Front Cover
 Title Page
 Table of Contents
 List of Figures
 Women and small micro-scale enterprise:...
 Guidelines for integrating women...
 Gender concerns in project implementation,...

Group Title: Gender manual series
Title: Gender issues in small scale enterprise
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00080499/00001
 Material Information
Title: Gender issues in small scale enterprise
Series Title: Gender manual series
Alternate Title: Guidebook for integrating women into small and micro enterprise projects
Physical Description: 74 p. : ill. ; 28 cm.
Language: English
Creator: Otero, María
United States -- Agency for International Development. -- Office of Women in Development
Publisher: U.S. Agency for International Development
Place of Publication: Washington D.C
Publication Date: 1987
Subject: Women in development -- Developing countries   ( lcsh )
Businesswomen -- Developing countries   ( lcsh )
Economic development projects -- Developing countries   ( lcsh )
Genre: federal government publication   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
Bibliography: Includes bibliographical references (p. 69-74).
Statement of Responsibility: by Maria Otero.
General Note: Title on t.p. verso: Guidebook for integrating women into small and micro enterprise projects.
General Note: "Edited by Laurene Semenza, Paola Lang, Robert R. Nathan Associates, Inc. for Office of Women in Development, Bureau for Program and Policy Coordination, U.S. Agency for International Development, DPE-0300-0-00-5006-00, July 1987"--T.p. verso.
 Record Information
Bibliographic ID: UF00080499
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 21096407

Table of Contents
    Front Cover
        Front Cover
    Title Page
        Title Page 1
        Title Page 2
    Table of Contents
        Table of Contents 1
        Table of Contents 2
    List of Figures
        List of Figures
        Page 1
        Page 2
    Women and small micro-scale enterprise: A rationale for considering gender
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
    Guidelines for integrating women into small and micro-enterprise projects
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
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    Gender concerns in project implementation, monitoring, and evaluation
        Page 49
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Full Text

The Gender Manual Series

Gendr Isusi



The Gender Manual Series

' -- 'l ...* .. ..4...- ;.:- : .' 't -" ,--' ".. ,'. ".-, -

by Maria Otero


By Maria Otero

Edited by
Laurene Semenza
Paola Lang
Robert R. Nathan Associates, Inc.


Office of Women in Development
Bureau for Program and Policy Coordination
U.S. Agency for International Development
July 1987





Introduction 3
Definition of Terms 3
Women as Microentrepreneurs 6
Conclusion 9


Standard SME Project Components 11

Credit 12
Technical Assistance and Training 14

Issues in SME Project Design 16

Funding of Project Components 16
Cost Effectiveness 18
Technical and Managerial Capacity
of Implementing Institutions 20
Outside Technical Assistance 21

Guidelines for Integrating Women
into SME Project Design 24

Step One: Identification of the
Type of Assistance to be Provided
to Women 24
Step Two: Feasibility Studies/
Disaggregation of Data by Gender 26
Step Three: Identification of
Implementing Institution 33
Step Four: Identification of
Constraints to Female Small and
Micro Entrepreneurs 35




Project Implementation 49

Project Promotion 50
Credit 50
Loan Requirements 51
Loan Review Procedures 52
Loan Disbursement and Repayment 54
Interest Rates 57
Technical Assistance and Training 58

Project Monitoring 61
Project Evaluation 63
Conclusion 65


Figure Page

1 Characteristics of Micro and Small
Scale Enterprises 4

2 Characteristics of SME and Implica-
tions for Women 6

3 Grameen Bank 13

4 Small Business Scheme of the National
Council of Churches in Kenya 22

5 Advantages and Disadvantages of Three
Types of Women's Projects 25

6 Constraints Women Face in SME Projects 42

7 Institutional and Project Constraints
that Adversely Affect Women's
Participation in the SME Projects 44

8 Project Design Process 47


10 Monitoring and Evaluation System Model 66


In the last decade an extensive body of literature
has evolved on why women should be integrated into
development planning and programs, and on how best to
achieve this end. Many of the findings and data under
the "women in development" rubric have persuaded
planners and program designers that women represent a
critical human resource in the development process.

