Small enterprise credit

The project, a follow-on to the Rural Small Scale Enterprise Pilot Credit Activity (RSSE) funded through 2630182, will (1) capitalize a loan fund within the National Bank for Development (NBD), and (2) provide the NBD with training, TA, and other support by Cooperative Development International (ACDI). A.I.D. will provide $11 million and the NBD $3 million to capitalize a loan fund which the NBD will use to provide short-term credit to some 20,000 SMEs (firms with fewer than 15 employees and less than LE 25,000 in fixed assets) in the Cairo metropolitan area, creating or expanding 10,000 jobs in the process. Loan amounts will fall within the LE 250-5,000 range (twice that set under RSSE, due to the higher costs of operating a business in the Cairo area). Borrowers will be required to place a minimum of 10% of the loan amount in an interest-bearing NBD savings account. The loan program, which will operate as a separate activity within NBD, will be administered by 250 young Egyptian professionals who will be contracted to act as loan officers, management information system operators, and supervisory and support personnel. Loan officers will receive 2 weeks of classroom training in SME loan administration from NBD and ACDI, and will spend 1-2 weeks observing RSSE activities. In addition, NBD branch managers may receive brief, seminar-type training to explain project operations. Upon completion of training, the loan officers, headquartered in 16 existing NBD branches, will begin weekly visits to designated neighborhoods to seek out potential clients and help them with loan applications. While the loan officers will not provide formal TA to clients, they will help them to gain the basic financial skills needed to make cash flow projections. A computerized management information system will be used to regularly generate reports on loans made, amounts outstanding, borrower gender, savings generated, and operational costs and project income (leading to a break-even analysis). The project will finance fixed costs -- office equipment (workstations and fax machines for each branch) and staff training -- and initial operating costs (primarily staff salaries). This support will cease when the project breaks even, when USAID-sourced loan capital is fully in circulation, or 18 months from the date upon which end-use lending begins, whichever comes first. Amendment of 7/31/94 extends the PACD to 10/97, expands the geographic scope to include Upper Egypt, and adds $16 million in USAID funding and $3 million in NBD funding, increasing the total number of SME loan clients expected to be served to 38,000. (PD-ABL-562) Amendment of 3/30/96 increases project funding to $35 million, extends the PACD to 9/30/01, and expands the project"s scope. The newly amended project will continue to provide services to enterprises in the greater Cairo area through the NBD, while the Credit Guarantee Corporation (CGC) will provide financial and technical support to a variety of institutions through which small and micro entrepreneurs can be reached beyond the greater Cairo area. These institutions will include PVOs, community development associations, new or existing foundations registered with the Ministry of Social Affairs, banks, and other organizations registered under Government of Egypt laws and regulations. In addition to the activities under CGC, USAID will directly support the SME services of the Mansoura and Hurghada Business Associations. (PD-ABN-884)