent and the cost of sales to reopen. “I received this loan at a very critical stage because most likely, I would have had to close my business. This loan brought back my business to life,” Shadi says.
The restaurant can now continue to employ 11 people, including 5 women. Kale, is a young single mother supporting her two children, aged two and four. She has been working at La Dolce Vita since 2017. “I feel fortunate to have kept my job during this pandemic when so many people have lost theirs. I hope to continue working so I can support my family and send my kids to school.”
The severe impact of the COVID-19 pandemic on Iraqi SMEs has not only hit overall employment in the country hard – it is also worsening the gender gap in employment.
A study by the International Organization for Migration (IOM), the Food and Agriculture Organization (FAO), and the International Trade Center (ITC) among 900 SMEs across Iraq shows the employment gender gap exhibited at these businesses has widened by a massive 30 percentage points. In February, the ratio of women to men employed averaged 1 to 13. But when the research was conducted at the end of June, this had increased to 1 to 17. The SMEs surveyed also reported a reduction of 27% in full-time employment levels.
Luma Style, a high-end beauty and hair salon in the city of Erbil in northern Iraq, is a woman-owned business and one of the SMEs employing women which were forced to cut its staff numbers due to the impact of the pandemic. The salon – which offers a range of beauty products and treatments like manicures, pedicures, facials, massages, and waxing – was forced to closed in mid-March 2020 and COVID-19 measures aimed at the beauty industry meant it could only reopen near the end of May. Around the world, industries like beauty, hospitality, education, and healthcare – which tend to employ a higher number of women – have been disproportionately affected by the pandemic.
Luma K., the owner of Luma Style, is Christian – a minority group in northern Iraq – and originally from Karemlesh. The residents of Karemlesh were forced to flee the town when ISIS seized control of it in 2014. Luma started her business in 2017 but says she feared she would be forced to close it permanently when the lockdown measures left it unable to generate any income. Luma’s turnover is likely to be 40% lower this year than in 2019. “Costs accumulated put us under immense pressure at a time when the business did not make any profit. I felt like I would have to close my business at some point,” she says.
Luma was forced to permanently retrench three of her staff members and cut salary payments in half. To make matters worse, she and her family were infected by COVID-19. Thanks to a relief loan from the NII’s COVID-19 SME Support Programme, Luma now believes her business can recover and should be able to breakeven at the end of 2020. “The loan will help me to cover rent, salaries and the cost of raw materials to enable me to continue my business and avert risks at this critical time. I hope to grow my business and make it sustainable in the long run.”
This funding means that Luma Style can continue to employ nine people – eight of whom are women. Luma’s sister, Lobna K., works as a hairdresser at the salon. She financially supports her husband and two young children. She says she hopes to keep working for her sister. “I depend on this job for my livelihood and that of my family.”
How e-learning helped this Iraqi school survive the COVID crisis
When COVID-19 reached Iraq, no school could have been better prepared to shift to online learning than Al Mobdioon. Founded in 2008 and now regarded as one of the best private primary schools in Mosul, Al Mobdioon introduced e-learning tools into its classrooms early on in its existence.
Al Mobdioon’s curricula also reflect this innovative mindset. It offers the national primary school curricula, adding a range of study materials in English and French, as well as some more forward-thinking subjects. Students in grades 5 and 6 are exposed to study materials on robotics and the school even sent teachers abroad to receive training on artificial intelligence. Al Mobdioon also offers environmental studies as an elective subject which focuses on sustainability.
Iraqi schools were forced to send students home in March 2020 as part of the government regulations to curb the spread of COVID-19. Al Mobdioon’s focus on e-learning meant that it could quickly and easily shift teaching online. “We continue presenting lessons to all our students through the school’s own virtual platform, in addition to joining the governmental platform where homework is shared and exams are even possible,” explains Dr. Mohammed Najib Abdul Mawjood, who heads up the school’s administrative board.
However, the economic impact of the virus affected the payment of school fees as many parents saw the lockdown eat away at their incomes. At the same time, the Iraqi Ministry of Education also announced the reduction of private school fees by 10%. This left Al Mobdioon with a large receivable balance – something the school had never experienced before. “This negatively affected our commitments to meet our financial obligations in the specified time,” Mohammed says.