AID's policy statement, the "Women in Development
Policy Paper" (1982), emphasizes the importance of
integrating women into development programs both for
humanitarian/social considerations and for economic
reasons. Women's contributions to the economy are
already substantial. With increased education and
access to control over resources, women become an
increasingly important, dynamic force.

Misunderstanding of the gender differences,
leading to inadequate planning and designing
of projects, results in diminished returns on
investment. Gender, therefore, is a critical
category of analysis in AID's work, one which
has not received sufficient attention to
date. (AID, "Women in Development Policy
Paper," 1982).

This guidebook is designed to provide AID staff in
Washington and in missions with a guide to integrating
women into small and micro enterprise development (SME)
programs. It is not meant to be an in-depth reference
tool or a definitive statement on gender issues in SME
development. Rather, it -is intended to introduce
program designers to gender concerns and to provide an
overview of recent findings from the field. It may be
used by project design teams in the preparation of
Project Identification Documents (PIDs) and Project
Papers (PPs); by staff in the review of Operational
Planning Grants (OPGs) and other unsolicited proposals;
by project managers to ensure that program implementa-
tion and evaluation properly consider women; and by
other development professionals interested in formulat-
ing more inclusive and effective programs.

Regional or country-level considerations are
outside the scope of the guidebook. Each guidebook
user will have to identify for him/herself the country-
specific factors (cultural/societal norms, institutional
forms, legal aspects, certain economic factors) that
may affect program parameters.

The guidebook is divided as follows: the first
section summarizes the reasons for which women should
be integrated into SME or other income generating
programs. The second section presents a set of guide-
lines for the integration of gender issues into SME
project design. The third section looks at the imple-
mentation, monitoring, and evaluation of SME projects,
particularly in regard to gender issues.



This section describes the small and micro-
enterprise sub-sector. This will form the basis of the
overall discussion regarding the importance of consider-
ing gender issues in all aspects of small and micro
scale enterprise (SME) projects. Specifically, this
section includes:

Definition of basic terminology of SME

S Reasons why women are so prevalent among
the smallest of small scale enterprises,
those termed "micro-enterprises"

Definition of Terms

Most small and micro-enterprises operate in the
informal sector in urban and rural settings, and are
involved in manufacturing, food processing, commerce
and service. Although there is enormous variation
across countries and even within the sector of a single
country, certain characteristics are common to most
SMEs. Size, location, labor production, and inputs are
summarized in Figure 1 and discussed below.

Size: Measurements of size, the most often used
variable in defining SMEs, refer primarily to
fixed asset amounts and number of waged
employees. Generally, "micro-enterprises"
for AID purposes comprise establishments with
under US$10,000 in fixed assets, or five or
fewer workers. "Small" and "emerging out of
small" enterprises have a larger asset base
and a greater number of employees; small
enterprises can be defined as having 50 or
fewer waged employees and assets up to
US$100,000. Women dominate the ownership of
the very small enterprises, and their partici-
pation decreases as the size of the firm
increases. It is important to note that
definitions vary among countries, and that
enterprises in Africa and Asia tend to have
lower asset levels than those in Latin

Figure 1. Characteristics of Micro
and Small Scale Enterprises

Size Capital Employees Location Labor Production Inputs

Micro: Up to 5 or less Home based Family Local Use simple
$10,000 make-shift members markets technology
quarters Apprentices and locally
No fixed inputs
Small: Up to 50 or less

Location: Small and micro-enterprises often are
home-based, use make-shift quarters, and
operate in the street with no fixed location.
They may represent one of several income
stems for the family, and labor and capital
may be allocated based on need and circum-

Labor: Most small and micro-enterprises use
family labor or apprentices who are paid
minimal wages, or in-kind. Management issues
related to planning, accounting, and record-
keeping are resolved on a day-to-day basis in
no planned or systematic way. A low level of
formal education and literacy characterizes
most microentrepreneurs, most of whom have
learned their trade on the job.

