December 2001

Photo by Wally Kroeker of the Mennonite Economic DevelopmentAssociates/Mozambique

Microenterprise Development 

In A Changing World

U.S. Agency for International

Development Microenterprise

Results Reporting for 2000
USAID Microserve Indefinite Quantity Contract Numbers: PCE-0406-I-00-6012-00, 

PCE-I-00-96-90012-00, Delivery Order #5, Microenterprise Results Reporting; and, 

USAID Contract No. PCE-I-00-908-00012-00, Task Order # 06, with the Barents Group of

KPMG, LLC, Under Subcontract No. AID-99-I-00012-000-0029, Technical Assistance Order #3

Submitted by Weidemann Associates, Inc.

To USAID/Bureau for Economic Growth, Agriculture, and Trade/

Office of Microenterprise Development (USAID/EGAT/MD)

By Catherine Neill, Weidemann Associates, Inc. under the direction of

Elizabeth Hunt, USAID Supervisor for MRR, and Katharine McKee, Director

USAID/EGAT/MD
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD III

CONTENTS

Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

II. Terms of the Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

III. A Foundation for the Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A. Microfinance in a Changing World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

B. Business Development Services in a Changing World. . . . . . . . . . . . . . . . . . . . . . . . . . . 13

IV. How USAID Supports Microenterprise Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

A. USAID Field Missions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

B. USAID Central Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

V. Microenterprise Funding in 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

VI. Microenterprise Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

A. Microfinance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

B. Business Development Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

C. Policy Advocacy and Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

VII. Microenterprise Development for a Changing World . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Annexes

A. USAID Microenterprise Funding by Country, 1991-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 39

B. Microenterprise Results Reporting Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Tables and Figures

Table 1. Sources of USAID Funds for Microenterprise 

by Appropriation Account, 1991-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Table 2. FY 2000 Funding by Region of Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Table 3. Uses of FY 2000 Funding by USAID Bureau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Table 4. Percentage of 2000 USAID Funds Committed to Poverty Lending . . . . . . . . . . . . . 26

Table 5. Clients of Lending Institutions in 1999 and 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Table 6. Average Loan Balance and Percentage of Women Clients in 2000. . . . . . . . . . . . . . . 31

Table 7. Number of Savers and Savings Amounts in 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Table 8. Average Repayment and Loan Loss Rates, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Table 9. Clients of USAID-Supported BDS Programs, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . 36

Table 10. USAID’s Microenterprise Survey Respondents, 2000. . . . . . . . . . . . . . . . . . . . . . . . . 43

Table 11. Microenterprise Activities Funded in 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Figure 1. Amount of Portfolio for Lending Institutions in 2000 . . . . . . . . . . . . . . . . . . . . . . . . 32

Figure 2. Percentage of Clients with Poverty Loans in 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Figure 3. Percentage of Clients in Rural Settings, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Figure 4. Sustainability of USAID-Supported Institutions, 2000 . . . . . . . . . . . . . . . . . . . . . . . . 35
IV MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD V

ACRONYMS

ACDI/VOCA Agricultural Cooperative Development International/Volunteers in Overseas

Cooperation and Assistance

ACP Acción Comunitaria del Perú

AERA Accelerating Economic Recovery for Asia (USAID)

AFE Action for Enterprise

AIMS Assessing the Impacts of Microenterprise Services

ANE Asia and the Near East Region (USAID)

BDS Business Development Services

BHR Bureau for Humanitarian Response

BRI Bank Rakyat Indonesia

CACEDRF Central America and Caribbean Emergency Disaster Recovery Fund

CORE Child Survival Collaborations and Resources Group

CRS Catholic Relief Services

DA Development Assistance

DAI Development Alternatives, Inc.

DCA Development Credit Authority 

DCHA Democracy, Conflict and Humanitarian Assistance (USAID)

DCS Office of Development Credit (USAID)

DdG Dialogo de Gestiones

E&E Europe & Eurasia Region (USAID)

EGAT Economic Growth, Agriculture and Trade (USAID)

ESF Economic Support Funds

FOMIR Programa de Fortalecimiento de Las Microfinanzas Rurales

FSA Freedom Support Act

FY Fiscal Year

GDA Global Development Alliance

GH Global Health (USAID)

HIID Harvard Institute for International Development

IGP Implementation Grant Program

KCLF Kazakhstan Community Loan Fund

LAC Latin America and Caribbean Region (USAID)

M-CAP Masvingo Credit Against Poverty

MBP Microenterprise Best Practices 
VI MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

MEDA Mennonite Economic Development Associates

MFI Microfinance Institution

MIP Microenterprise Innovations Project

MRR Microenterprise Results Reporting

NGO Nongovernmental Organization

NOA New Obligating Authority

PRIME Program for Innovation in Microenterprise

PVC Office of Private and Voluntary Cooperation (USAID)

PVO Private Voluntary Organization

SADRF Southern Africa Disaster Reconstruction Fund

SAI Special Assistance Initiative

SEED Support for Eastern European Democracy

SEEP Small Enterprise Education and Promotion 

USAID United States Agency for International Development

VITA Volunteers in Technical Assistance

WOCCU World Council of Credit Unions
EXECUTIVE SUMMARY

The United States Agency for International

Development (USAID) annual report,

“Microenterprise Development in a Changing

World,” presents the results of its microenterprise development support in fiscal year (FY)

2000. As this year’s report was being compiled,

the events of September 11, 2001 placed the

Agency’s efforts to support the entrepreneurial

initiatives of the world’s poorest households in

a new context. U.S. financial markets took a

downturn as confidence in the future was shaken. Even deep cuts in interest rates failed to

rally Wall Street in the weeks after the deadly

attacks on the World Trade Center in New

York. Americans’ job security, already feeling

the effects of a slowdown in the information

technology industry, was further eroded as

businesses dependent on travel and tourism

laid off workers. For most Americans, the economic impact of these changes is likely to be

temporary, cushioned by insurance, and other

safety nets afforded by a large, wealthy, and

stable economy. For many Americans, the

experience of uncertainty and risk introduced

by the attacks was a taste of what millions of

people around the world experience as a part of

their daily lives.

For most poor people in developing countries,

uncertainty and risk are facts of life well beyond

their control. Poor weather can threaten crops

and livestock and limit a family’s agricultural

production. Natural disasters can destroy poor

communities and all their economic activities.

An economic downturn caused by a drop in

world prices for a major export crop, such as

coffee, ripples through a society, affecting the

livelihood of its poorest members; these individuals have no insurance and no government

support to fall back on. Ill health, perhaps due

to HIV/AIDS, can affect the family breadwinner and cause the whole family to suffer. 

USAID’s microenterprise development programs address the vulnerability of poor households around the world through support to

microfinance, business development services

(BDS), and policy advocacy. Microfinance has

helped millions of poor families and microentrepreneurs manage risk and adjust to difficult

environmental events. 

USAID has also increasingly promoted BDS to

help microentrepreneurs realize greater

returns, especially in rural areas. Many initiatives are underway to test sustainable business

services that link poor entrepreneurs to better

markets and boost their productivity.

USAID continues to place high value on establishing an appropriate policy and regulatory

environment for microenterprise development.

USAID recognizes that sound government

leadership is essential to create the stability that

supports entrepreneurial investment and

steady accumulation of assets and wealth.

Microenterprise development is a key component of USAID’s strategy for economic development and poverty reduction. While assisting

households to meet basic needs and protect

themselves against shocks, microenterprise

programs also help build stronger and more

stable communities, encourage civil society,

and promote gender equity. 

During the past 20 years, USAID has consistently led all bilateral donors in its funding of

microenterprise programs. USAID is now

working with more than 700 microenterprise

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 1
institutions worldwide. Many more receive

indirect support through USAID grantees and

partners that provide technical assistance or

funds to local organizations. Of the 88 countries in which USAID worked in FY 2000, at

least 58 have active microenterprise programs. 

Through a variety of channels and at different

levels, USAID programs in FY 2000 helped

microentrepreneurs address the many challenges they face and reduce their vulnerability

to events beyond their control. USAID’s leadership is shaping an environment to help poor

people plan for and realize their dreams in a

changing world. 

Highlights of USAID microenterprise development programs in FY 2000 include: 

■ Sustaining a significant financing 

commitment: By providing $164 million

worldwide to strengthen the microenterprise sector, the Agency surpassed the $155

million level authorized by the U.S.

Congress in the Microenterprise for SelfReliance Act of 2000. Currently, USAID

anticipates meeting the targets for FYs

2001 and 2002. 

■ Reaching the poorest and most vulnerable: The annual survey of partner 

institutions indicates that half of all

microenterprise funding was devoted 

to meeting the needs of very poor 

microentrepreneurs. 

■ More than 2.1 million clients had loans

through other USAID-assisted programs.

Of these clients, 70 percent were women.

Two-thirds of the loans held by partner

and grantee institutions were in sizes typically demanded by poor clients, or poverty loans. The institutions had combined

portfolios of $867 million. The average

loan balance for all loans was $401.

■ A record 2.7 million borrowers received

loans from a single partner institution,

the Bank Rakyat Indonesia (BRI), with

an outstanding portfolio of $893 million

and average loan size of $329. 

■ BRI had 25 million savings clients with

total savings deposits of $2.0 billion;

average individual deposits were $78.

USAID-assisted institutions, other than

BRI, had over 3 million savings clients

with combined savings deposits of $533

million. Average savings per client

increased by 50 percent from $113 in

1999 to $169 in 2000. 

■ Broadening the range of services available to the poor: Almost two-thirds of

USAID’s total funding was directed to providing financial services, principally for

credit and savings institutions. Recognizing

an increasing demand for other financial

products, however, USAID extended 

support to insurance and payment services.

Support to stimulate entrepreneurs’ access

to BDS boosted incomes through improved

product development and design, technology transfer services, access to improved or

lower cost inputs, business and skill training, advice, and information services.

■ More than 250,000 microenterprise

clients benefited from USAID assistance to BDS programs. Through these

programs microentrepreneurs received services, such as market research, marketing

assistance, new product development and

testing, technology transfers, and business

counseling. These services enabled them to

maximize credit benefits from microfinance

services. USAID-assisted BDS programs

encouraged private sector support and

delivery of services to build a solid base for

expanding the scale and sustainability of

BDS to microentrepreneurs.

2 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD
■ Leveling the playing field for the most

disadvantaged enterprises: A number of

partner organizations engaged in policy

research and advocacy focused on helping

to develop and institute appropriate 

microfinance laws and regulations.

USAID-supported institutions also

addressed business regulation and licensing,

foreign trade, nongovernmental organization (NGO) regulation, and equitable

access to services. The number of microentrepreneurs benefiting from such policy

changes far exceeds the number assisted

directly through microenterprise 

institutions. 

USAID is justifiably proud of its leadership in

the microenterprise sector and the support that

its programs provide to millions of poor families around the world. The Agency recognizes

the important commitments that its partner

organizations are making. The fact remains,

however, that millions of poor families and

microentrepreneurs still live economically precarious lives. The challenge in these changing

times is to reduce the vulnerability of the more

than 2 billion people who live on less than $2 a

day. Through the empowering value of microfinance and successful microenterprise development, USAID is helping to meet this

challenge.

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 3
I. INTRODUCTION

For most poor people in developing countries, uncertainty and risk are facts of life,

often well beyond their control. Poor weather

can threaten the productivity of crops and livestock, and thus the basis of family survival. An

economic downturn engendered by a drop in

world prices for a major export crop, such as

coffee, ripples throughout a society and poor

producers have no insurance, no government

support to fall back on. Ill health, perhaps related to HIV/AIDS, affects the family’s breadwinners and the whole family suffers. 

Microenterprise activities—the small businesses of the poor—help households cushion themselves against unexpected crises. Income from

microenterprises generates small amounts of

savings, while providing for essentials such as

food, clothing, medical care, and school fees. 

Microentrepreneurs throughout the world

have long adapted to unstable circumstances.

They have shown remarkable resilience in the

face of natural and man-made disasters. Even

in refugee camps, people living under conditions of extreme duress find a way to undertake

microenterprise activities. 

Microenterprise institutions are the vanguard

of support to vulnerable households around the

world. Financial services, especially safe and

reliable savings and loans, are often critical for

those who need access to capital when an unexpected event occurs, such as a family member’s

death or a flood that ruins crops. BDS help

microentrepreneurs improve production and

break major constraints that limit the amount

of income generated through micro-businesses. Such services are offered on a wider scale

and in greater variety than ever before, thanks

to the support of USAID and other donors. 

