USAID Microenterprise Development Program Conference Call Minutes Tuesday, April 21, 2009 11:00 AM - 12:00 PM
Speakers:
Mauricio Vera, Acting Director of the Center for Faith-Based and Community Initiatives at USAID
Jeanne Downing, Microenterprise Team, Bureau for Economic Growth, Agriculture and Trade at USAID
Tom Kennedy, Microenterprise Team, Bureau for Economic Growth, Agriculture and Trade at USAID
Mauricio Vera
Good morning everyone. I want to welcome to you all to today's conference call. I am Mauricio Vera and I am the acting director of the USAID Center for Faith-Based and Community Initiatives. Our Center serves as a bridge between faith-based and community organizations (FBCOs) and the U.S. Government (USG) and works to build capacity of FBCOs and to eliminate barriers within the USG that would hinder partnerships. Today we have some very interesting speakers from the Microenterprise Development team which is part of the Bureau for Economic Growth, Agriculture and Trade here at USAID. This is a subject near and dear to my heart since my permanent job with USAID is as the director of USAID's Office of Small and Disadvantaged Business Utilization. They have prepared presentations for the first few minutes and then we will move on to questions from you all. It gives me great pleasure to introduce Mr. Tom Kennedy and Ms. Jeanne Downing.
Tom Kennedy
I want to start by saying that it is a pleasure for us to participate in this call today. I have been with USAID for 10 years. One thing I have learned in my years here is that collaboration with FBCOs is extremely important to the success of our programs. USAID has a long history or working with organizations like yours. USAID has been working in the Microenterprise field for over 25 years. In 1994, we established the Microenterprise Development office to provide technical guidance and support to USAID Missions and other operating units. Needless to say, a lot has changed in this field since 1994.
Our main focus in 1994 was to strengthen the capacity of microfinance institutions and to provide them with needed loan capital. We believed, correctly, that the key, at that time, was to build strong, sustainable institutions that can provide on-going credit to poor entrepreneurs. USAID experienced a huge amount of success with these ventures. Flash forward to today and USAID is still a leader in this field but the sector now focuses on far more then the sustainable provision of microcredit. Over $245 million a year is dedicated to microenterprise development projects by USAID. Since 1994, the field has grown tremendously. There are a lot more actors involved in microenterprise development work. The microfinance sector has evolved over the past three decades and we continue to adjust our programs to keep pace. Large donor-funded, initiatives in earlier years focused on establishing microfinance institutions and providing the bulk of needed loan capital. Today, the private sector has taken the lead in building and financing these institutions, while we have joined other donors in developing innovative and more responsive delivery channels for financial services, particularly for hard-to-reach rural areas, where most of the poor live.
Private sector capital now plays a huge role in this field and this has continued during the current economic crisis. It is not just microcredit-focused programs, but there is increased focus on a broad range of financial services, remittances, insurance, value chain work, etc. There has also been a growing emphasis placed on strengthening the enabling environment in which microfinance institutions and their clients operate. We now realize that no matter how effective the program design, if the local enabling environment is not supportive, there will be difficulty sustaining the program once donor funding ends.
USAID's work in the microenterprise development sector is distinct from other donors' efforts in that it addresses the needs of microenterprises holistically - combining access to finance, access to markets and market information, business skills upgrading, policy reform, and strengthening of value chains.
We will also fund projects in economic strengthening for youth, financial literacy, and livelihood activities. This focus on the most vulnerable populations, including orphans, single mothers, those affected by HIV/AIDS and the food insecure, ensures that the poorest will be included in economic opportunities.
Currently there are microenterprise activities taking place in 90 USAID missions and other USAID offices. Since USAID missions operate on the country level, they're able to assess local needs and to make determinations regarding effective use of microenterprise development funds. The microenterprise development team here in Washington focuses on providing technical assistance to the field offices, working within the agency to set policy, engaging implementing partners, and the learning and dissemination of new policies, practices and procedures. We have a very active knowledge management program.
The grant programs that USAID uses are varied and depend on the programmatic priorities of the agency and the individual offices and Missions. While all grants are listed on www.grants.gov, the Microenterprise Development Team and the overseas Missions have their own separate grant programs. You can find out more about the programmatic priorities of each USAID Mission and other offices by visiting our website at www.USAID.gov. There is a new program that USAID introduced last year, the Development Grants Program (DGP), which is specifically geared towards new PVO and NGO partners that have had limited experience working with USAID in the past. Keep your eyes open for the next DGP solicitation this fall as there will be a significant microenterprise focus.