Production: Goods and services produced by small
and micro entrepreneurs are generally targeted
at local markets and are subject to volatile
demand forces. Micro-enterprises create
important backward and forward linkages
within the country's economy by using locally
produced inputs as well as producing inputs
for larger industries.

Inputs: Most small and micro-enterprises use
simple, labor-intensive technology, and can
therefore generate jobs at a considerably
less cost than their larger counterparts.

Women as Microentrepreneurs

The factors governing the economic activity of

small and micro-enterprises make them particularly
attractive to women. These factors are summarized in
Figure 2 and described below.

Figure 2. Characteristics of Small/
Micro-Enterprises and Implications for Women

Skills/ Hiring
Structure Barriers knowledge Location practices

SFlexible Less educa- Can use Street Women pre-
4 tion, training already exist- location dominate as
o Loosely structured and experience ing skills owners of
are required home-based certain
4 Lower level of
.- capitalization
o Use of family
labor rather
than wage

n Enables women to Because there Traditional Women can be Women
C divide their time are few activities involved in entrepre-
., between domestic barriers to such as several neurs tend
u E responsibilities entry into the garment activities to hire
3 and economically micro and small making, food at a time female
productive enterprise processing and overhead employees
0 activities sector, women can be turned cost is low
E!4 can actively into
participate businesses

Structure: Small and micro-enterprises are more
flexible and less structured than other

employment sources, enabling women to combine
productive activities with family respon-
sibilities such as domestic chores and child
care. This flexibility is even more important

as the number of female heads of households
increases throughout the developing world.
At the same time, women who retain the tradi-
tional female roles of homemakers and child-
bearers find themselves assuming a growing
share of the income-producing function within
the family. They too are turning to the
informal sector to earn income.

Barriers to entry: The barriers to entry into
small and micro-enterprises are few. Operat-
ing a small firm requires less education,
training, and experience than formal sector
jobs. Since women tend to be at a greater
disadvantage than men in these areas, they
are often limited to the least remunerative
jobs in the economy. Other barriers, such as
initial level of capitalization, production
technology, and wage requirements are also
lower; start-up costs for micro-enterprises
require a minimal asset base, and often
depend on family rather than wage labor.
These other factors are important considera-
tions for women who tend to have limited
legal rights over property or other assets
suitable for collateral in business start-up
transactions. As a result, women are concen-
trated in those entrepreneurial activities
that require the least capital, such as

Skills and knowledge: Small and micro-enterprise
activities often enable women to build on

skills and knowledge gained through their
traditional roles as household and child care
providers. The business becomes a natural
extension of household activity. For example,
textile processing (garment-making,
embroidery) and food preparation (baking,
candy-making, street foods) are areas in
which many women utilize traditional skills
to establish successful and growing enter-
prises. The serious limitation of these
firms, however, is that they tend to be among
the least remunerative and least capitalized
small and microenterprises. Because of low
skill levels, women are less able to diversify
or engage in more productive enterprises.

Location: The location for operating a micro-
enterprise can vary. In many countries,
women tend to predominate in the commerce and
street vending sector. They run their
businesses from shifting or fixed street
locations, rather than from purchased or
rented locales, which require greater capital.
Women involved in the manufacturing or
service subsectors tend to work from home-
based enterprises rather than in workshop or
small factory settings. In both instances,
the manner of operation enables women to
engage in several different tasks at the same
time, and reduces high overhead costs.

Hiring practices: A correlation appears to exist
among SMEs between the number of female

employees and the extent of female ownership.
For example, women are the proprietors of
most candy-making, dress-making, pastry, and
craft establishments in Haiti and Jamaica.
In these same establishments, women employees
far exceed the men, indicating that female
entrepreneurs tend to hire more female
employees than males.


