Microenterprise stock-taking : Guatemala

This report examines the experience of three A.I.D.-supported PVO"s providing microenterprise assistance -- the Women"s Development Foundation (FDM), the Small Business Assistance Foundation (FAPE), and the Foundation for the Development of Socioeconomic Programs (FUNDAP). The FDM and FAPE programs, which targeted enterprises with 1-4 employees, had dramatic employment generation impacts. Loans averaged $1,000-$3,500 per business, were made for both working capital and fixed asset investment, and were almost all given to manufacturing and service businesses. In general, the beneficiaries of these programs are not the poorest of the poor but moderately poor people who have a skill and a few assets. Although FUNDAP"s microenterprise program has not been in operation long enough to demonstrate employment or income impacts, its sheep production subprogram has had some income generation successes. The report summarizes the key factors influencing project performance and impact. (1) Microenterprise projects are in jeopardy due the lack of clear commitment to institution building or sustainability. (2) The creation of trade or industry-specific beneficiary groups is an effective, cost-efficient way of reaching targeted clients and leveraging resources. (3) FUNDAP"s integrated, industry-specific approach is effective when a real market exists for the improved quality and quantity of raw materials and finished products. (4) All three loan projects operated in a sound, businesslike manner. (5) The formal financial sector either does not or cannot reach the types of enterprises that benefited from these projects. (6) FAPE and FDM achieved relatively high rates of income and employment generation by targeting low-income skilled group enterprises that had a viable enterprise or idea for an enterprise. Lessons learned are as follows. (1) More attention should be placed on graduating the credit institutions aiding microenterprises rather than on graduating the microenterprises themselves. (2) The creation of new market channels for assisted enterprises is crucial. (3) The use of group or association-based training or technology transfer is particularly effective in insular, rural communities. (4) Greater employment and income generation impacts accrue from projects oriented towards servicing microenterprises than projects servicing the community through microenterprise development. (5) Women-specific programs can be successful if operated in a businesslike manner by lending on the basis of economic performance and not on the basis of female ownership. (6) Microenterprise development projects can have significant secondary impact by focusing the attention of the host government or other donors on a region or sector of economic activity. (7) The use of umbrella agencies as channels for funding appears to have limited potential to contribute to the institutional sustainability of PVO"s assisting microenterprises.