Transcript Micro Finance in Promoting Export and Entrepreneurship

July 18 -20, 2005
Dakar, Senegal
Topic: Micro Finance in
Promoting Export and
Entrepreneurship
By Vivian H. M. Attah (Mrs.)
[email protected]
Training Coordinator
GIMPA DLC
July 18, 2005
Dakar, Senegal
Introduction
Micro Finance
• Micro financial support refers to small financial
transactions to small and medium scale
enterprises
• Micro-enterprise is also referred to as, small
scale businesses that are operated by
individuals and groups
– Despite their size and limited market, microenterprises are the fastest growing part of the private
sector
– Has immense importance to the economies of Africa
Sources of Micro Finance
• Formal institutions (commercial and
development banks, non-bank
financial institutions, financial PLC),
• Semi-formal institutions (credit unions
and NGOs) and
• Informal sources (traditional systems,
moneylenders)
FOCUS
• Providing micro financial support to
promising small and medium scale
entrepreneurs to setup, expand and
sustain micro-enterprises in Sub
Sahara Africa
• Beneficiaries are individuals or
groups
Strengths of Topic Is Based On
Fact That:
• Micro financing enhances economic
development
• Emphasizes need for financial aid to small
scale entrepreneurs as well as prospective
enterprises in the low income bracket
• Has real potential of improving product
quality, quantity and promoting export and
entrepreneurship
Strengths of Topic Is Based On
Fact That: (cont.)
• Address unemployment and wealth creation
• Has the potential to provide social mediation
services
– Group formation
– Development of self confidence
– Literacy training (e.g. financial literacy and
management capabilities)
– Health care
– Skills training
– Marketing
– Etc.
• Policy implication of micro financing
Micro Finance Services Available to
Entrepreneurs
•
•
•
•
•
•
•
•
Savings
Credit
Insurance
Payments e.g. for agricultural inputs, paying
resource persons, etc
Small loans e.g. working capital
Capacity building
Repeat and larger loans, based on repayment
performance
Streamlining loan disbursement and monitoring
Challenges
• Identifying businesses worth financing (to avoid
losses and ensure efficiency in the use of funds)
• Production capacity (lack of volumes)
• Information acquisition:
– Markets (consumer preferences, etc.)
– Resources and production techniques
– Micro-finance supports
• Recouping of funds
• Policy implications (how do financial and nonfinancial institutions make sure the right people
get the needed assistance, loans are recouped,
businesses are successful and sustainable)
Control Mechanisms
• Integrated approaches/strategies
• Informal appraisal of borrowers and
investments;
• Collateral substitutes, such as group
guarantees or compulsory savings;
• Peer pressure to enforce contractual
obligations (solidarity groups);
Control Mechanisms (cont.)
• Access to repeat and larger loans,
based on repayment performance;
• Streamlining loan disbursement and
monitoring;
• Secure savings products.
The Way forward
• Capacity building
– Encouraging group formation
– Developing their entrepreneurial skills
• Making funds available to credit
worthy individual and groups
• Effective monitoring and evaluation
Summary
Issues addressed so far are:
• Reasons why small enterprises should be
supported
• Forms of micro financing support to provide to
micro enterprises
• Which entrepreneurs can benefit from the
support
• Of what significance is micro-financing in
promoting export and entrepreneurship
• The ultimate implications of micro financing in
poverty reduction, wealth creation and national
development
Thank You For Your for
Patience