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LESSONS LEARNED FROM USAID MICROENTERPRISE WORK IN BIG EMERGING MARKETS WITH HEAVY GOVERNMENT INTERVENTION. VIKAS CHOUDHARY, GMED INDIA, SALAH TAHER, QED/EGYPT; FERNANDO FERNANDEZ, AFIRMA MEXICO. MICROENTERPRISE DEVELOPMENT IN A GLOBALIZING WORLD: A USAID LEARNING CONFERENCE JUNE 15, 2006.
VIKAS CHOUDHARY, GMED INDIA, SALAH TAHER, QED/EGYPT; FERNANDO FERNANDEZ, AFIRMA MEXICO
MICROENTERPRISE DEVELOPMENT IN A GLOBALIZING WORLD:
A USAID LEARNING CONFERENCE
JUNE 15, 2006
Growth Oriented Micro-Enterprise Development Program (GMED)
Fresh fruits and vegetables
Organically certified food products
Broilers (Maize Supply Chain)
Solid Waste Management
The Egyptian financial sector has abundant funds; however, borrowers find it difficult to access such funds. The AERI-BDS project as a catalyst for development, has brought the different partners together to facilitate access to finance.
foundation of the partnership.
facilitating access to credit.
INITIAL EXPERIENCE OF THE AFIRMA PROJECT IN MEXICOFERNANDO FERNANDEZ, AFIRMA MEXICO
International banks hold 85% of assets following ‘94-’95 “tequila crisis”
Primary sources of banking profits: high margins, service charges, government bonds
Remittances $20bn in 2005 (2.5% of GDP) – BdM
Very limited access among the poor & MSMEs
“Popular Finance” Sub-sector:
>40 federal programs
Government funds > US$50 billion
Micro- and rural finance sub-sector +/- 10 years behind others in the region
Inefficient, expensive, but with rapid growth recentlySNAPSHOT: MEXICO AND ITS FINANCIAL SYSTEM
Source: World Bank Financial Structure dataset, 2004
** Source: UNDP 2005
63% of total loan portfolio of the formal banking system*
* Source: Comision Nacional Bancaria y de Valres – Bank Supervisor (Sept. 2005)
Bank Lendingto the private sector / GDP: 16%
(Source: Banco de Mexico)
Source: Situación de la Competitividad de México, 2004. Instituto Mexicano para la Competitividad. http://imco.solutrends.com
Secretary of the Economy estimates 12 million microenterprises in Mexico
67 MFIs that work with PRONAFIM serve 1.8 millionactive credit clients
Compartamos: 450,000 active credit clients
Caja Popular Mexicana 700,000
Regular press coverage of microfinance during Fox Administration
Suggests a market penetration of 25%, but portfolio is concentrated
Consumer lending growing quickly (along with portfolio risk)
“Contributeto the development of a dynamic financial sector in Mexico that provides sustainable services to under-served urban and rural markets, helping them manage risk and support local economic growth.”
FIVE PRIMARY TASKS:
Client of AFIRMA partner AlSol, Chamula, Chiapas
Microfinance “Best Practices” are well documented and readily available …
… management best practices for financial sector projects, are much less so. AFIRMA is building upon lessons learned in USAID projects:
Challenge: coordinating closely with the current government while also avoiding all politics or appearance of alignment with one party or another
Challenge: conflicting interests within “the” government, alignment, focus, competing programs (fed. state, local, etc.) can be constraints
Archeological site & church, Cholula, Puebla
Challenge: understand the full economic and politicalcontext and existing initiatives and develop innovative ways to support positive initiatives and influence others that may have perverse incentives.
SUPPLIERS REPRESENT AN IMPORTANT SOURCE OF FINANCE, ESPECIALLY FOR SMALLER FIRMS
Banks aren’t the most important source of corporate finance – much less so for rural MSMEs
Supplier credit important, but generally limited to:
Short-term, Product-specific working capital
Challenge: sophisticated mechanisms exist for the highly developed export agricultural value chains. Popular belief is that the experience cannot be “downscaled”
Vikas Choudhary, firstname.lastname@example.org
Salah Taher, email@example.com
Fernando Fernandez, Fernando_Fernandez@dai.com
Geoffrey Chalmers, GChalmers@usaid.gov