Micro Finance for Export Growth

1. July 18 -20, 2005 Dakar, Senegal

2. Topic: MicroFinance in Promoting Export and Entrepreneurship By Vivian H. M. Attah (Mrs.) Gha_vattah@gdln.org Training Coordinator GIMPA DLC July 18, 2005 Dakar, Senegal

3. 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, micro-enterprises are the fastest growing part of the private sector • Has immense importance to the economies of Africa

4. 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)

5. 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

6. 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

7. 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

8. 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

9. 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 non-financial institutions make sure the right people get the needed assistance, loans are recouped, businesses are successful and sustainable)

10. 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);

11. Control Mechanisms (cont.) • Access to repeat and larger loans, based on repayment performance; • Streamlining loan disbursement and monitoring; • Secure savings products.

12. 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

13. 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

14. Thank You For Your for Patience