Microenterprise development is a key component of USAID’s strategy for economic development and poverty reduction. While assisting

households to meet basic needs and protect

themselves against shocks, microenterprise

programs also help build stronger and more

stable communities, encourage civil society,

and promote gender equity. USAID is now taking further steps to strengthen and promote

the microenterprise sector as a reliable path

toward improved incomes, assets, and security

for poor households. 

This report summarizes the Agency’s support

to the microenterprise sector in FY 2000.

USAID continues to be a leader in this sector.

Its programs provide support to millions of

poor families around the world. USAID also

recognizes the important commitments of its

4 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

A client of the Grameen Village Phone project. 

Photo courtesy of Grameen Bank/Bangladesh.
partners. This report highlights USAID’s institutional partners’ services that have helped

millions of clients respond to business opportunities and reduce their vulnerability to

change and uncertainty. Nevertheless, there

are millions of poor families and microentrepreneurs who live economically precarious

lives. The empowering value of microfinance

and successful microenterprise development

can help meet these individuals find greater

stability in a changing world.

Each year, the USAID annual microenterprise

results report highlights key developments and

successful institutional partners in microenterprise development. USAID works with such a

large number of organizations that it cannot

mention every one. The annual report highlights a few institutions, such as FINCA, that

are implementing innovative approaches to

assist microentrepreneurs. Each institution has

made a difference in the market where it does

business, and each has contributed to the

tremendous dynamism in the microenterprise

development field. 

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 5

Sherida Mkama, mother of ten and FINCA/Tanzania client,

sells her home-grown tomatoes to pay her children’s school fees. 

Photo by Mary Plummer of FINCA International.

FINCA: Addressing Health Emergencies 

in Africa Through Village Banking

In 1992, as the toll of HIV/AIDS was growing larger in Africa, FINCA found that many of its village

banking clients were caregivers either for those suffering from HIV/AIDS or for orphans whose

parents had died from the disease. To reach these financially and emotionally strapped clients,

FINCA began tailoring its microfinance model to address health emergencies. In Uganda, where

working class families can spend up to 75 percent of their disposable income on health care,

weekly meetings of village banking groups, comprised mostly of women, have become platforms for AIDS education. FINCA members have also qualified for group rates for health and life

insurance. Currently serving more than 30,000 clients, FINCA Uganda has experimented with

more flexible loan policies and repayment periods, higher loan amounts, and a new system for

rewarding good clients. These programs helped FINCA Uganda grow its portfolio by 44 percent

in 2000.

Courtesy of FINCA International
II. TERMS OF THE TRADE

What are microenterprises? 

Microenterprises are small, informally organized businesses that are owned and operated

by the poor throughout the world. By USAID’s

definition, microenterprises include 10 or

fewer employees, including unpaid family

workers. Using the number of employees as a

threshold, many profitable businesses in the

developed world could be defined as microenterprises, but by limiting the scope to businesses where the owner/operator is poor, the focus

shifts again to the most vulnerable households

in higher-risk environments. In many countries, especially in Africa and Asia, the microenterprise sector constitutes the majority of the

working population.1 The sector’s growth rate

is also often higher than any other because of

its ease of entry. Particularly during times of

crisis or hardship related to conflict, natural

disaster or recession, microenterprise activity

increases as families seek new means of generating income to cope with these shocks. 

USAID’s evolving definition of microenterprise includes a wide range of agriculture-related activities, such as oil-seed processing,

horticulture, vegetable canning, and dairy production. For fund accounting purposes within

the Agency, support for staple crop production

or basic farming activities is tracked independently of microenterprise. Recognizing the

complex interaction between agriculture and

off-farm activities in the rural household economy, USAID is actively engaged in dialogue

with other donors and implementing partners

on how best to address the needs of agricultural households. An example from PRISMA in

Peru (see p. 7) demonstrates how, in practice,

support to microenterprise activities often contributes directly to the agricultural economy

and the well-being of agrarian households. 

What is microenterprise

development? 

Microenterprise development refers to the

programs and institutions that provide assistance to microenterprises and the households

they support. The players or stakeholders within the microenterprise development field

include the following: 

■ Owners/operators of the micro-businesses; 

■ Households around the world that depend

on the income from these tiny businesses

for survival; 

■ Organizations that assist microentrepreneurs to enhance their productivity

and business returns through the provision

of technical assistance, marketing, or other

business related services; 

■ Non-profit and for-profit organizations

that provide financial services directly to

microentrepreneurs for business and consumer purposes; 

■ Organizations that facilitate the provision

of business and financial services to

microentrepreneurs, either by developing

BDS markets or by providing technical

assistance and financing to retail microfinance institutions; 

■ Technical experts who contribute to the

field through research, program design and

implementation, and documentation of

field results; 

6 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

1 A 1998 survey of Zimbabwe found that informal small and micro entrepreneurs constituted 60 percent of working adults. This was an

increase of 50 percent over what was found in a 1991 survey, prior to the current economic crisis. 
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 7

■ Private investors who have invested in the

most successful and profitable microenterprise programs; 

■ Local and national governments that are

working to create better policy and regulatory environments for microenterprises and

the institutions that serve them; and

■ Bilateral and multilateral donors that have

committed financial resources to build

capacity in microenterprise assistance organizations and advance best practices. 

What is microfinance? 

Microfinance is the sub-field of microenterprise development that involves the provision

of financial services to microentrepreneurs and

their households. Financial services offered to

microentrepreneurs include savings deposit

services, loans, insurance, and transfer services.

The list continues to grow as microfinance

institutions develop new products in response

to client demand. 

PRISMA: Microenterprise in the Agricultural

Household Economy

PRISMA, a Peruvian NGO, initiated its Micro Credit Program, (PASA or Food Security Assistance

Program), in 1995 after conducting a socio-economic study in six districts. The conclusion of

this study was that new and long-term sources of income were needed to effectively address

acute malnutrition for the households in those regions. The original program consisted of loans

to individual farmers and small business operators and had little prospect for achieving self-sufficiency. In 1997, the program was redesigned to aim toward long-term program sustainability in

accordance with USAID’s microenterprise policy. Since that time, lending has been done through

village banks and solidarity groups, based upon mutual guarantees. 

In June 2001, the Micro Credit Unit had 35,563 active clients, an active portfolio of $6.6 million,

and an average loan size of $186. PRISMA’s operational sustainability now stands at 110 percent.2

In the last four years, PRISMA has become a microfinance leader in Peru, recognized by international, private, and public sector organizations for its work with women and the poor. PRISMA’s

experience shows clearly that organizations willing to use innovative methods and technologies

can reach the very poor and still achieve sustainability. 

A PRISMA client, Adela Huayhua Palomino began her first loan cycle with a loan of 300 Peruvian

soles ($85). Her only guarantee was a small piece of land on which she cultivated a tiny crop of

alfalfa. She made very little money and her family lived on the brink of starvation. With that first

loan, she went into animal husbandry, buying sheep and other animals to herd. In her second

cycle she received a loan of 600 Peruvian soles ($170) that she used to increase her alfalfa crop

and expand her herd. In her third cycle, Adela obtained a loan of 900 Peruvian soles ($255), to

further increase her production of alfalfa, which she now sells daily in the Huamanga city market. She also has two milk-producing cows that produce 18 liters of milk for sale daily. 

2 To calculate sustainability, the following was taken into account: income minus sales tax (18 percent)/operating costs, including the

replacement of capital losses and bad debt provisions, in accordance with the policies of Peru’s Superintendency of Banking and

Insurance.
What are poverty lending

programs? 

USAID has long emphasized the need to reach

the poorest households through its development efforts. Many microfinance institutions

develop strategic approaches that target the

very poor. Program features that are appropriate for poorer clients may include group guarantees (as a substitute for traditional loan

collateral) and very small loan sizes with frequent loan repayments. Savings services should

be flexible, permitting clients to save as they can

in very small amounts, and allow withdrawal

without penalty when unexpected opportunities

or emergencies arise. Loan size, while not an

actual measure of the client’s poverty status, has

become the leading proxy indicator for estimating the extent of service to poorer clients.

USAID and its microenterprise development

partners use this proxy to gauge the poverty status of their microfinance clientele. Many programs also use other measures to direct services

to poorer clients and assess their poverty and

vulnerability. 

In accordance with the Microenterprise for

Self-Reliance and Anti-Corruption Act of

2000, at least 50 percent of all USAID

resources devoted to microenterprise are to be

aimed at very poor entrepreneurs. Poverty 

loans were defined by region as those in

amounts of: 

■ $300 or less in Asia, the Near East, and

Africa; 

■ $400 or less in Latin America and the

Caribbean; and 

■ $1,000 or less in Eastern Europe and

Eurasia.

USAID accounts for its allocation of resources

to the poor through both microfinance and

BDS programs. The percent of USAID funding to microfinance programs is prorated based

on the proportion of the microfinance portfolio held in poverty loans. USAID funding to

BDS programs is prorated based on the percentage of BDS clients with poverty loans.3

What are business 

development services (BDS)?

BDS are offered to microentrepreneurs by a

variety of organizations to help microentrepreneurs increase business returns, build

capacity, or initiate new economic activities.

BDS includes many services, such as marketing

assistance, product development, business

training, advisory or information services,

assistance with productivity-enhancing technologies, and linkages to financial services.

8 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

3 The loan to the BDS client could be from either the BDS provider or another lender. 
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 9

III. A FOUNDATION FOR THE FUTURE

USAID has been the leading bilateral donor

of funds and technical assistance to

microenterprise development programs for the

last 20 years. Since 1988, when USAID began

formally tracking its microenterprise funding,

USAID has committed over $1.5 billion to support microenterprise development. USAID’s

contributions for the next two years are projected to exceed $310 million. During the past 20

years, as the result of a major effort on the part

of organizations and governments committed

to assisting the world’s poor, huge strides have

been made in developing systems and methods

suitable for the effective delivery of microenterprise services, particularly financial services. 

A. Microfinance in a 

Changing World

Today millions of men and women living in

high-risk environments are able to take advantage of financial services provided by thousands

of organizations. These organizations have

shown they can perform small transactions,

offering loans as small as $5 and savings

deposits as small as $3, to

huge numbers of people.

While access to finance is

not the ‘magic bullet’ for

those living in poverty, it is

one of the important ingredients of economic opportunity and security. 

Achieving

Sustainability

Every year more microfinance institutions (MFIs)

achieve the scale and efficiency that are the basis for sustainable operations. The number of organizations providing

safe and affordable financial services has

expanded to the point that real competition has

emerged in a number of countries. Competition

between MFIs often benefits clients through

better products, improved customer service,

and lower interest rates. In countries such as

Bangladesh, Bolivia and Uganda, where microfinance institutions have proliferated, competition has led to innovation and operational

efficiency. To maintain market share and better

serve customers, microfinance institutions must

offer a range of flexible financial products in

addition to working capital loans. 

The demand for financial services by the poor

continues to outpace supply. In some microfinance markets, such as Bolivia, the number of

clients of microenterprise institutions even

surpasses the number of clients in the commercial banking system. In Kyrgyzstan, for

example, the loan portfolio in local currency

of the eight leading MFIs is almost twice that

of the commercial banks. 

Two clients of ACDI/VOCA’s Kazakhstan Community Loan Fund (KCLF).

Photo by Janice Stallard of KCLF.
In every region of the world, microfinance

institutions have proven what was at one time

mere speculation: Poor people are valuable

clients of the financial institutions that serve

them, and serving that niche can be financially

viable. Not only are the poor good savers, they

are good credit risks. 

Extending the depth and scope of outreach

are important for microfinance institutions

that want to become sustainable. To achieve

this, a number of U.S.-based private voluntary

organizations (PVOs) have created large

microfinance networks through which they

reach significant numbers of clients. These

include: ACCION International (463,000

clients); Care International (390,000 clients);

Opportunity International (323,000 clients);

Catholic Relief Services (307,000 clients);

Save the Children (87,000 clients), and the

Grameen Trust (works with 89 institutions in

28 countries). 

USAID has long emphasized the need for

microfinance institutions to become financially

independent, and, in fact, many have, already

achieved financial sustainability. Financial

independence means independence from ongoing subsidies. Many institutions have shown

that they can achieve this efficiency level in

their operations while maintaining a focus on

poorer clients. Many institutions that are no

longer reliant on donor subsidies have now

crossed the threshold to access commercial

sources of capital, including savings deposits

from the general public.

