Project impact evaluation : USAID no. 519-0387-A-00-3233-00 -- small enterprise support : final report

The implementing institution, PROPEMI (Small and Microenterprise Promotion Program), is a division of the Foundation for Economic and Social Development (FUSADES), a Salvadoran PVO. Impact evaluation covers the period 9/93-5/97. The project has become one of the most effective forms of assisting SMEs in NRP and other high-poverty zones in El Salvador. A total of 1,507 loans were provided, helping assisted firms increase monthly incomes by 38% (vs. a goal of 30%), and generating 1.2 jobs per loan (vs. a goal of 1 job). The loans have helped businesses, most of which were family-owned, to improve the value of their assets, increase their savings level, augment their business funds, and improve their living conditions in terms of food, housing, clothes, education, and amusement. Although the project targeted small-scale enterprises, 72% of the businesses that received loans were microenterprises. Besides the loans, PROPEMI offered training (reaching almost 8,000 individuals) and provided loan assessments and loan administration services; both have received generally high marks and have generated income helpful to PROPEMI's sustainability. PROPEMI is a sustainable institution operatively as well as financially: its capital profitability is acceptable; it has the capacity to absorb operating expenses; it employs quality personnel; its maintenance of a flexible 20-23% interest rate (which is in keeping with the range of rates of the financial system) has enabled it to maintain a loyal clientele; and it has an outstanding repayment rate -- as of 12/96, 83% of the funds disbursed had been recuperated. It has also complied with many of the requisites for becoming a formal financial institution. As for FUSADES, its image has been strengthened by PROPEMI's outreach to new communities, especially in NRP areas. Finally, the project has made a successful effort to reach women, with 40% of loans made to women entrepreneurs. The following lessons were learned: (1) The operating and financial sustainability of SME promotion and development programs in the short term does not guarantee their sustainability in the long term. (2) Management information systems are necessary to guarantee timely and transparent registries for administering financial programs efficiently. (3) To achieve the goals and purposes of assisting marginal sectors, identifying and characterizing target groups and providing people to work with them is essential. (4) The success of microenterprise development programs does not depend on the gender serviced. Both genders have the same participation and development. (5) The financial success of a credit promotion and development program is directly related to the stability of its personnel as well as the integration of the credit component with training and TA.