Small business development II (ANDI grant)

Evaluation covers the period 1988-6/93. The concept of an umbrella organization to provide an array of services to PVOs remains valid due to the economy of scale which reduces the cost of services. However, the National Industrialist Association (ANDI)/Small and Micro Enterprise Program (PYME) will not become self-sustaining because of its role solely as a second-tier (an organization supportive of other organizations) organization. In order to promote sustainability, PYME"s role has to be modified to introduce other income generation activities such as a second floor financial operation (an organization that provides credit funds to other financial institutions) scheme. The institutional level (developmental capacity) of Honduran PVOs was far lower than anticipated in the grant proposal. Financial, administrative, and credit policies were rudimentary in most PVOs at the onset of the project. As a result, the outreach of the PYME project was smaller and the time and effort devoted to each PVO were greater than originally planned. ANDI/PYME"s efforts to influence PVO policies and encourage financial self-sufficiency have been hindered by the project"s failure to provide any linkage between the PYME program and sources of credit funding. This has left the PVOs with the need to search for funding from a variety of sources; the number of PVOs expected to be financially self-sufficient by the PACD is low. The following lessons were learned. (1) A key element in the equation of financially self-sufficient PVOs is portfolio size. The project design should have linked TA with funds for portfolio expansion. However, the design did not contemplate any linkages between TA and credit. As a consequence, PYME"s leverage was weaker than expected. (2) To achieve impact, special efforts should be made to overcome the general lack of understanding within the PVO community of the benefits flowing to microentrepreneurs from favorable financial policies. (Author abstract, modified)