Ali Awada, Fatima Jumaa and Jana Haidar
Three years have passed since the Port of Beirut explosion, and thousands of afflicted business owners still await the compensations they were promised by associations which assessed damages incurred immediately following the blast.
Take an inspection tour of the area surrounding the port and you will hear a torrent of complaints from business owners of afflicted shops in areas like Karantina and Al-Ashrafieh.
Adel Fahim Ali stands near the entrance to his modest tailor shop in Al-Ashrafieh holding up photos of his destroyed shop as he recalls the first moments of the blast. The 60 year old remembers how aid at the time was restricted to destroyed homes and because shop owners were excluded, he was forced to shut down his business for 3 months while he repaired a small part of it at his own expense.
Fahim says: “We received no compensation and were not even aware that we had to register on a certain platform to become eligible for any assistance.”
Donor countries stipulated distributing aid among affected parties through non-governmental agencies in case official agencies were unable to distribute them “appropriately” due to accusations of corruption surrounding governmental entities.
Ali Al-Asaad, owner of a bakery in the same street in Al-Ashrafieh, confirms that “the army and security forces promised us compensations but we received nothing.” Al-Asaad, whose losses are estimated at ten thousand USD, submitted all required documents and photos to the Vitas Micro-financing Organization in order to prove damages to his business. He received no response whatsoever.
Also, because of the high volume of loss from the blast, Al-Asaad was forced to lay off 5 workers and retain the services of only one, in addition to closing down his second shop adjacent to the first. There are many similar unfortunate stories. Rabie Amin Al-Ahmadieh is the owner of a hardware store that was destroyed by the explosion with damages estimated at 3 to 4 thousand USD.
Amin had applied to several organizations to receive some form of financial assistance but to no avail. He told this investigation that the “Ebdaa” organization, which was responsible for assessing damages incurred by the blast, had promised him several months ago to send a team of investigators to assess the state of his shop. Today, according to Amin, he is still awaiting the arrival of their team.
Fake Associations
In front of the ABC Mall in Al-Ashrafieh, Joseph Awn remembers the first moments of the blast that levelled his boutique to the ground shredding its clothes to pieces. His damages were estimated to be 40 thousand USD since most garments had been imported.
After quizzing him about the associations that contacted him for financial assistance, Awn said: “I was visited by many associations that showed much sympathy and promised compensation and aid. Some asked me to pay a fee to become a member of their association. Three years on and I have yet to receive any kind of aid.”
From Al-Ashrafieh, we moved to the area of Khandaq Al-Ghameeq closest to the port, where the Mukhtar, or locality mayor, Bilal Homsi, told us about the destruction of most shops in that area and how aid was received by only 5% of the afflicted enterprises despite the fact that, in his official capacity as Mukhtar or local mayor, he had kept a record of all damaged shops. He was even surprised to learn that there was a platform to register the names of affected businesses saying: “I am the area’s mayor, and had no idea that they existed. The only platform used by the residents was operated by the Lebanese Armed Forces who gave priority to damaged homes not businesses or shops. Even my destroyed office was repaired at my own expense.”
Owners of many businesses near the Mukhtar’s office describe the volume of the damages and how they were visited by associations who promised aid and compensation, but found themselves eventually forced to make their own repairs when nobody followed up.
Ali Awada, owner of a dairy shop in Khandaq Al-Ghameeq, had to reopen his shop in an informal way, due to the lack of any aid from associations who had recorded the damages his shop suffered and estimated that at 5500 USD. He also said that he was not aware of the existence of platforms where he could register his afflicted business.
Ibrahim Ghaddar, owner of the Barhoum Bakery, also made repairs to his business at his own expense, estimating damages to be seven thousand USD. He was visited by five associations who recorded his details and size of damages and he still awaits any form of compensation in order to repair the rest of his shop.
On the other hand, some businesses did receive compensation from the “Kafalat” Foundation, like Farid Kamel, owner of a wool factory in the area of “Burj Hamoud,” who received the amount of 20 thousand USD after the insurance company initially assessed his damages at 300 thousand USD. The total amount he received eventually did not exceed 60 thousand USD, and he stated that he had learned about the aid platforms through social media.