10 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Kazakhstan Community Loan Funds Achieves

Sustainability Without Losing Its Focus on the Poor

The Kazakhstan Community Loan Fund (KCLF), was founded in 1996 with funding from USAID

and the Soros Foundation and technical assistance from ACDI/VOCA. From its inception, KCLF’s

goal has been to increase women’s participation in the economy. In May 2001, KCLF had 3,500

active clients, of whom 81 percent were women. Average client loan size was $258. Today, KCLF

fully covers its operating costs through its interest income and fees, demonstrating that it is

possible to achieve sustainability while working with very poor clients. Recently, KCLF added subsector-focused BDS services to its product line for clients desiring to build their businesses.4

Using the model of KCLF in Kazakhstan, ACDI/VOCA has recently undertaken microfinance activities in the Ferghana Valley of Tajikistan and Uzbekistan. By adapting proven methodologies to

the operational environments in Tajikistan and Uzbekistan, ACDI/VOCA will establish two sustainable microfinance institutions that will create opportunities for income generation and employment throughout the area. The peer group methodology will also facilitate the notion that

individuals can work together through solidarity groups to their mutual advantage. In an area of

economic disruption, ethnic unrest and insecurity, the ability of groups to function in a mutually

beneficial way is a significant step towards stability.

4 Sub-sector approaches are those that work with businesses in an input and supply chain. The shoe sub-sector, for example, includes

tanners, leather workers, shoemakers, wholesale shoe sellers, and retail shoe sellers. 

Courtesy of ACDI/VOCA.
While long-term sustainability is critical,

USAID has, in tandem, promoted program

expansion so that more of the world’s poor

can benefit from financial services. Where

some institutions continually turn to donors

for assistance to expand operations, other

organizations are able to self-finance their

expansion by implementing improved

economies of scale. Credit unions, which

mobilize savings from members, have been

particularly effective in self-financing growth.

The credit union movement continues to

thrive, reaching large numbers of microentrepreneurs throughout Eastern Europe,

Latin America, Asia, and Africa. In FY 2000,

USAID assisted WOCCU’s programs in

Ecuador (746,000 clients), Bolivia (255,000

clients), the Philippines (132,000 clients),

Kenya (118,000 clients), and Romania (109,000

clients).

Commercialization of

Microfinance

The greater extension by banks and other commercial institutions into microfinance markets is

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 11

Katalysis Partnership Organizations Help

Microentrepreneurs Grow Their Businesses 

The Katalysis Partnership is a regional network that reaches 91,000 clients through 11 Central

American microfinance institutions. The 11 institutions provide small loans to poor microentrepreneurs, 72 percent of whom are women. Some partners also provide savings, insurance,

housing loans, loans for community infrastructure projects, and BDS. A U.S.-based partner,

Katalysis, and a Honduras regional field office support network members with technical assistance

and loan capital. The network allows for efficient transfer of methodologies, technologies, and

new products and services. 

One year ago, Mario Cibilla, a 21-year-old bike repairman, became a client of FUNDENUSE, Katalysis’

partner in Ocotal, a poor region of Nicaragua. He has received four loans since then. 

He repaid the first loan for 2000 Cordobas ($160) on time and repaid subsequent loans ahead 

of schedule; his current loan of 10,000 Cordobas ($800) is nearly repaid. What has he done with

these loans? First, he built a small repair shed for his business with a roof. Then he purchased

some basic bike repair equipment, and now he carries a small inventory of bike parts and add-ons.

Slowly he is building his business and increasing his family’s economic security. 

Mario Cibilla in the bike shop he built and stocked with four

loans from FUNDENUSE.

Photo by Margaret Diener of KatalysisNorth South Partnership.

Courtesy of Katalysis.
changing the complexion of microfinance.5 Not

long ago, commercial banks seemed completely indifferent to microenterprises, yet today,

many commercial actors have opened special

micro-lending windows, particularly in Latin

America. In the early 1990s, when donors

sought to promote bank involvement in

microenterprise lending, USAID and other

donors provided portfolio loan guarantees and

concessional funds as an incentive to the banks.

Today, as these commercial actors explore new

markets, they draw on their own resources to

fund these new programs, assuming 100 percent of the credit risk. 

By and large, the commercial bank programs

are reaching microenterprises that are more

established, although it is not uncommon to

see loans under $500 given to poorer

entrepreneurs. While some banks have

encountered difficulty in incorporating a

microfinance product, many others appear

committed to making the adjustments necessary to work with microentrepreneurs. In this

changing environment, donor support for bank

‘downscaling’ has begun to shift from financial

incentives to technical support. USAID has

actively supported technical assistance to banks

in Ecuador, El Salvador, Guatemala, Haiti,

Honduras, Kenya, Jordan, the Philippines, and

West Bank/Gaza. 

12 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Microenterprise Development and HIV/AIDS

As a part of its Assessing the Impact of Microenterprise Services (AIMS) research agenda,6 USAID

has taken the lead in helping microenterprise practitioners understand the effects of HIV/AIDS on

microfinance institutions, their clients, and communities.7 USAID/Zimbabwe has long supported

Zambuko Trust, an Opportunity International affiliate with over 10,000 clients. An AIMS

assessment8 found that Zambuko’s financial programs have had a positive impact on extremely

poor households when savings were started before a crisis situation such as an illness or death in

the client’s family. Long-standing program members experienced the greatest benefit, including

stability in net revenues and assets and greater client self-esteem. A greater proportion of male

children of Zambuko clients remained in school, when compared with children of non-clients. 

An important fact was underscored in this research: loans are a burden during crises. Loans are

an added financial obligation in times of economic uncertainty. This highlights the need for

appropriate savings products, loan insurance, or other safeguards against family crisis. Another

important lesson was the need for business support strategies for teenage children and older

relatives of clients with HIV/AIDS to enable those left behind to step into new economic roles

after a breadwinner dies. 

5 See Liza Valenzuela, “Getting the Recipe Right: The Experience of Commercial Bank Downscalers in Microfinance,” September 2001. 

6 The AIMS Project is implemented by Management Systems International in partnership with the Harvard Institution for International

Development (HIID), the University of Missouri, and the Small Enterprise Education and Promotion (SEEP) Network. 

7 Research on HIV/AIDS and microenterprise development was also undertaken through the Microenterprise Best Practices (MBP) agenda, implemented by Development Alternatives, Inc. (DAI), ACCION International, FINCA, HIID, International Management and

Communications Corporation (IMCC), Ohio State University Rural Finance Program, Opportunity International, and the SEEP Network. 

8 “The Relationship Between Microfinance and Households Coping with Illness and Death in Zimbabwe: An Exploratory Study,” Horizons

Project, Washington, D.C., July 2001. This activity was co-funded by the Office of Microenterprise Development under the AIMS Project

and the Office of Health under the Horizons Project. 
Challenges Ahead

Despite the notable gains in microfinance in

recent years, the road ahead is still challenging.

The numbers of microentrepreneurs without

access to reliable, attractive financial services

far exceeds those with access to services. Other

important challenges are: 

■ To reach deeper into poor communities

and create opportunities for those with

very limited resources to expand household

income and security; 

■ To keep services relevant to poorer and

more vulnerable clients, which requires a

good understanding of household strategies for managing risk; 

■ To develop new products especially savings and a wider range of loan products

including those that are more flexible and

appropriate for poorer households; 

■ To make financial services more available to the rural poor, many of whom

are engaged primarily in agro-related

activities; 

■ To improve how microfinance institutions help clients cope with crises while

managing their own risks; 

■ To support more institutions to reach a

level of sustainable operations; and 

■ To tap into more private capital (including

client savings) to expand microfinance,

instead of relying so heavily on donor

funding.

B. Business Development

Services in a Changing World

Recent BDS improvements have benefited

many microentrepreneurs. Initiatives to

expand the provision of business services to

poor producers in the handicrafts sector, for

example, have generated tens of millions of

dollars in increased export sales, helping disadMICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 13

DdG Training Triples Client Base and Boosts Income

When Olida Bermudez first came to Fundacion Mario Santo Domingo, she was working from

home, supporting her four children by sewing school uniforms and children’s party dresses. It was

tough going. Olida’s sewing machine was in need of repair and most of her profits went to buying new material. A $50 loan was enough to fix her sewing machine and spark production, but

she still had trouble attracting customers. After attending DdG classes in product quality and presentation, customer service, and advertising two years ago, Olida took what she learned to heart.

She improved her displays, distributed flyers, and painted a colorful sign on her house to attract

customers. Today, Olida’s client base has tripled, and she teaches workshops in making patterns

and employs several local women.

Olida Berúdez, a client of Fundación Mario Santo Domingo.

Photo by Robin Ratcliffe of ACCION International. Courtesy of ACCION International.
vantaged artisans tap markets far

more lucrative than those closer to

home. A number of microfinance

institutions have partnered with

BDS providers to introduce BDS

to their clients as a way to stimulate

further growth and productivity.

Other encouraging developments

include a greater emphasis on cost

recovery and innovative methods

for widening BDS markets to

reach more microentrepreneurs. 

ACCION’s ‘Dialogo de

Gestiones’ Provides

Demand-Driven 

BDS Training

ACCION International is a US-based microfinance PVO that has collaborated with partners

in developing countries to provide BDS to

microentrepreneurs. In FY 2000, USAID provided ACCION with a grant to scale up its

“Dialogo de Gestiones” (DdG) or “Dialogue of

Managers” client-training curriculum through

its partner, Fundacion Mario Santo Domingo,

in Colombia. This demand-driven curriculum,

aimed at increasing business performance and

enhancing the capability of microentrepreneurs to access business credit, is provided on a fee basis only. In the second half of

1999, ACCION’s partner trained 7,340

microentrepreneurs, 74 percent of whom were

women. DdG demonstrated that training can

be provided to large numbers of microentrepreneurs on a sustainable basis. Today, 17

institutions in 14 countries offer DdG classes. 

Action for Enterprise in Mali

Links Craft Producers with

Export Markets

Action for Enterprise, a U.S. PVO, received a

FY 2000 grant from USAID to further its

activities in the crafts sector of Mali. AFE helps

microentrepreneurs increase production for

the export market, thereby increasing revenues. In addition to providing services directly, AFE is developing local BDS providers’

capacity, so that they will be able to provide

BDS to local microenterprises after the program has ended. 

Using a sub-sector approach, AFE initially

determined the constraints on crafts producers in Mali, which included few linkages with

international buyers, limited new product

development, and irregularities in quality. To

help the crafts producers compete internationally, AFE promoted market access services, linking local exporters—who buy from

microentrepreneurs—to US importers in the

home accessories industry, which offers higher returns than the handicrafts market. AFE

also offers technical assistance in product

design and quality control and advocacy services to improve the regulatory environment

for exports. The results have been noteworthy: since February 2000, producer sales have

increased by 100 percent; exporter sales have

increased by 70 percent. AFE has worked with

a handful of importers and exporters, and 400

micro businesses. Another 2,000 small and

14 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

A group of Malian producers of mudcloth in Action for Enterprise’s

microenterprise export promotion program, Support Program for Artisanal

Product Exports (SEPA). 

Photo courtesy of Action for Enterprise
microenterprises have benefited from

increased sales and exports. 

Increasingly, USAID-supported BDS programs are developing BDS markets, rather

than just supporting direct BDS providers.

Through this strategy, USAID-supported BDS

programs are making it easier for private

providers to enter into the lowest end of the

BDS market and be responsive to the needs

and demands of poor microenterprise customers. The BDS programs are also ensuring

the relevance of services provided, improving

scale of outreach through multiple providers in

the market, and enhancing BDS sustainability

over the long run.

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 15
IV. HOW USAID SUPPORTS

MICROENTERPRISE DEVELOPMENT

USAID’s strategy to achieve broad-based

economic growth includes a strong,

vibrant microenterprise sector. USAID’s country programs reflect wider developments in the

microenterprise field and demonstrate how the

Agency is addressing the challenges caused by

unpredictable and difficult circumstances

around the world.

USAID supports service provision to microentrepreneurs through organizations that offer an

array of financial services and BDS. In addition, USAID promotes policies to improve the

enabling environment for poor entrepreneurs

and the institutions that serve them. A regulatory environment conducive to enterprise

growth is an essential building block for

microenterprise development.

USAID support flows through both its field

missions and central offices in Washington,

D.C. USAID is organized under four development pillars: 

■ Economic Growth, Agriculture and Trade

(EGAT); 

■ Global Health (GH); 

■ Democracy, Conflict and Humanitarian

Assistance (DCHA); and

■ The Global Development Alliance (GDA). 

Each USAID Mission develops a strategic plan

for accomplishing country level objectives that

reflect USAID’s six development objectives.

The development objectives are to: 

■ Encourage economic growth and 

agricultural development; 

■ Strengthen democracy and good 

governance; 

■ Build human capacity through education

and training; 

■ Stabilize world population and protect

human health; 

■ Protect the environment for long-term 

sustainability; and 

■ Promote humanitarian assistance. 