Private schools play a critical role in the Iraqi education system, as the quality of teaching and facilities in government schools has deteriorated. In Mosul, the education sector is still recovering from the period when the city was under ISIS control which saw many schools demolished. With student numbers in public schools often reaching 60 to 80 per class, many Iraqi families now choose to enrol their children in private schools like Al Mobdioon.
GroFin’s Northern Iraq Investments (NII), with the support of USAID through a gift from the American people, is extending $1.5 million in financing to help small businesses in northern Iraq survive the COVID-19 pandemic.
The school employs 58 people, including 48 women. The financing it received from NII will enable the school to cover salaries and other expenses until parents can pay the outstanding school fees. “The financing we received from GroFin will be used to pay the school’s previous financial dues caused by the crisis. A portion of the amount will also be used to develop the facilities to activate remote learning with better technology than before,” Mohammed says.
NII COVID-19 SME Support Programme
The COVID-19 pandemic has wreaked havoc on economies around the globe – and the small business sector is taking the biggest hit by far. In northern Iraq, where conflict has battered the local economy and infrastructure, small businesses are finding it even more difficult to stay afloat.
Strict lockdown measures meant that trading and business activity in Iraq came to a complete halt at the end of March 2020. Although some measures were later eased, increasing infections forced the Iraqi government to impose a second lockdown at the end of July and to continue to restrict movement between provinces. As a result, small businesses have seen their income all but disappear, while also facing increased input costs. Many have been left struggling to cover operational costs, including salaries.
“Small businesses in northern Iraq were already in great need of support even before COVID-19 arrived. Many entrepreneurs lost their businesses and were displaced when ISIS took control of the region. They are still trying to rebuild – most often from scratch,” says Raed Adnan, Investment Executive at GroFin Iraq.
GroFin, with the support of USAID through a gift from the American people, is extending $1.5 million in financing to help small businesses in northern Iraq overcome the crippling impact of the COVID-19 pandemic.
MIA BELLA BEAUTY LOUNGE
Shilan Azhgy and her family fled from Ninawa when ISIS invaded in 2014. She settled in Erbil, where she opened Mia Bella Beauty Lounge in 2018 with co-founder Julia Koliensikova. The salon started out focusing only on nails and employed four women. The founders continued to grow the businesses, adding hairdressing and other beauty treatments to its services.
Mia Bella was employing nine people and set to open a second branch in Mosul when the pandemic struck. Lockdown measures meant that Mia Bella had to remain closed for 75 days – generating no income. The business has received USD 50k in financing through the NII’s COVID-19 SME Support Programme. This funding will allow Mia Bella to continue operating and retain its staff, including 21-year old Harzhin who works there as a hairdresser.
According to a survey conducted in June this year by the International Labour Organisation (ILO), unemployment rates were already high among women (28%) and youth (42%) before COVID-19, especially in the Kurdistan Region of Iraq. Now, the pandemic is disproportionately affecting young workers in Iraq, with 36% of those in the age group of 18-24 reporting that they were permanently laid-off.
“It is very difficult to find a job here and unemployment is a serious problem especially for students. Young people often find themselves trapped between education and a fruitless job market,” Harzhin. This is her first job and she is thankful to be able to keep it. “My job allows me to pay for my college tuition fees and to support my mother. It gives me the self-confidence to know that I can face anything in this life.”
They first heard the mortars in the early morning. Karam’s mother was worried – but after half an hour the shelling stopped. He was on his way to the market to buy bread when his father called. “He told me to come home as fast as I can. On my way there I saw a car filled with bodies of children. When I got home, they told me a mortar hit our neighbors’ house. It killed a woman and three children.”
Karam and his family knew they had to flee their home in Bakhdida, a town in northern Iraq’s Nineveh Plains. He says he was lucky to have a summer house, about 100km to the east in Akre. The five-hour wait in the hot car to get past a checkpoint was hardest on his elderly father. It took the family more than eight hours to reach Akre. “The next morning my uncle arrived. He told us that everything was gone. ISIS had taken the city. We lost everything. We have only memories.”