This section set out the basic factors that
characterize small and micro enterprises. These
characteristics make SMEs a particularly viable employ-
ment creation and income generating alternative for
women. The SME sector, as we have seen, is rather
loosely structured, and this allows women to divide
their time between economically productive activities
and domestic responsibilities. Limited access to
education and training, as well as low literacy levels,
do not pose as severe a constraint for women in the SME
sector as they would otherwise. Through the provision
of assistance, women can use the skills they already
possess to expand household activities such as food
processing into business activities to generate increased

The next step is to incorporate the characteristics
of SMEs, and the factors which make them particularly
viable for women, into the design of an assistance
program to improve the levels of economic productivity
of a large number of women.




This section of the guidebook describes the
principal steps in designing SME projects to ensure the
inclusion of women among the project beneficiaries.
The discussion in this section will cover the following
subject areas:

Standard project components

S Issues in SME project design

S Guidelines for integrating women into SME
project design

Standard SME Project Components

Projects designed to assist small and micro-
enterprises are generally comprised of three components:
credit, technical assistance and training. The propor-
tional size of the components vary according to the
degree of sophistication of the targeted beneficiaries
(the entrepreneurs), the managerial and financial
capabilities of the implementing institutions, and the
resources available for overall project implementation.


Credit programs have the potential to become self-
sustaining. Training and technical assistance programs
have not yet demonstrated the ability to do so.


SME projects usually contain some form of credit
assistance to the entrepreneur. The manner in which
the credit component is implemented varies, particu-
larly regarding issues such as the methods of seeking
out potential borrowers, regulations regarding the uses
of the loans, and the type of businesses on which the
credit component will focus.

Credit assistance programs are frequently charac-
terized by:

Short-term working capital loans

Single borrowers and, with increasing
regularity, group borrowers (see Figure
3). These groups, sometimes called
solidarity groups (Latin America) or
village cooperatives (Africa), are
composed of people who are collectively
and individually responsible for loan

Different loan application procedures,
depending on loan size, business type,
and borrower experience. The potential
financial and credit information may
even be collected through an oral
interview in the case of small or repeat


FIGURE 3. Grameen Bank

The Grameen Bank, started in 1976 by Mohammed Yunus, provides loans to the landless poor
in Bangladesh. The Bank successfully reaches its target group by operating branches at the
village level and by focusing on group formation amongst borrowers. A week-long course is
required prior to loan disbursement more to ensure proper understanding of the loan repayment
process than to upgrade business skills.

From 1981 to 1985, the Bank extended 115,000 loans through 86 branch offices to approxi-
mately 58,000 beneficiaries located in 1,250 villages. The repayment rate was 94 percent.
By April 1986, the Bank operated nearly 250 branches.

Women account for approximately 69 percent of all members and receive about 55 percent
of the total credit. Many women (60-65 percent) had not previously been engaged in income-
generating activities.

Project design features that contribute to the Bank's success in reaching women include:

Group formation and loan extension services at the village level: minimizes the
amount of time female borrowers must spend away from their households and income-
generating activities. It should also be noted that travel beyond the home village
is particularly difficult for women in Bangladesh because of cultural constraints.

S Branch staff members living in the village where the branch is located: provides
greater opportunities for interaction between staff and clients. This is especial-
ly important for women who often rely on informal contacts for information and
technical assistance. In addition, at least two staff members of each branch are

S Standard training for all borrowers: increases the self-confidence of women.


Single or multiple interest rates, with
the latter type reflecting loan size

Potential collaboration between the
non-financial implementing organization
and a bank, especially with respect to
the disbursement and collection of loans

Technical Assistance and Training

SSE projects also provide technical assistance and
training to project beneficiaries. Most often technical
assistance and training are seen as complementary to
credit. Some projects provide technical assistance on
request. Occasionally, a small fee is charged. Other
projects feature technical assistance as a mandatory
step toward obtaining credit. Still other projects,
especially those working with beneficiaries at the
pre-entrepreneurial stage, focus on technical assistance
or social education for varying periods before initi-
ating any discussion of credit.