Microenterprise assistance activities are programmed under one or more of these objectives. Of the 88 countries in which USAID

worked in FY 2000, at least 58 have active

microenterprise programs. 

A. USAID Field Missions

In the past 20 years, many USAID Mission

microenterprise programs have evolved from

small isolated efforts to build capacity of individual institutions to broad integrated programs that address the problems that

microentrepreneurs and their households face.

Below are some examples of USAID Mission

programs that have evolved over time in

response to difficult economic, political, and

social conditions.

Zimbabwe

USAID/Zimbabwe has made substantial

investments in the microenterprise sector since

1994. The Mission has worked to expand the

access of microentrepreneurs to capital and

high-impact BDS. In addition, USAID/

Zimbabwe helped to coordinate the efforts of

other donors engaged in the microenterprise

sector through the Zimbabwean Consortium

of Microfinance Donors. Up to this point, the

16 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD
USAID Mission has helped to build institutional capacity in the microfinance sector by

providing loan capital and funds for technical

assistance to a number of MFIs, including

Zambuko Trust, the Self-Help Development

Foundation, Phakama Development Company,

Masvingo Credit Against Poverty (M-CAP),

and the Zimbabwe Women’s Financial Trust.

Collectively, these organizations reach tens of

thousands of clients through their savings and

loan programs. 

Building on this foundation, the Mission has

implemented a new strategy to respond to

Zimbabwe’s troubled economy and spiraling

rural poverty. Recent Mission funding will support outreach by microfinance programs to

rural and peri-urban areas that have not been

served. 

As a complement to its microfinance activities

and to further extend its outreach to the poor,

the Mission designed a program to build the

capacity of local business associations and

groups engaged in collective business activities.

Throughout Zimbabwe, there are many collective business groups engaged in agri-business

activities, such as vegetable and fruit distribution, dairy farming, cattle feeding, fishing, and wild-produce

gathering. Other groups are

organized around eco-tourism

activities, sewing and crafts production, and other activities.

The Mission is also seeking to

mitigate the economic impact

of HIV/AIDS on orphans and

others affected by the disease, in

a country where one in four

people between the ages of 15

and 45 has HIV and some

624,000 children under the age

of 15 have lost one or both parents to the disease. Program

services to provide training,

business skills, and microfinance services to

affected communities are funded under the

Mission’s new strategic objective. 

Armenia

In Armenia, USAID has had the considerable

challenge of trying to stabilize a weak economy

that was rocked by a political crisis following

the 1999 assassination of the prime minister

and a number of other officials. Since 1995,

USAID/Armenia has been engaged in activities

to assist firms in growing sectors that have the

potential to increase employment. The

Mission has also worked to promote organizations that provide assistance to microentrepreneurs. The Mission’s microfinance

activities focus primarily on lending to

microenterprises, but also include legal and

regulatory reform and sub-sector interventions

to support microenterprises.

USAID is providing $1 million to MDF

Kamurj, for example, a new MFI that is organized as a local foundation and developed from

the merged operations of Save the Children

and Catholic Relief Services (CRS) microfiMICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 17

Fortunate, a client of Zambuko Trust, received a loan of $200 to buy a sewing

machine with which she began a career in dressmaking.

Photo by Carol Stigger of Opportunity International.
nance projects. The merger arose from both

organizations’ need to address organizational

challenges in the Armenian microfinance market. By combining the technical and monetary

resources of these two international organizations, they have consolidated overhead expenses and achieved better economies of scale for

service delivery. At the end of 2000, MDF

Kamurj had over 4,200 active clients, all of

whom are women. Its portfolio value was

$415,000, with an average loan size of $99.

MDF Kamurj has already attained operational

sustainability and is close to being fully financially sustainable.

Another microfinance institution supported by

the Mission, FINCA Armenia, also provides

group lending, with approximately 65 percent

of its loans going to women entrepreneurs. At

the end of 2000, this program had over 1,600

clients with an average loan size of $255 and a

portfolio value of $183,000.

Jordan 

USAID/Jordan employs a comprehensive

approach to microfinance that facilitates development of an entire industry rather than a

number of individual organizations. Since early

1998, USAID has committed approximately

$30 million to the development of many industry components including:

■ Four retail MFIs: Microfund for Women,

Jordan Micro Credit Company, Ahli

Microfinancing Company, and Jordan

Access to Credit Project;

■ A credit information bureau to stimulate

Jordan’s entire economy by facilitating the

provision of lender, retailer and wholesaler

credit;

■ A comprehensive technical assistance program to address the needs of all of a sustainable microfinance industry;

■ The Microfinance Association of Jordan to

deliver microfinance training, undertake

advocacy for the industry, and provide a

discussion forum for industry issues;

■ A new product development program that

is designed to enable the microfinance

institutions to better serve their clients

while increasing their revenues; and,

■ A strategic sector assessment that examines

Jordan’s microenterprise and microfinance

sectors and makes recommendations to

frame future national policy.

By December 2000, Jordan’s four microfinance

institutions had nearly 17,500 borrowers, 79

percent of whom were women. All four institutions are expected to be operationally sustainable by December 2001 and financially

sustainable by December 2002. Due to rapid

loan portfolio growth, USAID is planning

ahead to ensure that these four institutions

continue to grow. To facilitate the loan capital

provision at commercial interest rates, USAID

is capitalizing a wholesale funding facility that a

18 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

A Palestinian refugee in the MicroFund for Women

Program, Save the Children/Jordan.

Photo by Susan Warner of Save the Children.
commercial bank will manage on a fee-for-service basis. The funding facility’s capital will collateralize guarantees issued by the facility

manager in support of credit lines that the

MFIs have obtained from local commercial

banks. When the MFIs have developed strong

credit histories with the commercial banks, the

guarantees will no longer be necessary and at

that time, the microfinance institutions will

graduate from dependence on the facility and

receive as capital contributions their pro-rata

shares of the facility’s capital.

El Salvador 

Over the last five years, USAID/El Salvador

has strengthened financial institutions to

increase and ensure that financial services reach

rural areas. The Mission’s support to microfinance comes under the Mission’s first strategic

objective, “Expanded Access and Economic

Opportunities for Rural Families,” and contributes to its goal of poverty reduction,

enabling rural poor households to have economic alternatives for improving household

income. 

The Mission has concentrated on a few institutions (“market leaders”) that have shown the

potential to become financially viable and

helped them expand coverage. Assistance has

included technical advice, training, equipment,

and funds for loan capital. Two recently completed activities are support to the credit union

movement through CRECER and a new

microfinance institution, ENLACE. 

■ The CRECER project led to impressive

improvements in savings mobilization over

five years (1996-2000). The project supported a 345 percent growth in savings in

13 credit unions. CRECER also contributed to the expansion of operations and

improved financial practices by credit

unions. 

■ The Micro 2000 Project, which ended in

December 2000, successfully created the

microfinance institution, ENLACE. At the

project’s end, ENLACE had four branches

that worked with very poor microentrepreneurs and served 10,457 clients, 81

percent of whom are women. Average loan

size for all clients was $132. Despite its

outreach to poor clients, however,

ENLACE was 94 percent financially selfsufficient and 118 percent operationally

sustainable. 

Microlending activities in El Salvador are currently at an expansion or competition stage.

Institutions are widely concerned with reaching sustainability, new commercial actors, risk

management, urban market saturation, new

market development, leadership/governance,

and client satisfaction. USAID/El Salvador

now works with 11 microfinance institutions

that serve rural communities, including nongovernmental institutions, credit unions, a

licensed financial institution, and commercial

banks.

In addition to its microfinance activities, under

FOMIR9 the Mission supports the Barents

Group’s technical assistance to the Superintendency of the Financial System. The technical assistance covers the review of regulations

and information technology used in policy

implementation that governs non-banking

financial institutions.

The Mission responded quickly after January

and February 2001 earthquakes and drew on

USAID’s Development Credit Authority to

obtain temporary assistance for Financiera

Calpiá, while the institution restructured and

refinanced the portion of its portfolio affected

by the quakes (see page 29). 

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 19

9 FOMIR is the “Programa de Fortalecimiento de Las Microfinanzas Rurales”; DAI manages FOMIR.
B. USAID Central Offices

Through USAID/Washington, the Agency

supplements field technical capacity and

advances research agendas, in addition to managing a number of grant and credit programs.

In the EGAT Bureau,10 the Office of

Microenterprise Development and the Office

of Development Credit have played key roles

in providing assistance to the microenterprise

sector. In the DCHA Bureau,11 the Office of

Private and Voluntary Cooperation (PVC) has

consistently supported microenterprise activities through its Matching Grant program; the

Food for Peace Office has been a steady funding source for microenterprise through its food

security program under PL 480. 

Office of Microenterprise

Development

Since 1995, the Office of Microenterprise

Development has managed the Microenterprise

Innovations Project (MIP), which has provided

a range of technical, financial, and research services to the microenterprise community. The

major project components were: 

■ The Implementation Grant Program, a

grant facility to promote innovation and

expansion in financial and business development services fields;

■ The Program for Innovation in

Microenterprise (PRIME) Fund, for

“mainstreaming” best practices throughout

the Agency by co-financing microenterprise projects that USAID Missions

designed and managed; 

■ Microenterprise Best Practices (MBP),

action research to strengthen the knowledge base, microenterprise development

practices, publications, a grant facility, and

extensive dissemination activities; 

■ AIMS, a research agenda to measure the

impacts of microenterprise programs and

develop practitioner tools for client assessment and market research; and, 

■ Technical assistance to USAID Missions

through the MicroServe contracting vehicle to provide a range of short-term technical services and training to USAID

Missions and practitioners.12

During this period, USAID funding advanced

a research agenda that shed light on important

trends and developments in microfinance,

including commercialization, management

tools, new product development, managing

risks and emergencies, regulation and supervision, and rural finance. In addition, MBP

research addressed key development issues in

the business development field, such as

methodologies for assessing BDS markets, the

effectiveness of vouchers, intervention strategies to develop BDS markets, and business

linkages. 

Microenterprise practitioners have valued

USAID’s leadership in the AIMS initiative,

studying the impacts of microenterprise services on microentrepreneurs, households, and

communities. In the last five years, AIMS has

provided technical assistance in all areas of

client assessment, including impact assessment

to USAID Missions and their development

20 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

10 Formerly the Global Bureau. 

11 Formerly the Bureau for Humanitarian Response (BHR).

12 MicroServe was implemented by two contracting groups: Chemonics International, Inc., with Agricultural Cooperative Development

International (ACDI), Association for the Development of Microenterprises, Inc. (ADEMI), and CARANA Corporation; and Weidemann

Associates, Inc., with ATMA International, CARANA Corporation, Deloitte Touche Tohmatsu IIA Group, Development Associates, Inc.,

Sterling International, and Winrock International. 
partners, because these organizations have limited resources to undertake this research on

their own.13 The practitioner-led client assessment tools developed through AIMS and in

conjunction with leading microenterprise institutions were widely disseminated and are now

being used by many institutions to improve

services. In addition, AIMS conducted longitudinal research in three regions to better understand the ways in which microenterprise

services affect poor households.14 This

research has contributed much to the new

client-focused agenda. It is guiding microenterprise institutions in their efforts to design

appropriate products and services and improve

delivery systems. 

Office of Development Credit

The Development Credit Authority (DCA) is a

general authority that permits USAID to offer

credit assistance (direct loans or loan guarantees) for any development purpose of the

Foreign Assistance Act. USAID’s Office of

Development Credit is now assisting field missions to use this authority to further their initiatives. In FY 2000, for example, FinComun, a

microfinance institution in Mexico City,

received a loan portfolio guarantee under DCA

to expand microfinance services. 

The Office of Development Credit also offers

portable guarantees to microfinance institutions to facilitate loan access from domestic and

international commercial lenders. All USAID

guarantees are risk sharing and cover up to 50

percent of the loss of principal in the event of

default. 

Other credit instruments available to support

microfinance institutions include: 

■ Guarantees to banks for on-lending to

microfinance institutions; 

■ Wholesale guarantees to a group of microfinance institutions; 

■ Bond guarantees to reduce the risk of issuing and buying an organization’s bonds;

and,

■ Bond guarantees for a special purpose vehicle for microfinance in which banks would

invest. 