According to the Ninewa Reconstruction Committee, ISIS damaged and looted over 7000 homes in Bakhdida. Once Iraq’s largest Christian community – one of the minority groups targeted by ISIS – the group left behind only a shell of the town Karam remembers. His successful coffee shop in the city was destroyed and his plans to start a new manufacturing business with his brothers and a friend were put to an abrupt end.
Karam started his professional career in 2003 when he worked as a journalist for a local newspaper while studying in Mosul. When Al Qaeda began threatening and killing both journalists and Christians, Karam was in danger on both counts. Yet, he was determined to complete his studies and graduated in 2008. “I am always looking to develop myself through self-education. Graduating from college was important – even if it was risky. Education is the weapon that helps you face risk in the future.”
In the following years, he worked in the aviation security industry and then as a teacher at an international school before starting his coffee house. Karam says he learned valuable lessons from each job he did. “I learned how to lead a team, manage processes, solve conflict and to work on deadline and under pressure.”
Now, more than five years since the morning his family were forced from their home, Karam and his three business partners are reviving their plans. His coffee house has been refurbished and is operating again but he wants to do even more to help rebuild Bakhdida, his community.
Karam is currently undergoing screening to receive financing from Northern Iraq Investments (NII) to establish a factory to produce facial tissues. “We are trying to change the local market from merely trading to rebuilding industry. We want to attract investment into the area again.”
Karam also wants the new factory to bring new jobs to Bakhdida. “There is a shortage of jobs in my city and establishing a factory that will provide tens of jobs is a big motivation.” The business is projected to create 23 new jobs, including 14 jobs for unskilled or semi-skilled workers.
The partners hope to combine their own capital and the financing they have applied to secure a lease, purchase raw materials, vehicles and the equipment needed to set up the factory’s first production line. Poor infrastructure like roads, electricity and a lack of skilled workers remains challenging, but the partners believe demand in the region is great enough that they will ultimately be able to establish four production facilities and to expand their product range. None of their current competitors are based in Nineveh province.
Karam believes teamwork will be key for them to succeed and sees the partnership as a source of strength for the business. “We complement each other. The business will require a lot of effort, time and relationships. Four people are better than only one and four opinions are wiser than one.”
Should their business be approved to receive financing through NII, Karam and his partners will also benefit from continuous business support and advice from GroFin to help them establish a sustainable business and rebuild their city, and their lives.
The news hit him like a bolt of lightning. Mohamed M.A was devastated when he heard that his once-successful business had been destroyed. Mohamed stayed in the northern Iraqi city of Mosul throughout the years it was under ISIS control and during the nine-month battle to retake it from the militant group. He survived. The business he had spent years building did not. “It was heartbreaking and difficult to bear,” he says.
Mohamed became an entrepreneur after choosing to leave his career as an engineer in the Iraqi army, where he was tasked with constructing roads and bridges. He started two other businesses before establishing a manufacturing plant producing steel products for construction in 2007. When ISIS invaded Mosul in 2014, the group seized his factory.
The city was hit hardest by the military action to oust ISIS. The Norwegian Refugee Council (NRC) estimates that 138,000 houses were damaged or demolished during the conflict. Commercial and industrial buildings, hospitals and schools, roads and bridges were all destroyed when the fighting leveled entire neighborhoods. In 2018, the World Bank estimated the total cost of housing damage in the city to range somewhere between US$5.1 billion and US$6.9 billion.
Mohamed says the scale of the destruction is catastrophic. “The occupation delayed progress and destroyed the country. It also led to the killing of the many innocent and oppressed people and the destruction of historical and cultural landmarks. The city of Mosul was stable, but now it’s devasted and people are yearning to return to a free and dignified life.”
Many people are still struggling to just return to their former homes. The NRC estimates that 300,000 residents of Mosul district are still displaced with no homes to go back to. Although it has been nearly two years since ISIS was expelled from Iraq, progress on the reconstruction of Mosul has been slow. “As a businessman, I cannot simply sit and do nothing when the bridges, hospitals, factories, and schools of my city lie destroyed and people are desperate for work to ensure a livelihood for them and their families.”
