U.S. Army microgrants help revive small businesses

When US Army Capt. Nick Piergallini appeared in Hassam Jabar Kareem's appliance shop in Baghdad and offered him $1,000 to do whatever he needed to improve his store, the Iraqi businessman was understandably skeptical. "This is weird. Someone comes into my store and offers me money," says Mr. Kareem, who is considering closing his shop due to poor sales.

Captain Piergallini is participating in one of the US Army's latest reconstruction efforts: microfinancing. Although the microgrants doled out through program are turning around a number of businesses across Iraq, many soldiers worry that the program taxes combat resources while providing only limited oversight.

"Our end state at the local level is goods and services for Iraqis, provided by Iraqis, and these microgrants really help us accomplish this," says Maj. John Gossart, executive officer for the 3rd Brigade Combat Team (3BCT).

Instead of targeting major projects like roadways and electric pylons, microgrants help small businesses. The recipients are not expected to pay back a single dinar, but if they don't follow through with their plan, the US military can detain them or force them to pay the money back. No one involved in the program is aware of such an incident, though.

"The markets are cleaner, the electricity is on more, fuel is available.... What the construction doesn't fix is getting people into those retail shops, so that's where the microgrants come in," explains Maj. Brain Horine, the 3BCT civil affairs officer from Phoenix, Ariz. "[Retailers] may need simple things like enough money to paint their shop or put up some new shelves [and] ... that small infusion of money will enable them to make those upgrades" and increase business.

Each microgrant also generates an average of 2.5 jobs, says Major Horine. According to US Army officials, a $2,500 grant allowed a furniture shop to hire an additional eight people.

Since the 3BCT arrived in Iraq seven months ago, they've handed out 147 microgrants worth $368,000 throughout their area of operation, which encompasses nearly 40 percent of Baghdad.

Under current distribution requirements, Piergallini's platoon of nearly 40 soldiers will pass out an additional $380,000 or more to more than 250 businesses before they leave Iraq in eight months. They estimate that more than $1 million worth of grant applications are pending.

Though the program has existed for nearly a year, it has become a major focus for the Army's nonlethal operations only in the last few months. In July, the number of microgrants each platoon in the 1-68 Combined Arms Battalion, part of the 3BCT, passed out quadrupled to eight a week. On average, most microgrants total $1,500, though many reach the $2,500 limit, says Piergallini. Larger grants require more paperwork and approval from the brigade or division level.

Units that conduct patrols are expected to find businesses during the course of their regular missions and help them fill out grant applications. If the grant is approved, the unit returns to give the shopkeeper the money. The unit is also supposed to do follow-ups every 30, 60, and 90 days, but many commanders say just one is acceptable.

All this is on top of regular platoon duties – patrolling for insurgents, setting up checkpoints – which is why Piergallini usually spends less than five minutes soliciting most grant applications. "It's to the point where we are just trying to throw money into the economy blindly," says Piergallini.

"It's a good program, but the current implementation is overwhelming," adds Lt. Josh Ladner, the nonlethal targeting officer for the 1-68 CAB. He says that Iraqis who receive the grants are not being held accountable for following through with their business plans.

At a gym that received $2,500 for a stereo, among other things, the owner tells Piergallini that he paid $500 for the new sound system. Although the price seems high, Piergallini settles on telling the gym owner that he got "ripped off." A price survey by the Monitor showed comparable stereos in Baghdad usually sell for less than $100.

Lt. Col. Michael Pappal, 1-68 CAB's commander, says that if the program develops relations with locals while improving the economy, it will prove a win-win. "It's a way to establish a relationship with a person that's hopefully positive and ... if you do some favor for them, they're likely to do something for you," he adds.