Financing Microenterprises: Lessons Learned from the AID Stocktaking

Abstract

This paper summarizes the key results of the analysis recently conducted as part of AI.D. Stocktaking of its microenterprise projects and programs. A total of 32 programs in 20 countries were reviewed. The programs were divided into three types: enterprise formation, enterprise expansion, and enterprise transformation. The results include key variables such as average number of annual beneficiaries, average cost per beneficiary, average loan size, average program cost per dollar lent, average real interest rate and percent of loan funds in arrears. The financial institutions that operate enterprise expansion programs represent a clear subgroup as they reach thousands of clients and make mostly working capital loans. Most programs require subsidies but the enterprise expansion programs come closest to self-sufficiency. The key issues facing designers of microenterprise projects is the number of clients to be reached, policy regarding cost recovery, and extent to which the program will strive for self-sufficiency.