Jeanne Downing
I'd like to also start with a little bit of history. During the 1990s there was a specific focus on business development services. We were looking at non-financial services (also called business development services) and ways to strengthen service providers. We learned a lot about doing that. We also realized that unlike money, business services are not fungible. Unless operating in markets that are growing, it just didn't make sense to invest in business development services. As a result, we took a different view and started broadening our scope. That's when we started looking at value chains.
We've spent a long time developing strategies focused on how to move micro-entrepreneurs from low or no return activities into higher return activities. Many micro entrepreneurs are working in saturated markets, where there are lots of sellers, not many buyers and not a lot of growth potential. There has been a great deal of research on the relationship between economic growth and poverty reduction. It has established that economic growth is a requirement/necessity for poverty reduction. We can't just look at poverty alleviation; we must also look at economic opportunities for the poor. Where are the growing markets that the poor can link into? That's how we came to the value chain approach. Today, value chains are a focus of the entire agency. Large initiatives such as the Global Food Security Response (GFSR) are focused on chronic food insecurity. Value chains are front and center to USAID's approach to this issue.
There are several grant opportunities in microenterprise development at USAID.
The USAID Implementation Grant Program comes out every 1 to 2 years and is focuses on value chains and getting smaller entrepreneurs into the market.
Grants under Contracts (GUCs) are aimed at letting NGOs know more about value chain approach as well as learning about institutionalizing the approach into business. For some this will mean moving from more of a community development orientation to a market-led orientation while still reaching the poor.
I talked about food security, but there are other areas that we focus on as well such as vulnerable populations, HIV/AIDS, OVCs, poor etc. We are currently doing a lot of work with PEPFAR programs and linking them to economic opportunities.
We had a presentation on vulnerable populations at the last Breakfast Seminar. All of the past presentations are posted on our website www.microlinks.org. The website is an excellent tool for you to use as it contains a lot of case studies, presentations, notices of grant opportunities, etc.
Tom Kennedy
I would also add that in the micro-finance sector USAID also has an Implementation Grant Program that focuses on microfinance issues of interest to this community. USAID has recently authorized several cooperative agreements that focus on housing microfinance. There are large microenterprise development programs in a number of countries including Afghanistan, Iraq, Pakistan and Sudan to name a few. I want to reiterate what Jeanne has said in saying that we frequently discuss how USAID can help microfinance institutions and microentrepeneurs cope with the ongoing economic crisis. We have had several seminars and papers published on this topic. You can see these presentations on our website, www.microlinks.org, which is the pinnacle of our knowledge management work. It's an award winning site, so please check it out.
This field is very active and very vibrant and evolves constantly. We are constantly searching for better and more effective ways to meet the needs of the poor.
Jeanne Downing
On the microlinks website you can find a lot of training materials, tools about how to analyze and evaluate value chains as well as case studies. www.microlinks.org/vcwiki contains a vast array of resources on value chains. Also, please engage with us on the site. We want you to tell us how you like it, let us know your experience with the site, and post your own comments and information.
Q&A
Can you tell us the break out of funding and programs by region?
The bulk of resources go to Asia and Near East (ANE), Latin America and the Caribbean (LAC), Africa & Europe and Eurasia (E&E). In Fiscal Year 2007 there was about $72 million for funding of MED programs in ANE, $47 million in LAC (the largest program was Colombia), $30 million in Africa, $23 million in E&E, and $21 million for centrally funded MED program.
Can you tell us more about grant opportunities? You mentioned the Implementation Grant Program; can you tell us more about when the next solicitation is coming out and how we can find out information about that?
We just recently awarded one, so it might be awhile before the next solicitation comes out. They will all be listed on www.microlinks.org, as well as www.grants.gov. If you are interested in a specific country look at www.usaid.gov and look at the specific country programs. We have a contract called Knowledge Driven Microenterprise Development (KDMD) there are a number of grants under contracts (GUCs) within that contract. These grants/contracts are smaller and more frequent and thus might be a better opportunity, especially for FBCOs that have not worked with USAID before.
As previously discussed, there are 90 USAID offices and missions that fund MED programs. When the solicitations for grant funded programs are listed, you can find references on the www.microlinks.org and www.grants.gov websites.
Do you need to be registered as a private voluntary organization (PVO) to apply for the microenterprise development grants?
Yes. If you are a US-based organization, it is mandatory that you complete the PVO registration process. To learn more about the registration process, click here.