Training assistance often has the following

Individual sessions before and after
loan disbursement

Requirement that applicant attend a
specified number of hours of group
training prior to disbursement of the
first loan

Assistance in specific management
skills, such as bookkeeping, planning,
and production functions

Training in technical skills specific to
a given line of production (furniture
making, tailoring, metal work, etc.)


Training in related areas, such as
literacy, group formation, laws and
regulations, etc.

Assisting borrowers to form their own
associations to increase their leverage
and access to institutions and resources

The provision of technical assistance to the
institution implementing the project is often a com-
ponent of SME projects. Through the work of a long-
term advisor, periodic visits, workshops and a variety
of other mechanisms, projects seek to strengthen the
local institution's human resource base and upgrade its
financial and monitoring systems. Assistance designed
to improve the organizational and managerial capacity
of the institution will increase that institution's
ability to assist micro and small-scale entrepreneurs.

It is important to note that there are cases where
SME projects provide a wide variety of other non-
financial inputs to beneficiaries. These can include
market facilities, delivery of health and family
planning services, improvement of roads or other
infrastructural components, and formation of coopera-
tives. These types of assistance are generally the

The informality of the SME sector limits the
access of entrepreneurs, particularly women, to produc-
tive resources such as credit and technical assistance.
The provision of such resources would enable many
entrepreneurs to break out of subsistence-level activi-
ties. This step is crucial if small and micro entrepre-
neurs are to contribute to the growth and development


of their economy. However, the ability of
entrepreneurs to expand production, hire additional
workers, and increase overall income and/or value added
is dependent on suitable SME project design. The
following sections review the design elements of SME
projects. Particular emphasis is placed on the design
elements that affect the smallest enterprises, and
consequently female entrepreneurs.

Issues in SME Project Design

Several issues need to be addressed in the project
design phase. Two such issues -- the strategy for
funding components of SME projects and types of techni-
cal assistance to be provided -- are discussed below.

Funding of Project Components

Most SME projects are initially funded by a grant
from an international donor. USAID mission portfolios,
for instance, include "OPGs" and/or other bilateral
projects designed to reach SMEs. The grant funds cover
the costs of operation (salaries, overhead, equipment),
and of project components, directed to the institution
and the beneficiaries.

In some cases, local institutions also help to
finance projects through loans from local banks and/or
through local fundraising efforts. This type of
support typically represents a small percentage of the
overall project budget, despite the popularity of SME
projects in the targeted geographical area.


The need for outside financing raises the issue of
project sustainability and self-sufficiency. If
designed properly, SME projects can achieve considerable
levels of self-sufficiency, particularly in the provision
of credit. However, experience shows that achieving
full self-sufficiency in SME projects (i.e., covering
program costs from interest and other income earned
through the program) is very difficult unless the
project manages a very large fund and has quick rotation
of loan moneys. One problem often encountered in this
regard is poorly conceived cost recovery estimates,
which contribute to low levels of project self-
sufficiency. These estimates rely on shaky assumptions
or ignore important cost determinants and point the
project toward continued dependence on grant funds.

The issue to consider is whether some level of
subsidy is justified, and which project components,
such as credit, can be expected to cover their own
costs. In general, training and technical assistance
to the implementing institution and project evaluation
require some outside support. Certain local organiza-
tions, such as those working with Accion International/
AITEC in Latin America and the Caribbean and the
Grameen Bank in Bangladesh, underline the importance of
project sustainability by setting it as a project goal.
These local organizations use grant moneys as start-up
funds and, over time, reach increasing levels of self-

The use of project funds will vary depending on
the target group. For example, for beneficiaries at
the pre-entrepreneurial level, where women predominate,


more input is needed at the preliminary training
stages. The use of project funds will be greater up
front. Projects focusing on target groups at subsequent
levels of entrepreneurial development use most of the
project moneys at latter stages when intensive training
is provided in conjunction with the loan and project
monitoring takes place.

