In Iraq, where ethnic and sectarian conflict is killing dozens of people daily, small business loans are cutting across ethnic and religious lines to help people move forward with their lives. As VOA's Margaret Besheer reports from northern Iraq, while U.S. AID-funded programs hope to reduce poverty by giving the poor more opportunity, they are not a cure-all for a country rocked by violence.

In Majid's neighborhood, and in many others in Iraq, electricity is in short supply. Here, the government provides residents only about two hours daily, and most rely on a large neighborhood generator to provide them with enough power, so they can cook, wash and watch television.

But 29-year-old Majid has recognized a business opportunity in the power vacuum, and taken a $3,500 loan to purchase a new generator, which he says will provide more than 100 houses in his neighborhood with electricity.

Historically, a society with a strong merchant class, Iraq's private sector was devastated by decades of mismanagement under Sadaam Hussein's Ba'athist party, sanctions and conflict. Coupled with the current daily violence, Iraq seems ripe for the help microfinance institutions can offer.

Under its umbrella program, known as Izdihar - or "Prosperity" in Arabic - the U.S. aid agency has invested more than $30 million in Iraq's nascent microfinance industry since Sadaam was toppled in 2003.

Microfinance loans are usually given to people who would not otherwise qualify for a loan from a regular bank, because the amount is too small, or they are too poor.

But USAID's Greg Howell cautions that such programs are not intended to be a magic cure for Iraq's violence.

"In a conflict situation, microfinance is not necessarily a panacea, but it is certainly a way to promote small business development at the poorest of the poor level," he said.

Magdy Ismail runs a U.S.-based non-governmental organization's office in the northern city of Irbil. He says the goal is not just to help Iraqis in the short term, but to create something that will become self-sustaining and permanent.

"Our vision is to build an Iraqi institution, to continue providing small loans to the people and to benefit the community," he said.

Loans average between $1,200 and $2,500, but can go as high as $10,000, or in some instances even $25,000.

Borrowers can apply for money to make home improvements, to enhance their small businesses, or to buy a taxi or small pick-up truck.

Despite the security situation, Ismail says, the rate of repayment on the loans remains very high.

"The repayment rate is 94 percent, and, sometimes, according to the security and stability situation, it does not go less than 90 percent," he said.

The standard interest rate in Iraq is about 15 percent, and most loans must be repaid within one year.

Some microfinance critics argue that such high interest rates can eventually make the poor poorer.

But the interest rate has not deterred 20-year-old Dilkhwaz. She owns a small hair-dressing salon, which, she says, desperately needs renovation and new equipment in order to succeed.

She says the $1,300 she is borrowing is much more than any of her relatives could ever have loaned her.