In the area of Jemmayze, the volume of damage was very high due to its close proximity to the explosion site. The commercial manager of Mayrig Restaurant, Rami Neameh, estimated his damages to be between 500–750 thousand USD because the restaurant contained antique furniture he claimed. Neameh said that the restaurant gradually restarted its operations one month after the blast relying on the establishment’s own efforts, and help from “Nusaned Association,” (we help association), which repaired the restaurant’s glass exterior.
Neameh denied knowing anything about any official aid programs or grants made available by some associations stating: “Restaurants have never been a priority for donor entities.” Some owners of small and medium sized businesses even refused to discuss with us any assistance they may have received while others said that the explosion to them was a thing of the past.
Ten Thousand Afflicted Businesses
The World Bank estimated the number of businesses affected by the Port of Beirut explosion to be around ten thousand small to medium sized businesses, stating that 17% of these entities have shut down temporarily and some permanently.
The World Bank also stated that 79% of enterprises witnessed a 69% decline in sales on average, while 61% of them were forced to downsize their employee base by 43%, bringing the rate of employment down to 57%. The physical damages inflicted on these entities were estimated to be between 225 and 275 million USD, according to the World Bank.
| Damages in the commerce and industry sectors: 105-125 million USD |
| Losses: 285-345 million USD |
| Cost of recovery and reconstruction: 165-205 million USD |
According to the World Bank data, 56% of commercial and industrial enterprises were adversely affected; that is 100% of facilities owned by the private sector including companies and shops selling food, beverages, clothes, construction materials, services, furniture, cars, petrol, plastic, chemical substances, paper and manufactured goods.
Businesses selling clothes, furniture and home accessories made up 52% of afflicted enterprises, and these shops sustained the highest costs “in absolute terms.” From a relative perspective, more than 90% of medium and large sized manufacturing companies operating within a 5 km radius of the explosion site were also adversely affected.
Right after the blast, the Lebanese Armed Forces conducted a detailed assessment of the resulting damages, however, it adopted a narrow criteria which included small/micro businesses, like tailor shops for example, despite those not being officially registered as a business and lacked legal ownership or registration titles. The number of businesses recorded in the Armed Forces’ initial survey, carried out within a 5 km2 radius from the port, was 19 thousand business units. International entities and local associations adopted later the Armed Forces’ assessment in order to distribute assistance to those adversely affected so they begin repair or reconstruction.
In August 2021, which marked the first anniversary of the Port of Beirut explosion, the UN’s office in Beirut began implementing its humanitarian response plan, holding a virtual international conference in which the World Bank announced that it signed an agreement to establish the Building Beirut Businesses Back and Better Fund (B5) which allocated 25 million USD for afflicted enterprises, to be distributed in cooperation with the Kafalat S.A.L. Foundation.
However, as we mark the third year anniversary of the explosion, the fund’s targeted micro and small enterprises have still not received the awaited support from the B5 project. The Kafalat S.A.L. Foundation, which is responsible for the fund, spent 10 million and 400 thousand USD from the allocated 25 million USD until the date of publishing this report.
“A Complicated Process Implemented by the B5 Project to Support the Recovery Needs of Damaged Enterprises”
The B5 project is a grant funded by the Lebanon Financing Facility, a multi donor fund established in December of 2020, and managed by the World Bank to coordinate donor grants and resources which aim to support the socio-economic recovery of vulnerable people and businesses affected by the explosion in the Port of Beirut on August 4th, 2020.
This support aims to preserve jobs in the private sector and limit business closures and layoffs. The B5 fund will provide grants to 4300 micro and small enterprises (MSEs) to cover expenses related to working capital, technical services, equipment and repairs. Female run enterprises will make up 30% of benefitting businesses and will enjoy financial and technical support to help better reform and rebuild.