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 21

Leveraging Funds for Microenterprise In Uganda

In FY 2000, USAID/Uganda identified four sectors where credit was in short supply and where

they would have high economic impact per dollar placed. The sectors were agriculture, agribusiness, grain wholesalers, and fisheries. Through USAID’s Office of Development Credit, a partial

guarantee was made to seven of Uganda’s top financial institutions15 to reduce risk as they

increased lending to the four sectors. Wholesale lending to NGOs and MFIs that on-lend to

micro, small and medium-sized enterprises is also planned under this facility. Borrowers should

benefit from the increased competition among the banks. Potentially, this facility could leverage

up to $300 million in both short-term and longer-term loans. 

13 Impact assessments were performed in Bangladesh, Honduras, India, Jamaica, Kenya, Peru, Philippines, Poland, Uganda, and

Zimbabwe.

14 These studies are available online at the AIMS Publication section of www.mip.org.

15 These are Citibank Uganda, Standard Chartered Bank Uganda, Stanbic Bank Uganda, Barclays Bank Uganda, Allied Bank International,

Centenary Rural Development Bank, and Nile Bank. 
These mechanisms are ways that USAID

assists microfinance institutions to link to commercial markets. Such approaches are creating

additional opportunities for institutions that

are ready to transition to capital sources

beyond donor grants. 

Office of Private and

Voluntary Cooperation 

The PVC Office’s Matching Grant Program

has a long and successful history of assisting

U.S.-based PVOs and their local partners to

strengthen their ability to achieve sustainable

service delivery in a number of key areas critical to USAID interests, including microenterprise development. PVC grants have been

effective in fostering innovative approaches

and building the management and technical

systems that have allowed a growing number

of PVOs to become major forces in development assistance. 

PVC grants provide funding for both PVO

headquarters’ and their local partners’ institutional development. This has been an important factor in the PVOs’ growth. PVC

recognized that strengthening management

and technical support systems at the headquarters and field levels results in more effective and sustainable country program service

delivery.

The Matching Grant Program also played an

instrumental role in assisting PVOs to develop microenterprise programs. For example,

CRS initially used Matching Grant funds to

develop its headquarter’s microfinance technical unit and to initiate pilot microfinance

programs in five countries. CRS is now using

PVC funds to reach greater scale and outreach, develop formal financial institutions,

establish regional microfinance learning centers, and implement a network-wide accreditation system. With the accreditation system,

the microfinance unit has once again taken the

lead on an initiative with implications for the

organization as a whole. Other CRS technical

units are beginning to adopt the same methodology, i.e., to develop standardized evaluation

tools and move towards accreditation.

Two PVC-supported PVO networks, the

SEEP Network and the Child Survival

Collaborations and Resources (CORE) Group,

recently formed a joint task force to investigate

cross-sectoral programming in HIV/AIDS and

microenterprise development. The joint task

force will examine how the microenterprise

and health sectors can form strategic alliances

to effectively address evolving development

priorities in the face of the HIV/AIDS crisis. 

22 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Teodora Acuña Jesús, a Mibanco client, at her shop in Lima,

Peru.

Photo by Rohanna Mertens of ACCION International.
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 23

Peru’s MiBANCO Offers Microloans to

Microentrepreneurs 

In 1991, a fire destroyed one of the busiest outdoor markets in Lima, Peru. With it went Teodora

Acuna’s livelihood—the three food stands that she had worked 20 years to create. Not easily

deterred, Teodora saved to buy another stand. But without the resources to stock her shelves

as she had before, she was often forced to send her customers to other vendors. One day, the

customer she was turning away offered a solution: a microloan. He was a loan officer at

ACCION’s local microlending affiliate, Acción Comunitaria del Perú (ACP). 

ACCION founded ACP in 1969 as an organization focused on development projects ranging from

housing construction to education programs. But it became clear that, to dramatically reduce

local poverty, ACP needed to support small informal businesses—like Teodora’s stands—that

employed 60 percent of Lima’s workers. 

Sixteen years later, ACP’s microlending program served 36,000 clients and was rapidly outgrowing available lending capital. In 1998, ACCION, ACP, and Peruvian authorities collaborated to create a new microlending bank, Mibanco, or “my bank,” Peru’s first commercial bank dedicated to

microenterprise. Today, Mibanco is one of the most successful microlenders in Latin America. By

early 2001, it was serving over 65,000 borrowers.

Office of Food For Peace

Under Titles II and III of the Agricultural

Trade Development and Assistance Act of 1954

(Public Law 480 as amended), agricultural

commodities are donated to the least developed

countries. The revenue generated by the sale of

such commodities has been used for economic

development. Among the uses prescribed for

local sales proceeds are activities that promote

increased access to food through programs

designed to boost employment and income,

such as microenterprise development programs. In accordance with USAID-approved

implementation plans, a number of Title II

cooperative sponsors have applied funds

toward microenterprise development. 

In FY 2000, local currency derived from PL

480 commodities supported microenterprise

development in Ghana, Kenya, Guatemala,

and Peru (see box on PRISMA on page 7). 

Courtesy of ACCION International.
V. MICROENTERPRISE FUNDING

IN FY 2000

I

n FY 2000, USAID contributed $164.3 million to microenterprise development programs, a 7 percent increase in funding over the

$153.5 million that USAID programmed in

1999. 

As in 1999, Development Assistance (DA)

funds constituted half of the total for microenterprise development. Within the DA account,

two special funds, Accelerating Economic

Recovery for Asia (AERA) and the Southern

Africa Disaster Reconstruction Fund (SADRF)

were applied to microenterprise programs in

Indonesia and Mozambique, respectively. 

In Honduras, monies from a separately appropriated account, the Central America and

Caribbean Emergency Disaster Recovery Fund

(CACEDRF) were directed to microenterprise

activities. 

The use of Economic Support Funds (ESF),

authorized through the U.S. Department of

State, to support microenterprise decreased by

40 percent in FY 2000 over FY 1999. This

resulted from reduced funding by

USAID/Egypt, which typically contributes

large sums annually to ongoing microenterprise activities. Subsequent years’ funding will

24 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Table 1. Sources of USAID Funds for Microenterprise by

Appropriation Account, 1991-2000 (US$ millions)

Fund 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

DA1 40.2 61.3 51.6 89.2 93.3 72.9 83.3 79.9 75.3 84.5

AERA 2.0

SADRF 1.5

Total DA 88.0

ESF 43.2 34.4 20.8 31.6 22.9 16.1 24.5 27.2 32.9 19.5 

FSA 5.4 20.6 14.3 12.8 30.2 

SEED/SAI2 4.7 24.8 4.6 12.0 9.0 

CACEDRF 3.2 8.0 

CSD/HIV3 0.8 

Local 30.2 30.6 23.6 16.6 17.3 12.2 11.8 12.4 17.3 8.8

Currency 

Total 113.6 126.3 96.0 137.4 133.5 111.4 165.0 138.4 153.5 164.3 

1 Development Assistance Funds include the Development Fund for Africa.

2 Funds appropriated under the Support for Eastern European Democracy (SEED) Act; 

also includes funds appropriated under Special Assistance Initiatives (SAI). 

3 CSD/HIV funds are from the Child Survival and HIV/AIDS account. 
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 25

reflect USAID/Egypt’s new project cycle to

promote microentrepreneurs through a range

of microfinance and BDS institutions. 

In FY 2000, there was a large increase (136%

over FY 1999 funding) in Freedom Support

Act (FSA) funds for microenterprise. The FSA

account is USAID’s funding source for programs in Russia, Ukraine, the Caucasus, and

the Central Asian Republics. FY 2000 FSA

funding reflects large contributions to

microenterprise programs across the region: $7

million in Azerbaijan, $5.2 million in Russia,

$4.7 million in Ukraine, $3.5 million in

Georgia, and $3 million in Kazakhstan. 

Local currency used for microenterprise (from

the monetization of Title II funds under PL

480) was down by 47 percent in FY 2000 ($9

million from $17 million in 1999). Early estimates indicate that microenterprise funding

from Title II will return to roughly $12 million

in FY 2001 and 2002. 

As shown in Table 2, funds programmed by

USAID’s central bureaus are allocated to the

region of the funded activity. In FY 2000, 65

percent of total USAID funding went to financial services programs (for loan capital, operational expenses, technical assistance, or microfinance policy work). The remaining 35

percent supported business development programs or policy advocacy on issues affecting

microentrepreneurs. 

Of the two-thirds of total funding applied to

microfinance, $2.4 million or 2 percent went

for financial policy reform or for reforming or

instituting laws and regulations affecting

microfinance institutions. There was $5.3 million in general microenterprise policy advocacy

funding in 2000 (9% of non-financial funding,

3% of total funding). 

Total funding to Africa has increased steadily

over the past five years and was 62 percent

higher in 2000 than it was in 1996 ($43.8 million in 2000 vs. $27.1 million in 1996). Within

that total, microfinance program funding rose

from $19 million in 1999 to $26.5 million in

2000, a 40 percent increase. Unlike previous

years, where BDS program funding in Africa

exceeded microfinance funding, in FY 2000,

the proportions for microfinance and BDS in

Africa paralleled the proportions for the

Agency as a whole. 

Table 2. FY 2000 Funding by Region of Use

(US$ millions)

Financial Programs Non-Financial Programs Total

Amount Percent Amount Percent Amount Percent 

Africa $26.5 61% $17.3 39% $43.8 27% 

Asia/Near East $18.0 74% $6.3 26% $24.3 15% 

Europe/ Eurasia $21.6 54% $18.5 46% $40.1 24% 

Latin America/

Caribbean $31.2 73% $11.7 27% $42.8 26% 

Worldwide $10.1 77% $3.1 23% $13.2 8% 

Total $107.4 65% $56.9 35% $164.3 100% 
Table 3 presents the same data as in Table 2,

only from the viewpoint of the funding source

in the Agency rather than the destination of

funds. The Bureaus for Africa, Europe and

Eurasia, and Latin America and the Caribbean

provided roughly equal amounts to microenterprise programs. The Bureau for Asia and the

Near East was the only source showing a significant drop (down $13 million or 37%) from

the prior year, once again related to the

reduced funding by USAID/Egypt. 

The Microenterprise for Self-Reliance and

International Anti-Corruption Act of 2000 set

a new target for the Agency, requiring that at

least 50 percent of all USAID funding, including that provided to institutions engaged in

business support services and policy work, go

to the poor or directly benefit them. In prior

years, the Agency’s target was that 50 percent

of funding for financial programs should be

devoted to poverty loan clients. This year’s survey of microenterprise institutions also asked

26 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Table 3. Uses of FY 2000 Funding by USAID Bureau

(US$ millions)

Financial Programs Non-Financial Programs Total 

Amount Percent Amount Percent Amount Percent 

Africa Bureau $20.9 56% $16.2 44% $37.1 22.6% 

Asia/Near 

East Bureau $16.3 73% $6.0 27% $22.3 13.6% 

Europe/Eurasia 

Bureau $17.8 50% $17.5 50% $35.3 21.5% 

Latin America/ 

Caribbean Bureau $26.5 73% $10.0 27% $36.5 22.2% 

Central Bureaus $25.9 78% $7.2 22% $33.1 20.1% 

Total $107.4 65% $56.9 35% $164.3 100%

Table 4. Percentage of USAID Funds Committed 

to Poverty Lending in 2000

Total Percent of Percent of Percent of 

Microenterprise Financial Non-Financial Total Funding 

Funding Funding for Funding for for Poverty 

(US$ millions) Poverty Lending Poverty Loan Clients Lending

Africa $37.1 93% 9% 56% 

Asia/Near East $22.3 50% 87% 60% 

Europe/Eurasia $35.3 50% 1% 26% 

Latin America $36.5 73% 38% 63% 

Central Bureaus $33.1 70% 27% 61% 

Total all Bureaus $164.3 66% 28% 53% 
BDS practitioners to report on the percentage

of clients with poverty loans. BDS funds were

attributed to very poor clients based on the

proportion of BDS clients with poverty loans

from any source. The data contained in Table 4

represents the tabulation from those institutions reporting FY 2000 data. 

As in prior years, microfinance institutions

reported on the percentage of their portfolio

held in loans equivalent to poverty loan sizes.

Based on the new regional limits established in

the Microenterprise Act, institutions reported

on loan sizes of $300 or below in Africa, Asia,

and the Near East; $400 or less in Latin 

America and the Caribbean; and $1000 or less

in Europe and Eurasia.

By these definitions, two-thirds (66%) of FY

2000 funding to financial institutions was channeled to the very poor through microfinance

institutions. In addition, more than a quarter

(28%) of BDS funding was channeled to very

poor clients, based on BDS institutional

reports. Combining the funding amounts for

both financial and non-financial purposes,

53 percent of total funding was directed to

institutions whose clientele are very poor,

meeting the poverty target included in the

Microenterprise for Self-Reliance Act. 

