Expanding Opportunities in Madagascar, One Microloan at a Time

Dawn has barely broken over Miandrarivo Ambanidia, a lively neighborhood perched high along the hairpin roadways of Antananarivo. Her husband and children are still asleep, but Patricia Rakotonirina is already stirring the pots on the stove. The little food stall on the street—or gargote as they are commonly known in Madagascar—opens every day at 6:00 a.m. She wakes up early to prepare the rice soup, samosas, meat, and potato balls that her neighbors and customers love so much.

By midday, the house she and her husband built behind the food stall at the end of a steep alley is filled with the sounds of their children playing, back from school, while Patricia continues her work. Her days are long, stretching late into the evening as she tends to the needs of her bustling food stall.

“I decided in 2010 to start this business because it was hard to find work. I used the little money I had to open the shop,” she said. Lacking sufficient funds to grow their business, Patricia and her husband turned to microcredit.

Like many small business owners in Madagascar, she found out about the credit institution by word of mouth. “I’ve been a PAMF customer since 2011. Completing my loan application was easy. The customer advisers explained things in stages,” because, as she admitted, “nobody understands everything the first time.”

The Première Agence de Microfinance (PAMF) has had a presence in Madagascar since 2006, with customers concentrated largely in the capital and in the north of the country. Its financial products are designed to address the specific needs of very small business owners. Women, with lower rates of non-performing loans, are seen as reliable borrowers and comprise more than half of PAMF’s 400,000 customers.  

“PAMF’s vision of reducing poverty and including women in the financial system resonated with me,” says Tsirimpitiavana Rakotondrazafy, an SME loan officer at PAMF. Adding, “And it is one of Madagascar’s leading institutions.”

When it comes to granting loans, getting to know the customer, their business, assets, and personal experiences is key. Most customers of microfinance institutions (MFIs) cannot produce a bank statement or balance sheet. PAMF loan officers build relationships with their clients as a way to overcome this gap and determine their capacity and willingness to repay their loans.

In 2011, Patricia and her husband were granted an initial credit of 1 million ariary (or about $220). Now, they can borrow 3 million ariary (or about $660).

Their partnership with PAMF enabled them to expand their business (with plans to launch a new one) and improve their family’s well-being.

“When we began working with PAMF in 2011, we had only one person to help us. We didn’t have any children at the time; we were renting. It was credit that made it possible to hire a new employee. Now, we are owners, and we even rent out part of our property. We have two children, and we can afford to send them to school,” Patricia shares proudly.

Monique Razaiarinoro runs one of these small factories. “We started this business about 35 years ago,” she told us. “We inherited it from our in-laws. My husband had been working in this field since he was a boy. One of our sons plans to take the baton. My husband oversees the workshop,” she added. “He's the one with all the experience in this trade. I manage the business. I take care of all the orders and our son deals with the sales and collecting the aluminum. We each have our responsibilities.”

The employees are working away in the workshop situated at the end of a clay-floored courtyard, strewn with metal objects of all sorts. To one side is the house, and on the other are the kitchen, the stable, and small sheds. Their movements are precise, repeated over and over—their technique unchanged over time.

The cooking pots are made from recycled aluminum bought from merchants or companies in Madagascar. Pipes, ball bearings, hub caps, and various other parts are first broken up and then melted in a brick oven in the middle of the courtyard. The red, viscous molten aluminum is then poured into a handmade mold filled with wet black sand found only in the rice paddies surrounding Ambatolampy. The workers tamp down the sand using their bare feet to ensure the sand mold holds its shape throughout. A few minutes later, after the aluminum solidifies, it is cooled and then removed from the mold. After sanding and polishing, the pots are ready for sale.

“We sell in Coum—the craft market in Tana. And we deliver orders in the countryside. Our customers are faithful customers. They give us a call and we deliver the products by van, truck, or bush taxi,” Monique explained before adding: “During peak season, we can hardly find time to sleep. There’s so much work to do.”

Over the years, the foundry grew and needed more financing. Today, it employs 12 workers—four women and eight men—and churns out up to 300 cooking pots per day. “Our sales were taking off, but our finances were still on the ground. Friends of ours told us where we could get a loan,” Monique explained. “A kilo of aluminum costs upwards of 20, 30 euros. It takes a lot of money to develop the business and increase production,” she added. “That’s why we reached out to ACEP.”

Jacques Fidelis Randimbiarisoa, a craftsman living in the Avaradoha neighborhood in Antananarivo, dreamed of one day owning his own business. When he decided in 2013 to leave the province of Mahajanga in the west of Madagascar, and his job at the factory where they made wood model cars and boats, he had no home or workshop. But he and his wife were determined to try their luck in the capital so they could provide better opportunities for their children.

 “Life in the countryside is hard, so I tried finding work in Antananarivo. After a while, I didn’t want to work for anyone anymore. I wanted to work for myself,” explains Jacques. “So, I built this little workshop.”

Jacques has always worked with wood, but it wasn’t until he came to live in Tana that he began making wall clocks. “I started out on a learning curve because it was all new to me. But it paid off. And now I have to employ people,” he told us.

Starting his own business was no easy task. Wood, his raw material, was a huge expense, especially for some of the rarer types that he works with. “Wood is expensive,” explains Jacques. These days, 1 million ariary (about $220) is not enough. You need 2 million ariary—not to mention having to buy more equipment to meet growing demand.”

In the beginning, Jacques and his wife managed to finance the business out of their own pockets. But news of their fine work soon spread, and little by little their products were being sold in every province of Madagascar. As their business grew, so too did the resources and capital required to run it. That’s when they decided to seek out a small loan.

According to Jacques, “We needed a regular supply of raw materials. A friend suggested we apply to ACEP for financing. He found their loans affordable and had a good experience doing business with them. So, we were able to finance our purchase of materials, such as the wood, glue, and the clock mechanisms. It was enough to finance that year’s output.”