The World Bank manages this project in cooperation with the Lebanese Kafalat S.A.L. Foundation, to administer the disbursement of funds among afflicted enterprises. However, this grant is considered a form of donation hence no private entity can single-handedly disburse it. This called for the participation of the Lebanese Armed Forces in the project, and the statistics, data, numbers and names provided by these forces were adopted.
In turn, the “Kafalat” Foundation cooperated with microfinance institutions to expedite the disbursement of funds among affected beneficiaries, on the pretense that such institutions had a network of direct relations with private businesses and were located within the explosion area. The microfinance institutions had also carried out field work and were in direct contact with the afflicted entities.
Mechanisms for Selecting Microfinance Institutions
The “Kafalat” Foundation reached out to the “Lebanese Microfinance Association” which includes all microfinance institutions that are categorized as either Non-Governmental, or institutions affiliated with the Bank of Lebanon and operate under its rules and regulations.
After the announcement of the B5 project, eight financial institutions applied for partnership in its implementation process. Four units that fulfilled the conditions of the World Bank were chosen: Ebdaa, Vitas Micro Financing, Association d’Entraide Professsionelle, and the Lebanese Association for Development Network (NGO).
The B5 Components and Activities
Component 1
Grants to Micro and Small Enterprises (Proposed Allocation: 18.5 million USD) : This component will provide grants to eligible Micro and Small Enterprises (MSE) that have been directly affected by the Port of Beirut explosion, in order to support their recovery. These grants may be used to cover expenses related to working capital, technical services, equipment and repair. Two approaches for implementation may be followed: A retail implementation approach through the “Kafalat” Foundation, or a wholesale implementation approach through microfinance institutions (MFIs), in accordance with specific criteria and measures. The project will adopt a zoning approach for prioritization, whereby eligible beneficiaries will be prioritized based on their proximity to the explosion site.
Component 2
Grants to microfinance institutions (MFIs) (Proposed Allocation: 5 million USD): This component will provide grants to MFIs which, in turn, will finance small and micro enterprises (SMEs), low-income populations, and the informal sector at large.
Component 3
Project Management by the “Kafalat” Foundation (Proposed Allocation: 1.5 million USD): This component will finance project management costs over the project’s life. It will also support training and capacity building activities for institutions owned or led by women or disabled persons, with emphasis on financial management and sales.
The “Kafalat” Foundation considers that one of the mechanisms for spending the B5 Project funds is the establishment of the Lebanon Financing Facility following the launch of the Reform, Recovery and Reconstruction Framework after the port explosion. The reason is that some donor countries wanted to guarantee that their assistance would not be disbursed haphazardly and stipulated the presence of one entity that regulates the distribution of aid.
According to Yolla Sarieddine, Deputy General Manager of the B5 Project, “donor countries met and provided their donations to the World Bank which, in turn, wanted a well-known official entity to disburse the funds, and hence reached an agreement with “Kafalat” to take on the implementation of the project.”
She adds: “Actual work began in early 2022, due to the involvement of many entities in the project (us, the World Bank, the Armed Forces, and MFIs). Some assistance was disbursed and it was important to identify the beneficiaries.”
Sarieddine also states that “the Lebanese Microfinance Association includes all microfinance institutions, and so, “Kafalat” reached out to them to identify all registered institutions. It then announced the project and asked all interested parties to contact them. Out of nine registered institutions, eight expressed their interest to participate and four of those were chosen after meeting the required criteria. They were: Ebdaa, Vitas, AEP and the LAD Network.”
Samantha Mansi, Head of Customer Relations and Sales in “Kafalat” says: “we follow a two part mechanism. The first involves a field survey to identify afflicted enterprises in need of support. Seven thousand enterprises have been registered so far. The second mechanism is confirming the eligibility of these businesses to receive assistance and the accuracy of the information “Kafalat” has received.”
She adds: “For example, if there is a pastry shop owned by a man and his wife, and the man filled out an application to receive assistance from Ebdaa, while his wife filled one to receive assistance from Vitas, our role is to verify that both applications belong to the same enterprise. This part of our work is continuous and never-ending. Many mistakes could be made whether in the way the names of individuals or the names of areas are spelled.”
