Documents and Videos of the October 12th, 1999 Meeting of the 

SPECIAL COMMITTEE ON INTER-AMERICAN SUMMITS MANAGEMENT

Hall of the Americas, Organization of American States

Fostering the Development of Micro, Small and Medium Size Enterprises

Presentation by Mr. Jeremy Smith, United States Agency for
International Development (USAID)

 

Background

USAID has been deeply involved in microenterprise development in Latin America for more than a decade. Since 1990, USAID has dedicated nearly $250 million to support microenterprise in the region.

As the lead U.S. Government Agency for Microenterprise for the Summit of the Americas process, we are committed to supporting the Santiago Summit Plan of Action. To that end, the Latin America and Caribbean Bureau has pledged $120 million in assistance between 1998-2000.

In 1994, USAID launched the Microenterprise Initiative, with critical support from the Microenterprise Coalition and certain members of Congress. Under the Initiative, which was renewed in 1997, USAID will:

  • Maintain a focus on women and the very poor, particularly through support for poverty lending
  • Help microfinance institutions (MFIs) reach greater numbers of people
  • Support institutional sustainability and financial self-sufficiency among implementing organizations
  • Seek improved partnerships with local organizations

Progress

These priorities are directly linked to the Summit Plan of Action. USAID has made significant progress toward implementing the Plan, as the following highlights illustrate:

Access

  • The number of clients served by MFIs supported by USAID in the region has reached 870,000 and is expected to go over one million by the turn of the century. The total active loan portfolio in 1998 was $679 million.
  • 62% of these clients are women.
  • 63% of funds committed in Latin America went towards poverty lending.
  • Our partners have provided safe savings vehicles for almost 1.5 million people. Total savings in USAID-supported institutions now exceed $515 million.
  • In collaboration with the Inter-American Development Bank, USAID committed $5 million for a microenterprise fund in response to Hurricane Mitch. The fund's purpose is to ensure that local MFIs have the resources available to respond to client's needs as the rebuild.
  • The Micro and Small Enterprise Development (MSED) Program utilizes USAID's guarantee authority to promote the development of micro and small enterprises (MSEs) around the globe. MSED works primarily with the formal financial sector to provide loan guarantees, bond guarantees and direct loans to encourage financial intermediaries to extend and expand credit to MSEs. To date, this program has leveraged more than $35 million in Latin America.

Policy Reform and Formalization of Microfinance Institutions

  • Several organizations in the region are becoming regulated financial institutions with USAID assistance. For example, USAID helped to create Banco Solidario in 1996. Banco Solidario is Ecuador's first fully private bank established for the purpose of serving the microenterprise sector.
  • Other organizations assisted by USAID in their transformation into regulated institutions include FINCA/Honduras, Bolivia's BancoSol, and Accion Communitaria in Peru.
  • Many other organizations are moving toward financial self-sufficiency. In fact, over 30% of the institutions supported by USAID are currently fully sustainable, while another 30% cover their operational costs.
  • USAID recently awarded a grant to ACCION International that will promote, among other important objectives, innovations in lending operations that should improve the efficiency of microfinance operations.

Non-financial Services

  • Business development services represent an increasing portion of USAID's microenterprise efforts. It currently accounts for 25% of the program in Latin America.
  • To cite one example, USAID has committed $2.4 million of five years to the Center for the Support of Micro and Small Enterprises in the Dominican Republic. The program, which began in 1997, provided training to more than 2,500 entrepreneurs in the first year alone.

Inter-Institutional Coordination

  • At the Inter-American Microenterprise forum held in Mexico City in 1998, USAID and the IDB announced a joint effort to help regulated and unregulated financial institutions to expand and consolidate microfinance services. USAID has committed$1.5 million of technical assistance to organizations eligible for the MIF's Lines of Activity.
  • More recently, USAID sponsored the 2nd Annual Latin American Bankers in Microfinance Conference, held in Brazil this past September. Participants from twelve countries, representing 26 financial institutions, discussed critical emerging issues for the sector; including technology, operations, marketing and regulation.

USAID will continue to work with our partners to implement the Summit Plan of Action. We look forward to further success in these efforts in the future.
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