Small business II project, Honduras : midterm evaluation of the ANDI/PYME [Asociacion Nacional de Industriales/Pequena y Micro Empresa] component

The component is implemented by the National Industrialist Association/Small and Micro Enterprise Program (ANDI/PYME). The evaluation covers the period 1988-2/92. The institutional capacity of the Honduran PVO's was far lower at the onset of the project than anticipated. Most had only rudimentary financial, administrative, and credit policies. As a result, PYME has had to concentrate its efforts on fewer institutions than was planned. Although considerable progress has been made, the number of PVO's attaining financial self- sufficiency by the end of the project will be far below target. In addition, PVO boards of directors have resisted the establishment of effective credit policies. There is little understanding of the benefits of market interest rates and effective collection practices. Efforts to influence PVO policies in this area have been hindered by the project's failure to link the PYME program with sources of credit. PYME has functioned well with regard to technical and administrative matters, including management information systems. Training has been beneficial for both the PVO staffs and beneficiaries. However, more emphasis should be placed on product-related TA for beneficiaries, and training for PVO staff could be improved. TA to PYME from the Project Technical Unit has been both effective and essential. This assistance continues to be needed. At the current rate of expenditure, $2 million will be left over at the end of the project. Thus, it is recommended that PYME hire new staff members, shorten the approval process for PVO subprojects, and consider establishing a second-tier credit facility to channel credit funds to eligible PVO's. ANDI/PYME's prospects for financial self-sufficiency are nonexistent without any extraordinary new source of funding.