FINAL EVALUATION, LOAN 518-L-034 : SMALL ENTERPRISE ASSISTANCE

$4.45 M AID LOAN, INCLUDING $137, 000 TECH ASSISTANCE ($550, 000 OF ORIGINAL $5 M LOAN DEOBLIGATED 3/75) AND $21 M GOE SUCRE EQUIVALENT FUNDS COMMITTED TO PROVIDE INJECTIONS OF CAPITAL TO STIMULATE PRODUCTION & EMPLOYMENT, AND TO ACHIEVE GREATER PARTICIPATION OF SMALL ENTREPRENEURS IN ECUADOR SYSTEM. EVAL BASED ON USAID DOCUMENTATION AND ON 1976 USAID SURVEY OF 263 SUBLOANS MADE TO THAT TIME; BORROWER REPORTS DELINQUENT. FOLLOWING LENGTHY START-UP DELAYS,LOAN SUCCESSFULLY IMPLEMENTED AND FULLY DISBURSED BY APRIL 1977. A TOTAL OF 295 SUBLOANS TO SMALL ENTERPRISES WERE FINANCED UNDER THE LOAN WITH PARTICULAR BENEFIT ACCRUING TO MAKERS OF PROCESSORS OF METAL,PLASTIC PRODUCTS,SMALL APPLIANCES,FURNTIURE,CLOTHING,AND WOOD PRODUCTS. LOAN'S MAJOR ACCOMPLISHMENT,AIDED BY 032 AND 033 AID LOANS AND WORLD BANK CATTLE LOAN,IS STRENGTHENING OF GOE'S INSTITUTIONAL FUNDING MECHANISM/ (CENTRAL BANK FINANCIAL FUNDS)AND THE OPENING OF NEW CHANNELS FOR THE MOVEMENT OF VITAL RESOURCES TO DEVELOPING SECTORS. ECUADOR'S SMALL INDUSTRY SECTOR HAS EXPANDED TO 22 CITIES THROUGHOUT COUNTRY. USAID'S 1976 SURVEY SHOWED THAT 535 NEW JOBS CREATED IN SAMPLE OF 162 SMALL ENTERPRISES INSPECTED. TOTAL PRODUCTION IN SAMPLED ENTERPRISES INCREASED 31% OVER PREVIOUS YEAR WITH AVERAGE INCREASE OF 72% IN UTILIZATION OF LOCAL RAW MATERIALS. INITIAL IMPLEMENTATION DELAYS RESULTED,ACCORDING TO EVAL,FROM ATTEMPT TO ADOPT -- RATHER THAN ADAPT -- A MEXICAN MODEL THAT PROVED TO BE INAPPLICABLE. A JOINT USAID/GOE TASK FORCE PROVIDED THE IMPETUS FOR ACCELERATION OF LOAN DISBURSEMENTS THROUGH NECESSARY RESTRUCTURING OF LOAN APPARATUS AND ELIMINATION OF DUAL CREDIT APPROVAL,REGULATORY RESTRICTIONS,AND OTHER BOTTLENECKS. PROJECT HAS STIMULATED FOLLOW-ON IDB AND IBRD CREDITS AND MANY POST-PROJECT BENEFITS,INCLUDING JOB CREATION AND THE PRODUCTION-ENABLING EFFECT OF EXPANDED AND MODERNIZED FACILITIES THAT ARE EXPECTED TO CONTRIBUTE TO THE GROWTH OF A VIGOROUS MIDDLE CLASS OF SMALL ENTREPRENEURS.