“On the other hand, it is difficult, at times, for us to determine if the afflicted applicant actually owned an enterprise prior to the explosion. In the initial stage we confirm the existence of the enterprise or the first beneficiary, then we send the data to the Armed Forces for further confirmation, and finally, the Armed Forces send it to the MFIs.”
Mansi adds: “After receiving approval from the Armed Forces, we contact the MFI to complete the applicant’s file. It is their role to verify all the details by asking afflicted enterprises to provide price offers on all purchases in addition to all required documents such as IDs, lease contracts, damage assessments and project size. Accordingly, the MFI and “Kafalat” reach an agreement regarding the amount of compensation to be granted to the afflicted business.”
“After the application is processed and the file completed, the names and compensation amounts are approved and sent to an Online Money Transfer office (OMT), which, in turn, sends an SMS message with a code to the applicant who can then receive the compensation free from any commission fees.”
Sarieddine says: “Around two thousand names were de-listed because of repetition. The Armed Forces assess each damaged unit, while associations accredited by “Kafalat” could not perform a full survey of the damages.”
The following numbers and data are from the site “B5 Fund” and are valid until the publishing date of this report:
| Number of received applications: 2989 Number of accredited grants: 2675 Approved grants amount: 13.2 million USD Spent grants amounts: 11.4 million USD Number of applications received through MFIs: 2535 Number of applications received through Kafalat: 454 Number of frozen applications: 253 Number of approved applictions: 2675 Number of rejected applications: 79 |
In an attempt to inquire about the method adopted by the Lebanese Armed Forces for assistance disbursement, the Armed Forces refused to answer any questions regarding the Port of Beirut explosion via email, confirming their willingness to cooperate with regard to any other matter in the future.
Field trips of the blast site and its surroundings, showed that many enterprises had shut down as a result of the explosion, while most of them had to repair damages at their own expense due to the lack of financial support. The volume of losses reached 580 million USD, while the support provided by the World Bank did not exceed 25 million USD, and even part of that amount was allocated for associations. This is in addition to the fact that a large segment of the afflicted business owners either had no idea about this aid or were unable to receive it.
We reached out to the World Bank requesting feedback regarding the findings of our report. The World Bank responded by saying that the Building Beirut Businesses Back and Better Project (B5) began initially with a total budget of 70 million USD, to support the recovery of most micro, small and medium sized enterprises afflicted by the Port of Beirut explosion.
According to the Bank’s response, and due to the initial limited available funding for the Lebanon Financing Facility (LFF), the multi donor trust for the B5 project fund, the budget had to be decreased to 25 million USD, which was much lower than the World Bank’s previous estimate of physical damages that was between 225 and 275 million USD.
In response to our inquiry regarding the small business owners’ lack of knowledge about these compensations, the World Bank said that the project was launched in a public governmental ceremony and “received wide local media coverage,” adding that efforts were made to raise awareness about the fund through many channels such as organizing field trips to potential applicants and using social media platforms. The project also developed a bilingual (Arabic, English) electronic site which provides detailed information regarding the project’s goals, eligibility criteria, the application process, and how to access application forms via the internet, according to the World Bank.
However, most of these channels do not necessarily guarantee reaching all targeted segments. Most micro/small business owners (like tailor shops and small cafes) have no internet connection, especially considering that applications are submitted either online or through accredited associations, some of which were accused of financial exploitation in return for registration in the program. The World Bank did not comment on these accusations.
In a response via email, the World Bank stated that since the project was launched in November 2021, and up until August of 2023, the amount of assistance pledges reached 19 million USD, which is 76% of the allocated 24 million USD. The total expenditure amount reached 14 million USD, including the 10.7 million USD allocated for MSEs, and the 2.4 million USD allocated for the selected finance institutions. The Bank added that, until now (the date of publishing this report), “we have received 2870 grant applications, of which 2574 applications were approved, and it is expected that all allocated funds will have been spent by the end of the project on July 31st, 2024.”