After the liberation of the city in 2018, Mohamed started a business importing medical drugs into Mosul. Now, he is working to establish a second business which will not only help to build his own life but also the city. Mohamed recognised the great need for construction materials in Mosul and plans to establish a stone crushing plant producing sand and gravel which is crucial for the construction of homes, as well as larger buildings and infrastructure. The plant will be located in the severely battered western side of Mosul, where no similar plants currently exist and the need for reconstruction is most dire.
Mohamed says a lack of financial support remains a key obstacle for entrepreneurs in northern Iraq as they try to get back on their feet. With their property and other assets destroyed, many do not even attempt to apply for loans. “The interest rates on both government and bank loans are high, as is the collateral they require,” he explains.
Mohamed is currently undergoing screening to receive financing from Northern Iraq Investments (NII) to purchase the equipment and vehicles needed to establish the stone crushing plant.
Mohamed has not been approved to receive financing yet, but GroFin is already supporting him in developing a robust business plan. Should he be approved to receive financing, GroFin will provide Mohamed with continuous support and advice to help grow his business and ensure that it remains sustainable.
According to the World Bank, job-intensive construction and repairs are an important means to address the very urgent need for job creation in liberated areas in Iraq. Mohamed’s business is projected to create 17 new direct jobs while helping to revive the local construction sector to foster further employment.
Mohamed is optimistic that the new business can succeed and make an important contribution not just in Mosul, but throughout the province. “My dream is to see my city prosper again,” he says.
When ISIS seized control of northern Iraq in 2014, nearly five million people were forced to flee their homes. By the time the group’s occupation of the region came to an end four years later, many Iraqis found they now had only rubble to return to.
In 2018, the World Bank estimated that nearly 140 000 residential buildings were impacted by ISIS and the military action to expel them from Iraq. Half of these structures were destroyed beyond repair and the bank valued the total damage at over $16 billion.
Mustafa Al Malihei, Investment Manager at GroFin Iraq, says seeing the devastated landscape that remains of the once prosperous city of Mosul is heart-wrenching. “The city now looks like the ruins of a prehistoric village that should be excavated by archaeologists. You only see dirt, rocks, broken concrete and the remains of old buildings. But there is hope because life is coming back to the city and people are starting to rebuild their houses and businesses.”
While the reconstruction of northern Iraq will require large scale investment and international support, small and medium-sized businesses can play a crucial role in helping the region to rebuild not only houses and infrastructure but also its economy.
GroFin has provided financing to Awael Al Janoob, an Iraqi SME specialising in interior decoration materials. Located in Basra, Awael Al Janoob offers an extensive range of imported products such as gypsum boards and PVC panels. When the reconstruction of northern Iraq and Mosul was announced, Awael Al Janoob did not hesitate to reopen its distribution channels to wholesalers and construction contractors there.
The funding Awael Al Janoob secured from GroFin allowed it to import additional stock from its Chinese suppliers when increased demand and sales from the north began to place pressure on its cash flow. “Most of the current demand from the North comes from people who are rebuilding their homes and need basic decorative materials such as PVC boards,” the company’s young founder, Nadheer A. explains.
Nadheer says obtaining funding is an important step on the path to success for most small businesses. GroFin has also advised him on how to improve the financial management of his company and assisted him in contracting an accounting company to implement a formal and computerised accounting system. This will contribute further to improving the business’s cash-flow management and allow for better planning based on more accurate business forecasts.
Nadheer began his career at an aluminum works company while completing his studies. He soon became the youngest senior partner and project manager in this business but chose to resign to follow his passion to become an entrepreneur. “I needed to prove to myself that I could manage people and market myself. I needed to prove that I could do it ‘right’. And it worked.”8
In 2012 and at the age of only 28, Nadheer opened the small store that would one day become Awael Al Janoob Company. Since then he has successfully established Awael Al Janoob as a well-known player in the Iraqi interior decorations market and grew the business to now operate two stores, three warehouses, and a large showroom. “The first year was slow, but I gradually built my financial independence. That feeling of freedom was indescribable.”
Through creating distribution channels to northern Iraq and Mosul, Awael Al Janoob is contributing to the reconstruction of the region and the revival of its SME sector. At the same time, the company is also creating job opportunities in Basra, where unemployment is also very high. It currently employs 36 people, including 8 women.