Cost Effectiveness

Small and micro-enterprise projects should be
designed with the aim of providing the optimal amount
of project benefits per unit of project cost. Calcula-
tions of the cost-effectiveness of a project must make
a distinction, however, between the various project
components. Credit, training and technical assistance
are not on an equal level in terms of self-sustainability.

The credit component of a SME project should be
able to cover its operating costs. Credit programs in
fact should be designed in such a way that will facili-
tate rapid loan recovery and a low level of loan

The training and technical assistance components
of a SME project, on the other hand, should be designed
to meet the real constraints on enterprise growth in
developing countries and should not be expected to
cover their own costs.

Some causes of lower cost effectiveness include
the following:


Fund disbursement from donors often
occurs in trenchess" that are not in
line with credit needs of the project.
If the project disburses its original
credit fund faster than planned (often a
sign of a well-run project), then it
temporarily depletes its credit fund,
since repayments are slow at first. If.
the project then must wait several
months for another disbursement from the
founder, it loses momentum, discourages
potential clients, and loses income.

Staff responsibilities are defined in
very broad terms; staff is not
encouraged to cut project costs or to be
concerned about program cost effective-
ness. Staff productivity, in terms of
amount lent, number of borrowers,
repayment record of clients, etc.,
is seldom considered an indicator of
performance. In addition, staff is
expected to be versatile enough to carry
out all functions related to credit and
technical assistance. For example,
staff time spent collecting bad debts
may carry a higher opportunity cost than
if a person is hired to perform that
specific function.

Movement of credit is hindered by
lengthy application procedures, compli-
cated review processes, and inefficient
disbursement systems. Turnaround, time
for loan decisions can be as short as
one week or as long as several months.
In the aggregate, this factor can
debilitate the project.

Dependence on concessionary moneys
prevails among implementing institu-
tions. There is little incentive to
aspire toward improved cost-
effectiveness if the donor organization
continues to provide funding without
identifying this issue as an important
factor in its decision.

There is a lack of proper documents
available to enable project monitors to
calculate cost-effectiveness as well as
issues related to cost-benefit ratios.

Technical and Managerial Capacity
of Implementing Institutions

In addition to project funding, the technical and
managerial capacity of institutions deemed capable of
implementing SME projects must be analyzed. Many
institutions have strong ties with the community and an
emphasis on community participation, which enhances
their ability to promote lasting social and economic
development. However, the financial, business, and
economic know-how required to coordinate a successful
SME project is not always part of the technical knowledge
base of such institutions' staff, whose backgrounds
tend to be in the social sciences (sociology, education,
anthropology, etc.). In the case of volunteer organiza-
tions, this deficiency is even more apparent.

These problems are compounded by the demands on
the personnel of the institutions. The staff are often
expected to assume a variety of responsibilities,
including training, review of credit applications,
business projections, and organizational development.
They are usually unprepared to carry out all these
functions and tend to spend the majority of their time
in the areas where they have the most expertise.
Moreover, allocation of time for each of these functions
is seldom well defined. The level of complexity
(growing number of clients, high number of transactions,
financial monitoring) and the diversity of the services


delivered (credit, training, technical assistance)
involved in SME projects makes a strong management
capability within the implementing institution partic-
ularly important (see Figure 4).

In general, SME projects are more efficient and
effective when:

The organization's leadership provides
vision (a clear mission for the organiza-
tion) and direction (clear goals and
objectives) to the project

The staff is dedicated and committed to
the project's goals and objectives

The organization has solid management
and efficient administrative systems

Decision-making is decentralized and
involves the staff

There is a strong component of staff
training in finance, business and
accounting. NGOs administering SSE
projects should be encouraged to hire
staff with business and financial skills

Staff productivity is emphasized and
incentives are built into the program

The organization has good links with the
business community and local community

Outside Technical Assistance

Many SME projects include some form of outside
technical assistance, usually provided through U.S.-
based organizations. Because such outside organizations
often have considerable input into the way in which the



The Small Business Scheme (SBS), established by NCCK in 1975 and expanded with
assistance from USAID in the early 1980s, seeks to increase the economic self-
reliance of the least skilled urban poor in Kenya through the provision of working
capital loans and advice on credit management. The SBS's client group consists
primarily of women, many of whom were without a regular source of income prior to
participating in the program.

