Kuwait Hands Out Cash To Bridge Small Businesses

By Simon Atkinson Business reporter, BBC News.

 

Two of Kuwait's new breed of entrepreneurs on the help they have received for their businesses.After struggling to find wedding invitations she liked for her own big day, Latifa Esbaitah designed her own instead.

And after getting plenty of compliments from guests, she decided to launch a business offering the same service for others.

With a stylish but small shop tucked away on the mezzanine level of a shopping centre, there is not much passing trade at Royal Wedding Cards. However, targeted adverts to people in Kuwait whose Facebook relationship status is listed as "engaged" have helped her get an average of one commission each week.

And with some Arab weddings attracting thousands of guests - and the swankiest invites costing up to $50 each - there is money to be made.

But Latifa has a real safety net not afforded to many entrepreneurs around the world - a wage of $1,500 she is paid each month from the country's oil-rich government.

There is very low unemployment in Kuwait - not least because, as one of fifteen wealthiest countries per capita in the world, any Kuwaiti who wants one is offered a public sector job.

However, entrepreneurship is relatively rare among Kuwaitis, and the monthly handout is just one incentive offered to encourage people like Latifa to strike out on their own.

 

"If that monthly wage money wasn't there I wouldn't have launched my business," she says.
"The profits from the company covers the rent, internet connections and mobile phone for that business. The money I get from the government is kind of pocket money."

While acknowledging she is fortunate to receive the cash, she argues it makes sense for the government to pay her.

"We are a wealthy country, and by doing this I'm not working in the public sector where's there's nothing to do. For every 20 people in government, 18 sit around doing nothing."

While there is no shortage of small businesses in the country, they are mainly run by expatriates, says Hassan al-Qanaie, manager of Kuwait Small Developments Project Company - a government body set up 14 years ago to encourage local entrepreneurs.

He says this domination by foreigners, and the easy availability of government work for nationals leads to a "reluctance" for people to launch their own firms.

"It is more hard work to be an entrepreneur than an employee" he adds.

The organisation aims to increase the number of Kuwait-run enterprises, with the goal of broadening the base of the country's economy, 95% of which is linked to the hydrocarbons industry.

"There is something every day going in my head telling me 'quit from your job and do something you love" said Mohammed Al Dubaib, Melanzane restaurant founder.

Would-be business people are helped with viability studies and have their ideas honed by experts.

Crucially, the organisation will also lend up to 80% of the cash needed for the venture - with no service charges or interest to pay.

And if the business does not work out - as about six in ten new start-ups in Kuwait do not - then it is the government which ultimately foots the bulk of the bill.

"It helps that we are sharing the risk," Mr Al-Qanaie says. "The government's generosity means there are no financial barriers to launching a business."

While the measures appear to be producing a greater volume of homegrown enterprises, most are offering simple services - such as restaurants and cafes - or producing basic items to sell, he adds.

While hoping that building more technical and knowledge-based businesses will really help the economy, he says that people with those skills are already in well-paid jobs - often within the oil sector - "so there's not so much incentive to take a risk".

"Eventually - not just before they reach retirement, but hopefully before then - they will set up their own firms and act as suppliers to those industries."

Overseas expansion

Among the hundreds of people to borrow money from Mr Al-Qanaies's organisation was Mohammed Al Dhubaib, who quit his job in a bank to open a small restaurant in Kuwait City serving Sicilian-style food.
And while admitting coming from a "fairly well-off" family, he says the launch of the Melenzane would not have happened so soon without the government cash - and the help in getting around the red tape, which some cite as another obstacle to entrepreneurship.

 

"When I started, it was a challenge to show for myself that I can do something that I love, and there is something every day going in my head telling me 'quit from your job and do something you love'," says Mr Al Dhubaib.

"But because we shared the risk with the government, it made it an easier decision to do. I think I would have eventually struck out on my own - but it might not have been for a few years."

Mr Al Dhubaib hopes to have repaid the borrowed money within a year and take full control of the business, and both he and Mrs Esbaitah are now thinking of how to expand their businesses.

For Melenzane, the next step will be another restaurant in Kuwait. But for Royal Wedding Cards, there are plans to expand abroad - possibly to other Gulf nations such as Qatar or the UAE.

And Mrs Esbaitah may not have to go it alone there either.
"I've lots of Kuwaiti friends who have set up in Dubai, in Doha" she says.
"And because they're from a Gulf country, they've got help from those governments too - sometimes even more help than they got in Kuwait."