Loay has been working at Awael Al Janoob for seven years. He started as a general worker, working extra hours to support his family. His manager noticed Loay’s love for working with people and moved him to sales. Today, Loay is the sales manager at one of Awael Al Janoob’s stores. “I can support my wife and three children, as well as my sister and her two children as her husband passed away in an accident. I also hope to continue my studies as I could not complete them because of my difficult living conditions before.”
Nadheer says his vision is for his business to create a better life for many people. “If you keep your eyes on the goal instead of focusing on present obstacles, your level of motivation can only increase with time.”
Access to finance a key obstacle for minorities
R.B Hussein says he lost everything within just a few hours.
When ISIS invaded his hometown of Bashiqa in northern Iraq in 2014, Hussein and his family were forced to flee. Taiba, his family business which had been manufacturing sesame paste for 47 years, was destroyed. “It’s difficult to express how I felt when I heard my factory was destroyed. I was shocked for a long time. I still don’t know what happened,” he says today.
Hussein is one of over 5.8 million Iraqis forced to flee their homes during ISIS’s invasion of parts of northern and central Iraq and the subsequent military action to liberate the region. Although many have since been able to return home, nearly 2 million remain displaced.
But despite the tragedy Hussein and his community faced, he was determined to rebuild his business. He says the legacy of his family gave him the strength he needed to move forward. “It gave me strength to want to keep the legacy I received from my grandparents alive for my grandchildren. I also regard myself as an ambitious entrepreneur. The drive to overcome challenges and achieve more goals is what helps entrepreneurs survive.”
Less than a year after leaving Bashiqa, Hussein rallied the support of his family and former employees to reopen his business in Erbil in the Kurdistan province of Iraq. It was not easy. He battled to overcome administrative obstacles to start the business and obtain the necessary health and quality assurance certificates. It was impossible to find any bank or other institution willing to finance his business, but Hussein persevered.
Today the new Taiba produces 16 to 20 tons of sesame paste per day and has a national distribution network in place to serve 20 Iraqi wholesalers. Hussein wants to expand the business further to increase his market share in Iraq and even export his product to surrounding countries. Taiba also employs 45 workers – including 25 women. Like Hussein, all of them lost their homes and livelihoods when they fled ISIS.
But access to finance remains a huge challenge and he has been struggling to get long-term financing at a fair interest rate. “It is difficult to convince the local banks to finance my startup project. Local banks are also asking for a huge amount of collateral. Sometimes over 300% of the capital.”
Hawrre Meerani, Investment Manager at GroFin Iraq, says a lack of collateral is currently one of the biggest obstacles facing entrepreneurs in northern Iraq in the aftermath of the ISIS occupation. “It is extremely difficult for startups to get financing as banks require a lot of collateral. Many entrepreneurs do not have collateral to provide because their property and land has lost a lot of its market value following the ISIS occupation.”
Hussein’s business is currently undergoing screening to obtain financing from NII which will allow him to upgrade and expand his factory with a new automated production line. The new production line will create 20 additional jobs and Hussein has committed to continue to hire other internally displaced people who are desperately in need of a steady income to rebuild their own lives.
Although Taiba has not yet been approved to receive financing from NII, GroFin’s investment team is already working with Hussein to make the business investment-ready and position it for success. GroFin is assisting Hussein in compiling audited financial statements so that he has a clear picture of the financial position of his business and can make better strategic decisions in the future.
GroFin has also introduced Hussein to global supermarket chain Carrefour and facilitated an agreement which will see Taiba’s products being sold in four of its Iraqi branches. This agreement is set to have a massive impact on Taiba’s sales. In addition, GroFin worked with the business to create more satellite sales points in Erbil and the Ninawa province during the month of Ramadan. Should Taiba be approved to receive financing, GroFin will continue to provide Hussein with such support throughout the tenure of his loan to ensure his business remains sustainable and can grow even further.
Meerani says although instability and a lack of security in areas formerly held by ISIS are still threatening SMEs and entrepreneurs, the business environment in Kurdistan is stable. “The outlook for the region is promising thanks to the assistance of the Iraqi government and international organisations are providing to SMEs. Businesses here are positive about the future.”