business-services

Making rural businesses bankable in Mozambique (thanks to ELDIS)

An interesting microfinance 'plus' project in rural Mozambique- see how microfinance with additional business support, market development and business association activities is effective- this holistic approach is a core in LED policy and practice. Take a look!

Most farms and small businesses in rural Mozambique lack access to finance and operate in poorly coordinated markets. This restricts rural economic development and leaves many people trapped in poverty. The active lending approach of one financial institution, Gabinete de Consultoria e Apoio à Pequena Indústria (GAPI), is helping to address these problems.

Research from the Open University, in the UK, and the Institute of Social Studies, in the Netherlands, examines the work of GAPI, a development finance institution in Mozambique. It explores how GAPI successfully combines loans with business support services to help rural industries grow.

GAPI became one of Mozambique’s first development finance institutions in 1990. Jointly owned by a German non-governmental organisation (NGO) and the Mozambican Ministry of Planning, GAPI finances its activities through the support of aid agencies and other donors.

The development of rural production in Mozambique is constrained by a number of factors. The limited availability of credit and the lack of coordination between different stages of the supply chain are major barriers faced by farms and small- and medium-sized rural businesses.

Unlike most banks in Mozambique, GAPI focuses on lending to farms and firms based in rural areas. In 2004, 66 percent of its lending financed rural production and trade (including agriculture and agro-processing).

The main characteristics of GAPI’s lending approach are: the combination of credit with business support services (thus improving the ability of borrowers to repay), supporting the whole supply chain in which borrowers operate, and the development of partnerships with other organisations. The researchers show how this distinctive approach to lending has helped promote rural industrial development in northern Mozambique. They use two case studies: the revival of cashew nut processing and the introduction of poultry farming.

The case studies show how GAPI:

• http://www.eldis.org/images/dotContent.gif); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 5px 5px; background-repeat: no-repeat no-repeat; margin: 0px;">supported cashew nut farmers by offering access to affordable credit and training
• http://www.eldis.org/images/dotContent.gif); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 5px 5px; background-repeat: no-repeat no-repeat; margin: 0px;">worked with the Cooperative League of the USA (CLUSA) to help farmers join together in associations, which increases their bargaining power when dealing with large traders and processors
• http://www.eldis.org/images/dotContent.gif); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 5px 5px; background-repeat: no-repeat no-repeat; margin: 0px;">worked with a partner organisation, the American non-government organisation TechnoServe, to help farmers find export markets for their cashews
• http://www.eldis.org/images/dotContent.gif); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 5px 5px; background-repeat: no-repeat no-repeat; margin: 0px;">worked with partner organisations to support small-scale poultry producers through training, setting up producer associations and micro loans.

The case studies show that GAPI’s active lending approach has boosted the development of two rural industries in northern Mozambique. This has helped create thousands of jobs, contributing to raising incomes and reducing poverty. It has also helped to lay the foundations for future rural industrial development.

The researchers conclude that:

• http://www.eldis.org/images/dotContent.gif); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 5px 5px; background-repeat: no-repeat no-repeat; margin: 0px;">development finance institutions do have a role to play in poverty reduction
• http://www.eldis.org/images/dotContent.gif); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 5px 5px; background-repeat: no-repeat no-repeat; margin: 0px;">not only can they provide credit and support to individual rural firms and farms, they can also aid the transformation of the rural economy
• http://www.eldis.org/images/dotContent.gif); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 5px 5px; background-repeat: no-repeat no-repeat; margin: 0px;">to do this, financial institutions should be designed to meet the specific needs of rural industries in poor countries (not modelled on institutions in rich countries).

Agricultural Development Support Project, Zambia

Enterprise development can be improved for a set of interrelated enterprises by granting those incentives and an enabling environment. The objective of this World Bank project from Zambia is to support increased commercialization of smallholder agriculture through improved productivity, quality and efficiency of value chains where smallholders participate.

Enterprise Incubator

This World Bank incubator project from Armenia exemplifies how innovative private-public mechanisms for providing business development services can be piloted. Inspiration can be drawn from the project on how to evaluate and monitor an incubator.

Improve Your Business Association

This handbook gives advice on how to deliver services to business association members, how to start up a business association in a Ghanaian context and how to manage a business association effectively.

Kigezi Business Development Services Project

The recently completed Kigezi Business Development Services (BDS) project aimed at promoting the development of BDS markets that service enterprises undertaken by poor and marginalized people. The project is a good example of an NGO (Care), the private sector and government agencies pooling resources in a collaborative fashion with participation from local governments, albeit these LG-project links were of more ad-hoc/pragmatic nature; not at the strategic level.

E-procurement in Government of Andhra Pradesh, India

This World Bank e-procurement initiative in India was aimed at linking government departments with their vendors in order to ease business for both vendors and government. The initiative shows how government business services can be improved through ICT.

Impact and Sustainability of E-Government Services in Developing Countries

This report describes a rural internet project in India, offering government services to villagers on the internet. Even though the project faced problems of sustainability, it underlines the social and economic importance of such services and the usefulness of offering them online.

Farmer Market Access Program, Armenia

This IFAD program in Armenia aims at providing innovative financing for rural enterprises. The program includes indicators for venture capital investment.

Indicators for the Commercialization of Publicly-funded Research

This study from the United Nations University aims at establishing indicators for assessing the success of commercialization of research conducted by public institutions. The study emphasizes the potential benefit for businesses of such a commercialization; however, several of the indicators are at a rather aggregated level.

IFC Emerging Markets Technology Transfer Facility (TTF)

In this study the International Financial Corporation aims at summarizing the experiences on technology transfer. Despite high costs and other challenges, the study underlines that developing countries can benefit from technology transfer, and it is outlined what role the IFC can play in the facilitation of this.