THE PROJECT

Economic Justification

A variety of economic benefits and project impacts, both direct and indirect, are expected. In addition to handover operations in 11 RSMEPP-I districts, over seven years, the project will cover approximately 48 districts (out of 98) in the 11 provinces. About 50% of locally elected representatives and district mayors in the project area will be trained on participatory approaches and on local development. Each district involved will be able to make use of a consultative platform bringing together SMEs (represented by collectives, professional bodies and federations), locally elected representatives and the administrative authorities. Women will constitute at least 30% of the direct beneficiaries and will be represented in the same proportion in decision-making bodies.
Sustainable national and local SME and MFI support structures, and representative organizations of SMEs (federations, collectives or professional bodies) will be established. In total, it is expected that 10 000 SMEs (including the 3 200 SMEs currently covered under the first phase) will receive support and that some 100 000 rural dwellers will directly or indirectly benefit from the combined impact of project activities. In addition, the capacity and asset base of the financial sector will be strengthened so that it can manage savings and provide loans to SMEs. Access to finance in remote rural areas will
be promoted through the establishment of 80 financial centres.

While it is difficult to measure the economic impact of a demand and process-driven project such as this, a series of enterprise profiles for representative activities has been developed and the sensitivity of the activities assessed. Fifteen typical enterprises have been analysed and their financial rate of return varied from 10-91%. A tentative estimate on the number of enterprises in each category arrived at an economic return of 33%. Internal financial returns vary widely and are highly sensitive, therefore an eight per cent increase in cost reduces the economic return to 12%. During project implementation, SME performance will be monitored (component 2) and entrepreneurs will be helped to improve their performance and reduce risks. New entrepreneurs will be informed of profiles and financial returns so that they can make informed viable choices.

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