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 27
28 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

The greatest stumbling block to economic

well-being for most of the world’s poor continues to be the setbacks they endure because of

their vulnerability to a range of societal and

household events. These include drought and

food shortages; ethnic, religious, or political

conflicts; natural disasters, such as earthquakes

and landslides; fluctuations in financial systems;

and health crises, such as HIV/AIDS and

malaria. Without a social safety net to protect

them during these times, microentrepreneurs

must weather the storms as best they can. Such

events also pose major challenges for microenterprise practitioners who must be able to

adjust their operations to respond rapidly and

effectively to their clients. 

Two themes that extend across many USAID

programs are “rebuilding after violent conflict”

and “disaster response.” Opportunity

International’s programs in the Balkans offer an

example of USAID’s efforts in war-ravaged

areas. Financiera Calpiá, a credit institution in

El Salvador that was particularly hard hit by

natural disasters, was able to weather crisis with

USAID assistance. 

Opportunity International:

Building Economic Security

In The Balkans Through

Microfinance

Since creating Nachala Foundation in Bulgaria

in 1993, Opportunity International, in partnership with USAID, has played a leading role in

developing the microfinance industry in

Eastern Europe by establishing IZVOR in

Romania (1995), Inicjatywa Mikro in Poland

(1996), Moznosti in Macedonia (1996), NOA

in Croatia (1996), PSHM in Albania (1998) and

Microcredit Montenegro (1999). Opportunity

began operations in Russia in

1993 and now serves microentrepreneurs through a nationally

registered fund, FORA, with a

distribution network of five

regional branches. In addition to

establishing twelve MFIs, Opportunity played a leading role in

establishing the MicroFinance

Centre for Central and Eastern

Europe and the New Independent States in Warsaw, Poland to

provide technical support and

training to MFIs throughout

Europe. 

In May 2000, the National Bank

of Macedonia awarded Moznosti,

an NGO, a license to create the

Moznosti Savings House.16 Beginning in late

2000, it began to conduct lending, savings and

deposit programs. Within a year, the Savings

House hopes to receive a full banking license,

which is a major step on the road to long-term

sustainability. The license will permit the

Savings House to mobilize savings deposits for

loan provision, so it can expand its operations

much more quickly. 

Opportunity International’s most recent

investment in Central Europe is in Serbia,

where United Nations data indicate there has

been a severe decline in the economy in the

past decade. An estimated 33 percent of the

population lives under the poverty line and the

unemployment rate is at least 35 percent. To

survive economically, many have been forced

ADDRESSING VULNERABILITY: REBUILDING AFTER

16 A savings house is similar to a savings and loan institution.

MAC

CROATIA

BOSNIA AND

HERZEGOVINA

ALBANIA

Kosovo

Montenegro

Serbia
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 29

VIOLENT CONFLICT AND DISASTER RESPONSE

to generate income in the informal economy.

Unofficial statistics indicate that 70 percent of

the Serbian economy now operates in the informal sector. As

with other Eastern European

countries in market transition,

Serbia’s banking system has been

ill-equipped to serve the needs of

small and micro businesses. 

In FY 2000, USAID provided

funding for a new microfinance

facility in Serbia that Opportunity

International would operate,

starting in the Vojvodina Region

with its main office in Novi Sad.

Opportunity Serbia was initially

registered as an NGO foundation.

Its target group is the poorest of

the economically active; they will

be eligible to receive loans

through solidarity groups.17

Financiera Calpiá: USAID

Guarantees Bring Stability

After Another Big Quake

Due to its location in El Salvador, a country

that is regularly affected by natural disasters,

Financiera Calpiá has had to overcome several

large external shocks in its history. In some

sense, the financial institution owes its existence to one such shock because its origins date

back to a major earthquake in the late 1980s,

when a special credit service was started by a

group of small and microentrepreneurs. In

1995, Financiera Calpiá became the first formal financial intermediary in El Salvador with

a focus on small and microenterprises. Apart

from continuing to develop its credit activities,

Calpiá, now regulated, introduced savings

facilities for its clients. 

By late 2000, Calpiá had several credit and savings products in its national branch network of

13 outlets. Calpiá mobilized more than $14

million in savings held in 40,000 individual

accounts. Then, in early 2001, Calpiá and its

clients were hit hard once again by earthquakes

that caused extensive structural damage and

threatened the institution with heavy losses

through loan defaults. To help the institution

maintain solvency, USAID’s Office of

Development Credit provided a guarantee to

reduce the amount of money Calpiá was

required to set aside as loan loss provisions.

Then Calpiá began to restructure and refinance performing loans that were affected by

the earthquakes and to lengthen repayment

terms where necessary. This immediate

response to Calpiá’s crisis protected the institution and its clients. 

Recently, Calpiá received technical assistance

through Frontier Finance, supported by the

Office of Microenterprise Development and

FOMIR, a USAID/El Salvador activity.

A client of Financiera Calpiá.

Courtesy of Financiera Calpiá.

17 Solidarity groups are small groups of 3 to 5 people who jointly guarantee each other’s loans. Typically members of the group are wellknown to each other. 

ROMANIA

BULGARIA

EDONIA
VI. MICROENTERPRISE INSTITUTIONS

30 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

A. Microfinance

USAID’s contributions to microfinance institutions have consisted of loan capital, support for

operational expenses, staff training, new product development, and new program initiatives.

All microfinance practitioners with active

USAID agreements in FY 2000 were asked to

provide data on their financial activities at yearend whether or not they received additional

funding in FY 2000. Of these, 282 reported

data for their 2000 fiscal year. Almost threequarters provided data in both 1999 and 2000. 

Many institutions have multi-year USAID

agreements that are evaluated annually against

performance indicators. Typically, institutions

that are not performing well do not remain in

USAID’s portfolio for long. Grants made

through central offices to organizations with

strong track records generally run for three to

five years with annual or semi-annual review

targets built into their agreements. Over time,

mature institutions may graduate from USAID

assistance, though USAID sometimes provides

short-term targeted innovation assistance to

strong institutions. In the case of both weak

institutions whose funding is terminated and

mature ones that graduate, they disappear from

the Microenterprise Results Reporting (MRR)

reporting set because institutions are tracked

only for the term during which their USAID

agreement is active. Hence, it is not possible to

capture the long-term effect of USAID assistance. To do so would require longitudinal

research with a set of institutions that may no

longer have active USAID agreements.

BRI exemplifies a mature institution that

received FY 2000 USAID funds for special projects. BRI is a large government bank with

extensive outreach to the microenterprise sector. To include BRI’s data in the summary tables

would overwhelm the remainder of USAID’s

Table 5. Clients of Lending Institutions in 1999 and 2000

(USAID’s Active Portfolio)18

Total Clients 2000 Total Clients 1999 Percent Change 

(‘000s) (‘000s) from 19991

Africa 315.3 250.5 26% 

Asia/ 625.5 821.4 -24%

Near East 88.7 101.6 -13% 

Europe/Eurasia 148.5 70.4 111% 

Latin America 986.4 775.7 27% 

Total 2,164.4 2,019.6 7%

1 While BRI provided data on its program for both years, it is excluded from the summary tables in both years. 

18 The number of loans is used as a proxy for the number of clients. Many microfinance institutions track only loans, not clients. It is still

uncommon for an individual to have more than one loan outstanding with the same institution.
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 31

portfolio; instead, it is discussed separately. At

year’s end, BRI’s Micro Division had 2.7 million

borrowers with an outstanding portfolio of

$893 million and an average loan size of $329.

BRI’s savings program is especially noteworthy,

however, with 25 million savers and total savings of $2 billion or average savings of $78.

These numbers suggest the tremendous value

placed by the poor on savings services that are

safe, convenient, and well-designed. 

There has been 7 percent growth since 1999 in

the number of clients served through USAIDassisted programs (see Table 5). All regions,

with the exception of ANE, reported considerable growth in the numbers of clients reached.

The change in the Asian numbers is mainly

attributable to a shift in the universe of institutions reporting, from a few larger institutions

to a number of younger, smaller ones.19

In the Europe & Eurasia (E&E) region, a

number of microfinance programs were initiated with USAID support in the last few years

(See examples on pp. 17 and 28). 

The amount of outstanding portfolio grew by

almost one-third (30%) in 2000, after a slight

dip in 1999. As in prior years, loan portfolio

value in the LAC region constitutes two-thirds

of the total portfolio of USAID-assisted institutions, excluding BRI. Where average loan

size in 1999 was $330, it rose slightly to $401 in

2000.20

Women in the developing world shoulder

much of the responsibility for providing for

their households, particularly in the care of

children. Income earned from microenterprises becomes the essential means for meeting

basic needs like food, shelter, medicine, and

children’s education. Because women were so

thoroughly excluded from formal financial systems in the past, USAID has long placed priority on assisting microfinance institutions to

design programs that provide women greater

access. 

As shown in Table 6, the percentage of women

clients in USAID-supported microfinance

institutions is high for all regions with the

19 The two largest individual reporters in last year’s portfolio (excepting BRI), Palli Karma Sahajak Foundation in Bangladesh and the

Women’s Development Federation in Sri Lanka, with 220,000 and 116,000 clients, respectively, did not have active agreements in 2000. 

20 Institutions report on the total amount of loan balances outstanding at the end of their fiscal year and the related number of loans.

Average loan balance is a proxy for loan size. 

Table 6. Average Loan Balance and Percentage of Women

Clients in 2000 (USAID’s Active Portfolio) 

Average Balance Percentage of Women Clients

(US$) % 

Africa 193 72 

Asia1 179 87

Near East 498 27 

Europe/Eurasia 432 54 

Latin America/Caribbean 595 65 

Total 401 70 

1 BRI, not included in this table, has 23% women clients. 
exception of the Near East. Many USAIDassisted programs, such as the Kazakhstan

Community Loan Fund, work almost exclusively with women. In the Near East, as in parts

of Asia, like Indonesia, cultural traditions limiting women’s role in the marketplace also affect

their participation in microfinance institutions. 

Average loan size is also slightly higher in the

Near East, second only to the LAC region. A

number of the countries of the Near East are

more developed and have higher per capita

GDPs suggesting greater comparability with

the transitional economies

of Eastern Europe than

with the developing world.

As in prior years, Asian

institutions hold the smallest loans. Microfinance

institutions in the E&E

region are now holding

more loans with smaller

loan balances than institutions in either the Near

East or LAC regions. As

noted earlier, a number of

the microfinance programs

in the E&E region have

recently been established with USAID funding, hence are younger than those found in

either the Near East or LAC. These newer

investments initiated poverty lending programs, such as village or community banks

where the group manages its loans to members.

Village bank loans to group members tend to be

much smaller than loan programs to individuals. USAID’s earlier investments in the region

were primarily to individual loan programs. 

Figure 2 shows the high percentage of total

loans that are poverty loans in all regions

32 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

0%

20%

40%

60%

80%

100%

Latin America/

Caribbean

Europe/

Eurasia

Africa Asia Near East

Figure 2. Percentage of Clients with Poverty Loans in 2000

Near East $44.1

Europe/

Eurasia $64.2

Africa $61.0

Asia $111.8

Latin America/

Caribbean $586.8

Figure 1. Amount of Portfolio 

for Lending Institutions in 2000 

(Millions of US Dollars)
except the Near East.21 It is notable that

USAID-supported institutions in the E&E

region hold such a high percentage of poverty

loans. The average loan balance for all

microenterprise loans in the E&E region,

$430, is significantly lower than the amount

designated by the U.S. Congress for poverty

loans ($1000) in that region. 

Building financial assets is an important step

toward achieving long-term security for poor

households around the world. Cash savings are

a way of reducing risk and vulnerability in

times of crisis. Recognizing this, USAID

emphasizes the need for safe and reliable savings mechanisms suitable for the poor. 

The average savings deposit held per client by

USAID-supported microfinance institutions

increased from $113 in 1999 to $169 in 2000,

an increase of 50 percent (see Table 7). The

Caisse d’Epargne de Madagascar (the National

Savings Bank of Madagascar), which has

received USAID support for several years,

increased its savings clientele by 9 percent from

517,000 individuals in 1999 to 573,000 in 2000.

Depositors’ average savings there also grew to

$54 in 2000 from $44 in 1999. Other large

USAID-supported savings programs are the

World Council of Credit Unions (WOCCU)

programs in Ecuador, Bolivia, the Philippines,

Kenya, and Romania.22 

In addition to USAID’s emphasis on outreach

to the poor, the Agency has sought to encourage strategies that impact rural areas.

