`By Dr Danson Kimani
“Most of my working life has involved doing menial jobs in Lilongwe (the capital city of Malawi) and subsistence farming, and now chicken rearing in my farm. At my age I can no longer do most of the jobs that I used to do in my younger years, such as handwashing people’s laundry or cleaning their houses.
“I also cannot do many jobs that require a lot of effort as I have become frail due to old age. That is why I decided to start a business that I can use to support myself because I do not have pension.”
These words were narrated by Asale Sigele (not her real name), a 65-year-old widow, through an English translator.
Having been born into a large, polygamous and poor family, Asale recounted to me how she was married off at a tender age without getting an opportunity to acquire formal education. As a result, Asale has never been in consistent gainful employment in her life because of inadequate formal education.
Asale’s story is also unique because she is in a minority category of people that enter into entrepreneurship while in their advanced years. Asale was 56 years old when she first ventured into her current poultry farming business.
Her case is not unique.
There are many women in Malawi who endure similar socioeconomic inequalities, including limited educational and employment opportunities, wage inequalities, or even being on the receiving end of gender-based violence.
Many women are also “overrepresented in the most unstable, lowest-paid and lowest-skilled agricultural and non-agricultural work”, especially in the rural areas. This is notwithstanding the demanding domestic and caring responsibilities that are bestowed on women.
Interestingly, and despite these hurdles, more women than men are likely to be self-employed in Malawi, with comparatively higher levels of women entrepreneurs amongst women with less formal education as well as those based in the rural areas.
Recent statistics show that about 62 percent of small business owners in Malawi have primary-level education and below (including nine percent who have no formal education). These attributes may partly explain the limited survival rate of micro and small enterprises (MSBs) in Malawi, which is one of the highest mortality rates in Africa.
After further discussions with Asale, it was clear that she had harboured a lifelong passion for entrepreneurship. This dream was, however, held back by her own doubts concerning her limited formal education which she feared would impede her ability to effectively operate a business.
She had hardly enough capital to start and finance business operations. Even after making the bold decision to eventually start a business, it was evident from my initial meetings with Asale that she was still deeply anxious about her capabilities to sustain and grow her business.
I met Asale in April 2017 when I first started working as a volunteer consultant with Grow Movement, a small third sector organisation with operations in Malawi, Rwanda and Uganda. The Grow Movement’s work focusses on alleviating poverty across the three countries, through providing support to proprietors of micro and small enterprises (MSBs), primarily by way of developing their business skills.
However, rather than doing this solely by taking them through generic training courses, the Grow Movement links each entrepreneur with a business mentor who works with the allocated entrepreneur for a period of at least six months.
The business mentors are usually business professionals or academics with skills in a range of areas, such as marketing, finance, book-keeping, strategy, business development and are sourced from all throughout the world.
The Grow Movement denotes the business mentors as volunteer consultants, as they hold an unpaid position. The objective of the volunteer consultants work is to facilitate the MSBs owners “to run their businesses more effectively, increasing profitability and [subsequently] creating jobs in their communities.”
By supporting MSBs to achieve these outcomes, the Grow Movement purposes to create capacity for alleviating poverty in some of the world’s poorest countries. This is also consistent with evidence from studies which suggest that entrepreneurship is an ideal vehicle for poverty mitigation and socioeconomic transformation.
My consulting journey with Asale lasted approximately eight months, ending in November 2017. She was then 61-years-old and had been in business for five years.
Although Asale’s business is located near Lilongwe, which provides her with easy access to a big market, she had been struggling with a number of challenges which had impeded its growth.
Asale had thus been linked with me, by the Grow Movement field officers, so that I help her in reviewing ways in which she could control or eliminate these challenges.
We began our first meeting by trying to gain an understanding of how Asale runs her poultry business, as well as the various challenges that she faced at the time. Asale informed me that she needed help on how to keep track of her business transactions (ie bookkeeping), how to make her business operations efficient (i.e. new business strategy), and how to minimise business expenses which have been eating into her business profitability (cost control).
During the first meeting with Asale, it became clear that she lacked adequate records of her business transactions. The only records that she kept included a collection of invoices that she received after purchasing chicken feeds, and poultry medicines and treatments.
She also informed me that she had a book where she recorded names of individuals and shops owners who took her eggs on credit. This was not surprising.
Record keeping is generally a problem for MSBs, and up to 65 percent of MSBs owners in Malawi are noted to lack financial records. The lack of adequate financial record keeping is also a key barrier to capital access, as financial institutions demand them as one of the preconditions for credit provision.
