Final report of mid-term evaluation of USAID/Egypt small and emerging business program

The assessment comprised of two different components: an evaluation of the SEB Project itself including implementing partners, approaches, objectives and outcomes; and an assessment of the microfinance industry in Egypt. Recommendations to USAID/Egypt on future support to the microfinance sector are based on the findings of these two assessment components. The SEB project evaluation consisted of a detailed review of six implementing partners including ABA, AsBA, BdC, DBACD, EQI and CGC. In addition, the evaluation included a review of the microfinance project objectives, approaches and outcomes of USAID/Egypt. USAID/Egypt's support to the microfinance sector started in 1989 and it has allocated a total of $141 million1 since the beginning. It has worked with a total of nine partner business associations and two banks. Together, these institutions reach over 270,000 active clients as of June 30, 2004. USAID/Egypt's approach has been to create retail NGO-Business Association partners and replicate the same institutional model across the country. The main lending methodologies used are individual lending and group lending. Since 1993 technical assistance has been provided by NCBA/EQI. The TA support included a package of services consisting of an MIS system, an accounting manual, the two loan products, training for loan officers as well as periodic support to staff on implementing any of these systems. USAID/Egypt has become known as the best practices donor and some of its partners are indeed among the best in Egypt. USAID's activities over the past 15 years have enabled development of a number of market leaders who have achieved significant scale of outreach as compared to their peers in Egypt. One of USAID's most notable achievements is the introduction of two banks to microfinance, one of which is utilizing its own funds. USAID partner MFIs has been able to attain high portfolio quality through solid lending methodologies and mechanisms. On the other hand, USAID's approach has also created institutions that are heavily reliant on it for vision and growth. The technical assistance and training activities supported by USAID have not lead to independent and innovative MFIs. Rather, USAID's partners have limited products and lack the capacity to innovate and respond to market needs. Many of USAID's partner MFIs have limited institutional visions, lack sound governance, and are highly inefficient. Some of the strategies used in the past by USAID, which were appropriate to introduce microfinance to the market, are no longer appropriate as the industry is now at a different stage of development. While there are some strong MFPs in the market, there are considerable areas for improvement within these MFPs such as governance, capacity of management, back office systems and market orientation. USAID should broaden its support to address the above weaknesses at the retail level as well as ensure development of suitable support structures that can help all MFPs increase market penetration. (Author abstract)