We work in Latin America and the Caribbean and we are currently developing different partners within different countries. Some of these partners are in extremely remote places within the countries. So much so, that they have no direct access to capital. Can you clarify what your definition of "ultra-poor" is? We are looking into the possibility of using cell phones to give remote populations access to lending institutions. I'm specifically thinking in the case of Cuba. What do you suggest?
USAID's definition of a microenterprise is a very small enterprise, with 10 or fewer workers, owned and operated by poor people, usually in the informal sector. Crop production activities can be included as long as they otherwise qualify on the basis of enterprise size and economic status of the owner-operator and employees. Our experience has been that micro-finance loans typically go to the working poor. These populations obviously already have some resources since they are working. USAID is looking to take it a step further and provide financial services to poorer households, particularly in the rural areas.
I would also say that savings is a very important financial tool. Having a safe place to put savings is very important in terms of poor household financial stability and enterprise development. We are continually talking about ways of integrating rural populations into markets, i.e. through feeder roads, etc. Sometimes it means grouping people so they can sell in bulk or grouping so they can buy materials in bulk. It takes a lot of creativity, especially with very isolated populations. They have to be linked to a market. The question continues to be how do we do that?
There is a growing amount of work being done on saving led groups. For years groups like CARE, Oxfam, Catholic Relief Services and Pact and thousands of NGOs in India and elsewhere have pioneered a savings-led approach for providing financial services to the poor, especially the rural poor beyond the reach of traditional microfinance institution. In recent years the methodologies have gathered more attention as they prove effective at reaching the poorest and most marginalized, particularly in Africa and India.
You mentioned the use of technology in reaching these populations. USAID is a leader in this area. Branchless banking and mobile phone services and other technological solutions that provide the poor with greater access to financial and enterprise development services are areas that we are very engaged in. For example, USAID Colombia has a pilot program utilizing neighborhood Point of Sale (POS) devices to facilitate electronic financial transactions outside of the traditional brick and mortar branches. In Malawi, USAID is funding pilot mobile branches as well as the use of smart card technology. USAID in the Philippines has provided global leadership in expanding the use of mobile phone technology in Microfinance. These are just a handful of examples in this exciting, cutting-edge field. You can review additional examples and discussions on www.microlinks.org.
Look at www.microlinks.org for listings of KDMD and grants under contracts. Search for "New partners in value-chain development" to find specific grant listings.
You mentioned the importance of having an enabling environment. What kind of activities do you get involved in to promote those types of environments? Policy? Advice to local governments?
We are looking at the necessary enabling environment for microfinance. We have been closely looking at the constraints to improving food security and the role that plays. Our team does not engage with foreign governments for policy reform, however the USAID Missions in country do engage with local government quite a bit, for example, the local government in Columbia requested the USAID mission's assistance to conduct research and provide recommendations for ways to improve the enabling environment for microfinance in that country.
Infrastructure plays a very large role in remote locations. What kind of influence can USAID have on local governments to encourage the development of infrastructure (i.e. roads, etc...)? That's not an area where FBCOs can really have a lot of impact.
The Millennium Challenge Corporation has been working on those types of issues a lot. USAID is increasingly looking at building feeder roads. We have also been linking with World Bank who is focused on infrastructure. We absolutely understand that it is very important.
Would you work with World Bank to build "feeder roads"?
We would link with them to make sure that our activities would be complementary. For example, in Zambia, the World Bank was looking for contractors to build feeder roads while USAID was looking into building market for contractors. USAID does not however provide credit to local governments.
Our organization is engaged in cultural enrichment programs in Burkina Faso and Cameroon. What kind of complimentary support can USAID offer a program such as mine?
To give an example, the Development Grants Program focuses on programmatic implementation, but there is also a strong capacity building aspect of the program. They can provide technical assistance to organizations to help them implement successful programs. Regarding the type of project, as noted earlier, it's important to be aware of the priorities of the USAID Mission or other office that is issuing a solicitation. Those priorities and the proposal evaluation criteria are defined in the solicitation, so please review those carefully and visit the USAID website for additional Mission and country specific information. I should note that we do not have a USAID mission in either Cameroon or Burkina Faso, but we do work in what we call "non-presence" countries. There is a West Africa Regional program, but you would need to keep your eyes open for solicitations that might apply.
Close
Thank you to Microenterprise Development Team for this informative session and to you all for your thoughtful questions. Send any questions we did not have time to address to fbci@usaid.gov and we will provide answers. Minutes from this call will be posted on the USAID CFBCI website and included in the weekly email newsletter. Our next call will be taking place on Tuesday, May 5th from 11AM to 12PM and will be discussing USAID's Limited Excess Property Program.
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