As someone who teaches and researches on accounting, I explained to Asale that proper business record keeping is an indispensable element of any successful business. I explained to Asale that keeping good records of the business operations can help her to keep track on the business costs and profitability, help with accurate monitoring of the business growth, and signal when change of business strategy is needed.
I identified bookkeeping training as one of the targets goals of my advisory role with Asale. Because of her limited formal training, sophisticated bookkeeping was impractical.
The next step involved training her to maintain a very basic profit and loss statement, comprising two columns. The left-hand side column (the debit column) was to be for recording all expenses related to the poultry business.
The right-hand side (the credit column) was to be for incomes received from the business.
To avoid confusion, we simply used lay language, ie left-hand side column and right-hand side column when referring to the record of expenses and revenues.
Asale would then tally the totals for each column on a weekly basis to estimate her weekly profit, while those totals would also be aggregated together to determine the monthly profit from the poultry business. To circumvent the difficulties that Asale had in using the English language, we agreed that she would be keeping her record of transactions in her native language of Chichewa, which is also the most widely spoken language in Malawi.
Growing the Business
The other aspect of business that Asale requested to be supported in was in identifying ways of enhancing competitiveness to grow her business further amidst stiff competition. She had explicitly identified competition as a limiting factor to her business’s growth. I also noted, when I began working with Asale, that her business worked with limited strategy. Her main focus was primarily the sale of eggs and ‘aged chickens’ that had ceased to lay eggs. Working together with Asale, we tried to identify a strategy that could help to accelerate her business’s performance. At this point, her local knowledge was instructive for among other things, mapping the local business terrain, including key competitors, potential clientele, and cheaper sources of finance.
Being in the capital city (Lilongwe), we identified households, local grocery shops and one supermarket as key customers for her eggs. Asale also identified five other businesses as being the main competitors in her locale. The presence of competition meant that she had to consider other ways of growing her revenue. Among our agenda therefore was how to differentiate her business from the competition. After deliberations, we identified that there were few businesses dealing in egg hatchery and sale of chicks. This, for instance, meant that Asale had to place orders up to 6 weeks in advance if she intended to buy new chickens. Following this, we identified egg hatchery as a potential avenue for diversifying Asale’s revenue stream. However, the next challenge was obtaining financing. Asale had an outstanding loan which she was struggling to pay after previously ordering 1,300 chicks, out of which 400 chicks died within weeks of buying them. This had adversely affected her profit margin and stretched her loan repayment period.
Asale could no longer use her existing chickens as collateral for a new loan, and therefore we had to look for alternative ways to get financing. We agreed that she should approach a few of the vendors selling the egg incubators, to compare prices and possibility of acquiring one through hire purchase arrangements.
We also agreed that a solar or kerosene-powered incubator would be more ideal to avert loss of eggs, considering the frequent power outages that happened occasionally in her area. In the end, the hire purchase arrangement was more costly than a secured loan and we thus agreed to approach a microfinance bank for funding using the incubator as collateral.
This was after looking around where we found that commercial banks were costlier as a source of finance, while the merry-go-round that Asale participated in lacked capacity to finance the acquisition of the incubator.
We also found out that the microfinance bank that provided the egg incubator loan, also provided customised insurance products to SMEs. After further deliberations, we agreed that Asale considers taking out an insurance cover to minimise losses if her brood of chicks died due to infections or environmental factors.
We agreed that such cover should be taken in two parts, one for the chicks which hatch from her incubator with the other cover being for any newly acquired chicken which form part of her egg laying flock.
This aspect of my advisory role – refining the business strategy – was the most difficult as it was filled with lot of uncertainty.
Firstly, Asale already had an outstanding loan when we were deliberating about the possibility of taking a second loan to facilitate the acquisition of the egg incubator. Yet, the chick hatchery presented a good opportunity for Asale to supplement her business income in an increasingly competitive market and therefore additional financing was vital to be able to expand her existing business.
However, we had to come up with an option that would not leave Asale in financial peril.
Secondly, Asale did not have much room for further losses, especially after having had lost over 30 percent of her brood to mass deaths caused by an infection. At this point therefore, the need for an insurance cover became apparent. Consequently, putting our minds together, that is, Asale’s knowledge of issues on the ground and my skills as an accounting and business educator, we were able to arrive at solutions that worked successfully.
The other area identified by Asale for guidance was on how to control her business’s expenses.
However, due to lack of proper accounting records previously, we had to rely on her memory and word of mouth regarding the various costs incurred in the poultry business.
The main expenses identified by Asale included: feeds for her chicken, medicines, kerosene to keep young chicks warm at night, and occasional costs for a casual labourer when egg yield was high.
Amongst these expenses, Asale particularly noted that chicken feeds were the most draining business expense which she also wanted assistance with exploring ways of reducing the same.