Throughout the world, the poorest entrepreneurs and their households are located in

rural areas, so these objectives converge. The

challenges of outreach to rural areas are

numerous, however. Poor infrastructure constrains microentrepreneurs who need access to

finance and markets. For microfinance programs that use group guarantees, one disadvantage of serving rural customers is that the

distance between group members discourages

regular meetings, which have proved essential

to good repayment.23 

Data in Figure 3 suggest that most of the

USAID-supported institutions have a greater

proportion of their clients in urban and periMICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 33

Table 7. Number of Savers and Savings Amounts in 2000

Region Savings Members Savings Amounts Average Savings Account

(‘000s) (US$ millions) (US$)

Africa 952.7 $105.2 $110 

Asia/ 792.8 $67.7 $85

Near East 3.2 $0.2 $56

Europe/Eurasia 147.9 $12.2 $83 

Latin America/

Caribbean 1,258.5 $348.2 $277 

Total 3,155.1 $533.5 $169

21 As noted above, poverty loans are defined differently by region: $300 or less in Africa, Asia and the Near East, $400 or less in Latin

America and the Caribbean, and $1,000 or less in Europe and Eurasia. 

22 Each WOCCU program represents the activities of a number of local credit unions; Ecuador has 22 affiliated credit unions; Bolivia, 

15 credit unions; Kenya, 16 credit unions; and Romania, 23 individual credit unions. 

23 Challenges associated with rural finance have been researched under the MBP project, managed by the Office of Microenterprise

Development. 
urban areas. While efforts to reach rural areas

are supported through many USAID offices, the

number of clients reached through these activities is still considerably less than the number of

urban clients who use microfinance services. 

As noted earlier, USAID monitors the annual

performance of the microfinance institutions

with which it has active agreements. Data on

repayment and loan losses are shown in Table 8.

These standard indicators are used in microfinance to monitor financial performance.24 

USAID continues to support institutions that

are making progress towards long-term sustainability independent of donor subsidy. As

more institutions are able to achieve this selfsufficiency level by tapping into private or

commercial sources of capital, the field widens

and creates opportunities for more new players. USAID offices track sustainability indicators as an important measure of institutional

development.25

As shown in Figure 4, almost two-thirds of

USAID-assisted institutions reporting for

FY 2000 are either operationally or fully

sustainable, an impressive achievement. It is

encouraging that the younger MFIs in the

Africa and E&E regions are also making strides

34 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Figure 3. Percentage of Clients in Rural Settings, 2000

24 Loan repayment is calculated based on the amount of portfolio reported to be in arrears for 90 days or more. Loan loss rates show the

percent of portfolio that must be written off because of delinquent loans. 

25 Operational sustainability describes an institution that produces adequate income to cover all operational expenses, including loan loss.

Full financial sustainability describes an institution that is able to cover operational expenses, the cost of funds, and inflation. 

Table 8. Average Repayment and Loan Loss Rates, 2000

Region Repayment Percent Loan Loss Percent

Africa 98.4% 0.9% 

Asia/ 97.2% 0.9%

Near East 96.2% 1.4% 

Europe/Eurasia 97.7% 1.6% 

Latin America/Caribbean 92.0% 1.1% 

Worldwide 93.7% 1.1% 

0%

10%

20%

30%

40%

50%

60%

Latin America/

Caribbean

Africa Asia Near East Europe/Eurasia
toward sustainability: more than one-third 

in each region is either operationally or fully 

sustainable. 

B. Business Development

Services

Considerable progress has been made to

strengthen business services to microentrepreneurs in the last year. USAID has been

instrumental in promoting innovative

approaches to BDS with the potential for longlasting effect. 

Of the institutions with active USAID funding

agreements, 66 provided data on their BDS

operations (see Table 9). Of these, 75 percent

(50) provided BDS services directly to clients;

47 percent (31) acted as BDS facilitators, working to build BDS provider capacity and link

microentrepreneurs to direct BDS providers;

15 served in both roles. All the providers and

facilitators offered a range of services to clients. 

Most direct service providers offered marketing assistance: 

■ 78 percent did market research, 

■ 74 percent assisted

entrepreneurs by linking

them to markets, 

■ 70 percent assisted

entrepreneurs by buying or

selling products. 

Of the BDS institutions working directly with microentrepreneurs:

■ 76 percent provided management training 

■ 68 percent offered technical

or skills training.

Of these providers, 62 percent

assisted their clients by linking

them to financial intermediaries. More than half (52%) charged their

clients for services.

The vast majority of clients of BDS providers

assisted by USAID are located in rural areas.

Nearly half (49 percent) report that they are

engaged primarily in agricultural activities;

another 28 percent are involved in agribusiness. 

Of the institutions engaged in facilitating BDS,

most (23) were engaged in capacity building of

BDS providers; 22 did monitoring and evaluation of BDS; 21 assisted in disseminating best

practice; 20 identified new opportunities or

products or are assisting in opening new markets for microentrepreneurs; 19 provided

information on demand for BDS; and 18 built

awareness among clients of the benefits of BDS

services. Over half of the institutions engaged

in BDS facilitation recovered some of their

costs through fees, margins on goods sold, or

other means. 

C. Policy Advocacy and Reform

President Akaev of the Kyrgyz Republic,

recently stated: 

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 35

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fully

Sustainable

Operational

Sustainability

Not Yet

Sustainable

Worldwide

(n=234)

Latin

America/

Caribbean

(n=87)

Europe/

Eurasia

(n=37)

Asia/Near

East (n=73)

Africa

(n=37)

Figure 4. Sustainability of USAIDSupported Institutions, 2000
“With the help of microfinancing and social

mobilization, we will be able to expand real

possibilities for the poor layers of the population. I would like to note that direct governmental support will not be fully able to solve

problems of poverty; society and individual citizens must learn to help themselves. The state

should undertake the creation of favorable conditions in which all members of society have

equal possibilities to improve their own lives.” 

USAID has promoted policy reforms as a critical part of its integrated strategy of support to

the microenterprise sector. USAID Missions

and USAID/Washington seek to address disparities experienced by microentrepreneurs in

the marketplace, where they are often severely

disadvantaged in comparison to larger businesses.26 USAID also supports work on the

policies that affect how microfinance institutions do business, especially those that help to

establish appropriate frameworks for the supervision and regulation of financial institutions

serving the poor. 

USAID recognizes that microentrepreneurs

and microfinance institutions must adapt to a

variety of different political and economic systems. Despite the overwhelming consensus on

best practices in the provision of microfinance

services, there is still not a consensus on what

constitutes the ‘best’ microfinance legal and

regulatory environment. Within that context,

USAID’s approach has been to encourage multiple institutional models, adequate financial

returns, innovation in product design and

service delivery, and competition among

providers. 

USAID’s efforts to deregulate interest rates are

important in assisting MFIs in becoming 

self-sustaining. In the past, many developing

countries had policies limiting the interest rates

that financial institutions were allowed to

charge. Such policies had the effect of preventing MFIs from charging rates that adequately

covered their transaction costs with microentrepreneurs. In effect, they rationed capital and

limited access to financial services. As a result,

many MFIs were not able to expand services

36 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Table 9. Clients of USAID-Supported BDS Programs (n=65)

Number of Percent Percent Percent Below Percent 

Micro Clients Women Rural Poverty Line1 Very Poor2

Africa 61,649 51% 94% 63% 17%

Asia/ 141,955 94% 91% 50% 18%

Near East 11,336 14% 12% 28% 3%

Europe/Eurasia 24,861 64% 31% 14% 19%

Latin America 15,008 53% 67% 68% 37% 

Total 254,809 75% 81% 50% 18% 

1 Organizations were asked to report how many of their clients were below their country’s poverty line. 

2 Organizations were asked to report how many of their clients were very poor, defined as having less than

half the income designated as the poverty line for that country. 

26 Policy biases in agricultural policy, foreign trade, capital and labor markets, taxes, and business regulation and licensing are key areas

affecting microentrepreneurs.
without added assistance from donors. As these

policies have changed, however, many institutions have demonstrated tremendous resourcefulness and capacity to reach more clients

through sustainable operations. 

In Europe and Eurasia, a region where much

attention has been placed on advocating for a

positive regulatory environment, USAID is

promoting independent business associations

that work on behalf of microentrepreneurs.

Across the globe, USAID has supported other

approaches, including support: 

■ To national networks (such as ZACCI in

Zimbabwe and GHAMFIN in Ghana) that

advocate for national regulatory reforms;

■ To Centers for Microfinance (in Uganda,

Nepal, and Poland) that promote best

practices by microfinance institutions and

advocate at the policy level on behalf of

microfinance institutions in the region; 

■ To the World Council of Credit Unions 

for the purpose of promoting legal and

regulatory changes to encourage the

growth of credit unions throughout the

world;

■ To the SEEP Network for capacity-building activities with international PVOs and

national NGO networks that result in

increased advocacy on behalf of the

microenterprise sector;

■ For convening high-level discussions with

central banks to convey the case for 

regulation friendly to microfinance; and,

■ For technical assistance to help financial

authorities better regulate and supervise

microfinance institutions and operations,

(for example, technical assistance to

Bolivia’s Superintendency of Banks). 

Conferences organized with USAID support,

such as a recent policy forum that focused on

the independent states of the former Soviet

Union, are helping to facilitate discussions on

how best to encourage a positive policy environment. Delegations of practitioners, policy

makers, and regulators convened to analyze the

state of microfinance in their countries, assess

the adequacy of the regulatory and legal environments, and develop action plans for achieving improvements. Follow-up includes work

on new or improved laws in Armenia,

Kazakhstan, and the Kyrgyz Republic. 

MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 37
VII. MICROENTERPRISE DEVELOPMENT

FOR A CHANGING WORLD

This report has highlighted many examples

of USAID support that have helped

microentrepreneurs and their households

address a range of unpredictable and complex

events affecting their lives and well-being. For

most of the world’s population, the uncertainty

and risk associated with catastrophic events are

factors they always keep in mind. But for those

living in poverty, these risks are much more

threatening and difficult to manage. 

Strengthening the microenterprise sector is an

important part of USAID’s strategy to build

economic security for those at the lowest

income levels. It has also been a strategy for

building civil society where people have been

excluded from both economic and political

processes. Institutions and programs offering

women opportunities to contribute economically to their households and communities have

given hope to hundreds of thousands of people

who had little before. 

USAID is committed to a far-reaching microenterprise development agenda. Its goal is to

promote microenterprise development that

will further expand access to microenterprise

services for more and more of the world’s poor.

As it seeks to carry this agenda forward,

USAID’s key challenges include: 

Reaching microentrepreneurs in hard-toreach areas: Poor infrastructure makes it difficult, if not impossible, for rural clients to access

outlet markets for their products, stay abreast

of market trends and new technologies, and

gain access to financial services. Many BDS

services provided by USAID-supported institutions address the needs of rural clients, but

these programs are still quite limited in scale

and scope. Many microfinance institutions are

extending their outreach to rural areas, but

these efforts are relatively new and not yet

widespread. The challenges associated with

lending for agriculture are also an impediment

to expanded financial services in rural areas. 

Understanding and meeting clients’ needs:

The USAID-funded AIMS research has collected useful knowledge on how microentrepreneurs and their households manage in

the face of constant insecurity. More research

and experimentation is needed to better support those who live on the margins of survival.

Such knowledge will assist microfinance institutions in new product development. And it

will help BDS providers address some of the

more challenging issues that constrain

microenterprise growth. 

Rethinking the private sector’s role: Greater

competition for limited donor funds has reinforced the necessity of involving the private

sector as a source of ideas, technologies, expertise, and investment capital. Microfinance

institutions are exploring ways to expand operations with private equity and investment.

Business-like BDS providers and facilitators

are introducing ways for microenterprises to

achieve increased efficiency and productivity.

USAID is rethinking ways to work with private companies that target hard to reach areas.

USAID’s Office of Development Credit, for

example, working in conjunction with the

Global Development Alliance, is implementing private sector strategies that encourage

growth by microfinance institutions. 

By addressing these challenges, USAID will

help more of the world’s poor to find and keep

their footing on unstable ground. 

