Summary analysis of the APRE/I revolving fund

The program involved loan guarantees and direct loans to intermediate financial institutions (IFI"s) that, in turn, onlent to small and medium scale enterprises (SMSE"s). This study report begins with a summary of program"s impacts; the bulk of the report consists of tables describing the lending activities of IFI"s, and several case studies of loans to SMSE"s. The objectives of the program have been met. The institutional impacts on participating IFI"s and the direct development impacts on SMSE borrowers have been significant. The program"s $32.5 million in loan guarantees and direct loans leveraged at least $126.9 million, a ratio of 5.8 to 1. Participating IFI"s have increased lending to SMSE"s and branch lending in rural areas, reduced collateral requirements (a major obstacle to borrowing by SMSE"s), increased their technical capabilities to analyze prospective loans on a rational cash flow basis, extended loan terms in some cases, increased their exposure limits in certain industries and sectors, increased lending leverage, and enhanced their competitive positions in terms of increased markets, greater lending capacity, increased technical capabilities, and experience. Direct development impacts on SMSE borrowers included the following: gross revenue and net income increased, for some borrowers by up to 40% and 32% a year, respectively; sales increased an average of 35.8%; export earnings increased, in one case by 75%; about 5,521 jobs were created, 1,764 of which were filled by women; and employees" salaries increased. The most important lesson learned is that commercial institutions, particularly financial institutions, can be a vehicle for realizing development objectives even though their main concern is generating profits. Profit can be generated, and at the same time, significant development impact achieved; indeed, sustainable development requires that these objectives coincide. USAID must design programs that meet both private profit requirements and public development goals. The APRE/I Revolving Fund is just such a program.