The first suggestion was to look for cheaper raw materials and we thus agreed that Asale would visit several shops to see which one had the cheapest feeds. However, another challenge emerged as the egg yield dropped significantly after the poultry were fed with the cheaper feeds.
The difference in price between the previous feeds and the newly purchase feeds was K5,000 (approximately £5.20 per kilo difference). At first, we were unsure whether the drop in egg yield was caused by the newly purchased feeds or as a result of ailment.
Luckily, Asale knew from experience that changes in nutrition can cause drop in egg production and we had therefore agreed to buy smaller quantities of the new feeds in order to be able to study their effect on the chicken.
We had also agreed to give the same to the chicken without mixing with the previous feeds. This way, it was possible to discern clearly the effect that changes in nutrition would have on egg production.
We also tried another option that involved mixing poultry concentrate with broken bits of raw corn. This idea followed from a web-based document that I came across, which suggested that a 50/50 base mix of poultry concentrate and corn can offer chicken nearly the same benefits as standards feeds, but at a lower cost.
High quality poultry concentrate is normally available in crumble form and contains protein and all vitamins and minerals necessary to main good health in chicken. When the poultry concentrate is then mixed with maize granulate, it can meet the dietary needs for egg yielding chicken.
The brood of chickens that Asale had at the time consumed 100kg of feeds per day. We again agreed that Asale should look for shops that sell poultry concentrate and she bought 350kkg for a one-week trial. We then mixed the concentrate with another 350kg of maize that Asale had harvested from her farm.
Fortunately, our trial was successful and, we did not see fluctuations to the egg yield.
Despite not being able to cut down on other business expenses, Asale was able to reduce her costs of feeding the chicken by approximately 40 percent. This was also a huge saving as poultry feeds were the single largest item of her operating expenses.
The additional advantage that Asale had, was that she had ample space to plant more maize to feed the chicken in a 14-acre farm she inherited from her late husband.
The partnership between Asale and myself provided an opportunity where we could collaborate by combining her local knowledge with my expertise to come up with ways of overcoming some of the main challenges that she faced, and enhance the efficiency and performance of her fledgling business.
Lastly, my experience as a volunteer consultant taught me that MSBs, including those owned by women such as Asale, can benefit immensely from outside counsel just as large corporations’ benefit from independent outside directors.
The insights in this article demonstrate that when appropriate support is availed, women business owners and other micro-entrepreneurs in Malawi can overcome many of the challenges which present obstacles to the growth of their businesses. Such support should also take a multipronged approach, and where possible customised to suits individual entrepreneur needs.
To begin with, we have seen that several MSBs owners have limited or no formal education. Research however suggests that formal education, at least up to the primary level, plays a key role in entrepreneurial success.
One study, for instance, argues that “basic skills of literacy and numeracy is a prerequisite for absorbing and putting to use the information learnt in a business training programme, or more generally to make use of business strategies above some minimal level of complexity”.
The Government of Malawi and other stakeholders, including non-governmental organisations, should ramp up support systems in the form of customised mentorship and consultancy to MSBs owners in order to aid them in overcoming the start-up hurdles as well as provide guidance on how to grow their businesses.
Secondly, the government through the various SME support institutions may consider adopting a more proactive approach where they designate SME support officers across the country to complement the work of Grow Movement.
This would also help to ensure that MSBs owners and women entrepreneurs can continue to receive necessary support when the term of volunteer consultants come to an end.
The SME support officers can also help to provide more near-customised support, as an alternative to generic business management training courses whose effectiveness in improving the “performance of small female-owned firms” in Africa has also attracted scepticism.
Thirdly, the National Association of Business Women may consider initiating nationwide mentorship opportunities where they pair women micro-entrepreneurs with other women who are more experienced in business as either executives or owners of large enterprises.
This can greatly assist women MSBs owners in developing and expanding their business and support networks, as research has demonstrated.
Finally, the government of Malawi should work with relevant stakeholders to develop and implement affirmative action policies that can assist in increasing opportunities for businesses owned by women.
This can happen by way preserving a percentage of government contracts for women-owned MSBs.
The government may also consider establishing a Women Enterprise Fund, similar to that in other African countries such as Kenya, to provide women entrepreneurs with easily accessible and inexpensive credit to finance their businesses.
The government should also expand opportunities for adult learning to provide entrepreneurs with limited education, with an opportunity to augment their literacy and numeracy skills to provide an effective grounding for other business skills needed in the modern economy.
Dr Kimani is a Lecturer in Accounting, and Co-ordinator at The Centre for Accountability and Global Development (CAGD), University of Essex, United Kingdom