38 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 39

ANNEX A

SUMMARY OF USAID MICROENTERPRISE FUNDING 

BY COUNTRY, 1991-2000

US$ '000's

REGION COUNTRY 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Africa (AFR)

Benin 1,835 1,040 1,397 1,109

Botswana 451 627 158 

Burkina Faso 110 150 

Burundi 1,020 2,171 543 

Chad 270 258 1,635 10 

Eritrea 200 200 

Ethiopia 330 34 1,049 1,683 600

Gambia 37 100 298 10 276 

Ghana 250 1,050 505 2,584 4,515 4,448 6,322 6,000

Guinea 4,054 1,409 2,210 2,210 500 401 73 1,300 600

Guinea-Bissau 40 1,370 1,855 2,575 2,033 

Kenya 1,608 1,084 270 1,650 2,000 2,904 1,717 2,629 943

Madagascar 685 801 550 229 260 225

Malawi 5,482 3,466 1,953 340 230

Mali 3,346 4,329 175 8,251 1,160 148 417 809 3,131 2,265

Mozambique 450 750 180 630 3,373 2,370 2,802 0 1,932

Namibia 280 320 410 712 241 

Niger 2,795 3 715 0

Nigeria

RCSA 400 200

REDSO/EA 260 

Senegal 932 7,040 7,850 3,520 450 932 364 2,500 2,778 12,916

South Africa 3,021 8,016 3,781 3,308 4,005 50 1,000

Swaziland 1,879 3,327 

Tanzania 1,558 1,478 200 950 2,000

Togo 1,292 1,141 

Uganda 2,328 2,330 3,358 2,582 2,416 3,044 5,481 5,162 4,752 2,540

Zambia 570 153 500 600 1,000 616 1,500 1,869

Zimbabwe 720 603 5,500 425 350 35 200 2,940

Regional Programs 491 100 800 

AFR Subtotal 21,470 35,295 29,747 24,074 17,013 22,853 25,764 24,421 27,257 37,144

Asia/Near East (ANE)

Bangladesh 1,500 250 650 1,165 5,670 8,639 7,663 3,388 2,000

Cambodia 112 462 2,398 1,281 750

Egypt 24,892 35,554 11,000 17,376 16,020 10,000 15,000 15,000 15,000 0

India 428 250

Indonesia 1,867 2,590 679 2,200 747 866 1,000 4,186
40 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

REGION COUNTRY 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Jordan 1,031 100 500 2,792 3,539 5,739 7,655

Lebanon 2,045 1,000 1,000 2,100 866

Morocco 210 1,500 3,600 1,450 990 2,000 1,250

Nepal 840 1,980 2,260 1,950 1,200 50 1,170 1,855 500 1,500

Pakistan 3,417 3,134 

Philippines 23,866 4,820 2,666 4,802 8,411 3,000 2,746 900 1,000

South Pacific 2,336 564

Sri Lanka 1,353 2,873 1,292 482 549 769 200

Yemen 821 658

West Bank/Gaza 1,888 2,499 3,311 501 3,133

ANE Subtotal 59,392 53,673 18,821 21,699 31,879 30,888 36,925 36,970 32,659 22,340

Europe and Eurasis (EE)

Albania 2,240 2,200 225 1,000 1,000 1,500 950

Armenia 553 2,150

Azerbaijan 991 4,200 6,961

Bulgaria 1,564 1,400 771 132 524 1,450 1,266

Caucasus 6,940 2,000

Central/Eastern Europe 2,614 200

Croatia 500 500

Czech Republic 569 500

Estonia 224 150

Europe/Eurasia Region 1,000 200

Georgia 870 923 2,027 500 3,590

Hungary 1,197 730 310

Kazakstan 244 1,377 1,975 3,045

Kosovo 1,000

Kyrgystan 6,200 487 2,878 1,177 1,826 999

Latvia 224 430

Lithuania 560 600

Macedonia 2,500 950 900 500 2,000 1,056

Moldova 60 180 200

Montenegro 1,000 1,400

Poland 7,756 4,976 1,693 19,088 

Romania 896 500 1,405 3,200 2,050 4,547 1,758

Russia 12,810 5,200 2,475 2,139 7,340 7,357 5,218

Slovakia 896 500 

Tajikistan 101 1,479

Turkmenistan 356 638

Ukraine 2,100 450 2,403 1,238 4,948

Uzbekistan 40 583

EE Subtotal 0 0 0 38,106 20,136 10,473 38,458 16,741 25,570 35,291

Latin America and the Caribbean (LAC)

Belize 342 266 

Bolivia 1,442 2,136 3,548 5,532 7,652 1,775 1,800 3,230 1,200 1,700

Caribbean 

Regional 1,021 1,005 1,000 4,610 600 

Costa Rica 200 300 110 140 15 

Dominican Republic 4,778 5,684 2,065 1,300 780 500
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 41

REGION COUNTRY 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Ecuador 200 250 945 1,094 796 945 758

El Salvador 11,863 11,882 9,898 19,120 7,788 2,478 3,214 3,800 2,990 2,918

Guatemala 795 647 708 1,974 1,403 9,576 2,155

Guyana 875 350 700 53 30 164

Haiti 2,030 1,180 760 3,148 2,868 3,698 7,246 6,789

Honduras 9,783 8,307 6,190 1,187 587 914 5,205 9,312

Jamaica 356 745 946 743 696 442 389 640 1,074

Mexico 65 200 147 550

Nicaragua 627 101 1,744 448 1,222 1,440 2,817 1,021

Peru 387 732 4,592 3,011 7,796 3,220 4,447 6,564 5,863 9,357

Regional Programs 1,444 1,453

LAC Subtotal 25,394 25,438 35,589 40,721 32,595 15,200 20,101 21,080 36,972 36,493

CENTRAL BUREAUS

Global

Business 

Development 3,150 10,750

Develop.Credit 400 500 450 61 573 375 784

Emerging Markets 4,136 2,800 

Microenterprise 2,595 3,145 3,793 4,909 22,416 20,194 28,534 24,994 12,288 22,844

Housing (RHUDO) 300 

Women in 

Develop. 216 730 645 

Global Subtotal 3,211 8,511 4,243 4,909 22,416 23,939 28,595 28,717 23,413 23,628

Bureau for Humanitarian Response (BHR)

Private 

& Volunt. 4,148 3,381 4,989 7,887 9,494 8,005 8,289 8,316 7,650 9,495

BHR Subtotal 4,148 3,381 4,989 7,887 9,494 8,005 8,289 8,316 7,650 9,495

SUBTOTAL 

Central Bureaus 7,359 11,892 9,232 12,796 31,910 31,944 36,884 37,033 31,063 33,123

GRAND TOTAL 113,615 126,298 93,389 137,396 133,533 111,358 158,132 136,245 153,521 164,391
ANNEX B: MICROENTERPRISE RESULTS

REPORTING METHODOLOGY

Microenterprise Results Reporting (MRR)

tracks the microenterprise support activities of USAID. MRR is implemented by

Weidemann Associates, Inc. through a contract

with the Barents Group of KPMG Consulting

and is managed by USAID’s Office of

Microenterprise Development.27

This is the fifth annual report that MRR has

produced. All prior annual reports are available

online at www.mrreporting.org and also at

www.mip.org, the official website of the Office

of Microenterprise Development. This report

will be available on the same websites in early

2002.

Funding data reported in this year’s report are

from USAID FY 2000, which extends from

September 1999 until October 2000. Funding

data was collected from USAID field missions

and the central bureau offices that control the

Agency’s budget. USAID and contract staff

enter this data into a secured online database.

Data for the preceding fiscal year are reported

in each annual report. Planned funding to

microenterprise programs in upcoming years is

also tracked. 

Implementing institutions with active USAID

funding agreements in the reporting year provide the institutional data. Institutions add data

online directly into MRR’s interactive database.

USAID field missions, institutions, and other

sources provide contact information, which

MRR updates annually. In some cases, umbrella

institutions that channel funds or technical assistance to implementing organizations have provided data for the institutions they support.

Because USAID’s funding often precedes new

program implementation by several months,

reporting for a particular fiscal year may not

capture all the eventual program uses for that

year’s funding. 

USAID supports microenterprise development

through multiple layers of delivery mechanisms.

Frequently, USAID field missions set up a

broad, multi-faceted activity to accomplish a

strategic objective. An institutional contractor

may then be hired to manage this activity, which

may include setting up grants or subcontracts to

a number of small local institutions or subcontractors. The grantees or subcontractors may

work directly with microentrepreneurs or with

organizations, as in the case of BDS facilitators.

This approach maximizes the effectiveness of

USAID assistance by putting funds in the hands

of expert managers and service providers and by

building institutions that will be strong and solid

enough to be independent and permanent

providers of services. It does, however, make the

tracking process complex.

While the data reported in this report cannot

be verified directly through audited financial

statements, MRR follows a set of steps

designed to cross-check the data received to

ensure accuracy and reliability. For those institutions that have reported over several years,

longitudinal data trends by individual institu42 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

27 This report was prepared by Catherine Neill, with assistance from Carmen Varley and Ling Ling Phung, under the supervision of

Elizabeth Hunt, in the Office of Microenterprise Development, and Katharine McKee, Director of the Office of Microenterprise

Development. The report is funded under the USAID-funded MicroServe Indefinite Quantity Contract Nos. PCE-0406-1-00-6012-00,

PCE-1-00-96-90012-00 and USAID Contract No. PCE-I-00-98-00012-00, Task Order No. 06, with the Barents Group of KPMG Consulting,

LLC, under Subcontract No. AID-99-I-00012-000-0029, Technical Assistance Order #3 with Weidemann Associates, Inc. 
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 43

tions are monitored for consistency of reporting. In addition, in as many cases as possible,

MRR seeks to verify reported data from one or

more additional sources, including the PVO

headquarters for field-based affiliates, and the

USAID field or central office monitoring the

grant or agreement. 

Each year more institutions put data systems in

place that make it possible for them to track

their results more accurately. Improvements in

field operations have a direct effect on what

MRR is able to report on institutional results.

As FY 2000 was the first year that BDS

grantees were asked to report on the poverty

loan status of their clients, reporting in subsequent years will likely improve in quality and

quantity as more institutions incorporate this

request into their management information

systems.

2000 Institutional Data

In 2000, 282 microfinance institutions

responded to the MRR survey. Only 42 (15%)

received funds in 2000; the remainder had ongoing USAID agreements. Of the 66 organizations that provided data on their business

development services, 24 (36%) received funding in 2000. Of the 13 policy advocacy organizations that provided information, nine were

funded in 2000.

Table 10. USAID’s Microenterprise Survey Respondents, 2000

Types Microfinance Business Policy Total 

Survey Development Survey Survey

Banks1 37 - - 37 

Business Associations 5 4 2 11 

Consulting Firms - 1 3 4 

Cooperatives/

Credit Unions 43 3 1 47 

For-Profits/

Finance Companies 4 4 - 8 

Government Agencies - - 1 1 

NGOs 136 27 1 164 

Non-Bank Financial 

Institutions 22 1 - 23 

PVOs 35 22 2 59 

Research - 4 3 7 

Total 282 66 13 361 

1 This includes 17 rural banks located in the Philippines. These small rural organizations function more as village banks

than as commercial banking facilities, as commonly understood in most countries. 
44 MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD

Table 11. Microenterprise Activities Funded in 2000

Financial Financial Non-Financial Non-Financial Total 

Policy Activities Policy Obligations

Amount Number Amount Number Amount Number Amount Number Amount Number

US$ US$ US$ US$ US$ 

(000’s) (000’s) (000’s) (000’s) (000’s)

Banks 1,988 14 0 - 574 1 0 - 2,562 15 

Business 

Associations 300 2 0 - 3,570 5 433 1 4,303 8 

Consulting 23,277 12 648 3 920 3 1,821 7 26,666 25 

Cooperatives

& Credit 

Unions 5,894 23 0 - 4,757 6 500 1 11,151 30 

For-Profits/

Finance 

Companies 1,958 4 1,099 2 1,263 3 1,099 2 5,419 11 

Government 

Agencies 0 - 0 - 1,500 1 0 - 1,500 1 

NGOs 23,729 35 0 - 4,736 20 355 2 28,820 57 

Non-Bank

Financial 

Institution 4,885 9 0 - 415 1 0 - 5,300 10 

PVOs 28,116 48 578 3 20,952 45 650 3 50,296 99 

Research 750 2 0 - 3,893 7 80 1 4,723 10 

USAID1 13,164 15 50 1 6,705 15 166 3 20.085 34 

Other2 983 3 2 1 2,375 8 206 2 3,566 14 

Total 105,044 167 2,377 10 51,660 115 5,310 22 164,391 314 

1 This includes Mission projects that have not yet committed funds to particular institutions, Mission support activities on

behalf of microenterprises, and technical assistance and support activities of the Office of Microenterprise

Development.

2 This includes institutions that do not fit into other categories, such as the International Finance Corporation and the

Enterprise Funds in Europe and Eurasia. 
MICROENTERPRISE DEVELOPMENT IN A CHANGING WORLD 45

Notes