Small, but promising

SMALL-SCALE enterprises have always constituted a sizable sector of the economy. However, this sector had suffered from a chronic shortage of credit. In the absence of banking experience and collateral, small entrepreneurs were not able to borrow money from commercial banks.

"What they needed was to be able go to an institution, ask for a loan, and take it in a matter of one or two weeks," said one USAID official.

Since 1990, USAID has provided indirect loans to small and micro enterprises (SME's) which have 1-15 employees. Loans range in size from LE500 to LE5,000 for micro and LE5,000 to LE15,000 for small enterprises. The loans are administered through non- profit organisations, which hire young graduates to act as liaison officers between the foundations and the SME's.

Since the start of the programme in December 1990, it has lent a total of LE1.8 billion, benefiting some 237, 000 borrowers.

Although the loan recipients pay commercial interest rates prevailing in the market, they are able to receive loans which commercial banks would probably not be ready to offer them.

The loans are used for operation expenses, to buy raw materials, or to upgrade or expand the business by buying equipment or hiring staff. These foundations provide credit, as well as technical assistance and marketing support.

To date, the most successful programme in Egypt is the one managed by the Alexandria Business Association. The Alexandria Small and Micro enterprise project, which started in 1990, has benefited about 25,000 borrowers, but has the lowest rate of arrears (2.32 per cent of portfolio) and risk (1.53 per cent of portfolio).

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		Al-Ahram Weekly Online 21 - 27 June 2001 Issue No.539
Published in Cairo by AL-AHRAM established in 1875		Current issue \| Previous issue \| Site map