Supporting the Private Sector
Supporting public sector in developing countries is a necessary but insufficient condition for fighting poverty amongst local populations. Donors recognize that by supporting growth and providing employment, the private sector plays an important role in reducing poverty.
Aid for the private sector consists mainly of providing access to financing. Microfinance is one of the instruments that allows individual entrepreneurs to access the resources they need to develop their businesses and create added value.
Over the past 20 years, AFD’s total aid to the microfinance sector has amounted to nearly €300 million, increasing considerably since 2002. In sub-Saharan Africa, AFD is the main lender, providing 35% of all donor aid for microfinance.
In 2007, assistance to the microfinance sector by Proparco, AFD’s private sector subsidiary, increased AFD’s intervention capacity, especially through its own funds. In 2007 alone, AFD committed €47 million for 11 microfinance projects. To support the development of microenterprises, Proparco has notably guaranteed a €12.5 million loan granted by a local bank to the principal Moroccan microcredit association. This intervention has allowed the association to expand its offering of financial products to the poorest people.
Microfinance allows entrepreneurs to access the resources they need to develop their businesses and create added value.
AFD will continue its effort to directly support microfinance institutions over the next three years by participating in their creation and expansion, by supporting them in rural areas and recovering economies, and by promoting their supplemental products in the areas of housing credit, customer services to migrants, and savings instruments.
AFD subsidizes microfinance institutions in Madagascar
Celestine Ravaonoro, dressmaker in Antananarivo, Madagascar
“Yesterday, we borrowed to buy a sewing machine, and today we employ 56 people.”
“I started to make dresses by hand, using two needles and buying my first batch of fabrics from a Chinese trader because it was cheap. But my husband and I quickly understood that we could not grow our business with only the money we had. We therefore decided to borrow. With microcredit, we first bought a sewing machine in 1978, on which I worked alone. The following year, we bought a second machine. Then we decided to set up a business. We hired two employees and invested in five new sewing machines. Today we employ 56 people and our products are known throughout the provinces and Antananarivo. We are proud of the journey we have travelled.”
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Project stories: Microfinance in Morocco
Supporting microfinance in Jordan
Jordan’s microfinance sector emerged in the 1990s and has since seen the rapid rise of specialized agencies. Mostly urban, the sector has 200,000 potential beneficiaries. Current coverage of this population is less than 30%. The five main Jordanian microfinance institutions cannot by statute collect deposits and therefore need access to credit. These institutions need lowest-cost financing, in local currency and in the medium term, to finance their growth.
To support the growth of these institutions, AFD has approved a $15 million grant for credit lines to two Jordanian banks.
The banks will in turn distribute these credit lines to the five main microfinance institutions based on eligibility criteria that meet project objectives.
This intervention aims to boost Jordan’s economic development and reduce poverty by providing those outside the financial system with access to sustainable financial services tailored to their needs.
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>> AFD and Microfinance - 1988-2008: a twenty-year milestone
April 2008 (760 ko)