In the early stages of expansion, the program was beset with problems in program
management and administration, i.e., frequent turnover of top staff, inconsistent
client selection criteria and technical assistance approaches between project sites,
and long delays between loan approval and actual disbursements. In spite of these
problems, it was clear by 1984 that the program had a positive economic impact (con-
sisting of a 10 to 14 percent increase in net income) on program participants.

Lessons learned during the early years of the program include the following:

Group formation is the only effective means for reaching a relatively
significant number of people in instances where both program staff and loan
funds are small. Group development may be impeded, however, by ethnic
diversity, a lack of leadership within the potential group, a lack of
managerial and administrative skills within the group, or haphazard group
formation. Technical assistance and training can often overcome many of
these constraints.

The system of assistance is as important as the nature of the assistance
itself. For example, workshops or seminars are important vehicles for
assistance for a variety of reasons. They allow program clients to brain
storm and solve problems as a group, a first step to self-help. They
provide a forum for discussion between program clients and staff in which
clients may express needs that they feel the program should address.
Finally, they facilitate program logistics and general administration in
areas such as loan collection and client follow-up.

Client selection is important; staff selection is critical. Aside from
having the appropriate technical qualifications (such as knowledge of
accounting principles, experience with loan disbursements and collection),
potential staff members must demonstrate a commitment to the program's
purpose. Commitment reduces staff turnover and ensures program continuity.


local institution designs and runs its program, the
capacity and approach of the outside firm are important
factors in project success or failure.

When technical assistance is flexible and
responsive to the country and institutional setting, it
can make the difference between an effective and a
struggling project. This does not necessarily include
the use of a full-time outside technical advisor --
he/she may become too involved in the institution and
the program to maintain objectivity. Moreover, the
salary costs may be prohibitive for projects that
should emphasize cost-effectiveness.

Experience has shown that outside technical
assistance is most useful when the technical advisor:

Plays a well-defined role, preferably
according to a specific job description

Develops a systematic way of training
local staff, beyond "learning by doing"

Uses lessons learned from other projects
but does not insist on replication

Participates in institutional policy
issues only when these affect the
project's outcome (e.g., credit review
policy, income level of client group)

Does not spend all his/her time at
headquarters, but considers field visits
to the entrepreneur's place of produc-
tion part of effective assistance

When feasible and advisable, facilitates
communication and negotiations between
program donors and the implementing


Guidelines for Integrating Women into
SME Project Design

The three components of micro and small-scale
enterprise projects -- credit, training and technical
assistance -- can be designed to incorporate elements
of gender-specific assistance. This process is criti-
cal, as project success rests primarily on effective
project design. The key steps in the design process
are detailed below.

Step One: Identification of
the Type of Assistance to
be Provided to Women

The first step in the process of integrating women
into micro and small-scale enterprise projects is
assessing whether the project is to focus exclusively
on women, is to feature a women's component, or is to
"mainstream" women into a larger development effort
(see Figure 5). Generally speaking, focusing on gender
issues does not require separate programs; it does,
however, entail special emphasis on women's activities
within general programs. The need for special attention
is due to the tendency to deny women -- albeit often
unintentionally -- the level of support enjoyed by male
project beneficiaries.

Women-specific projects are often
designed to test new approaches to
reaching women, to help women "catch up"
to men, or to strengthen women's -
research/action organizations. They are
implemented particularly in situations
where cultural constraints act as a
barrier to integrating women in main-
stream projects.



Type of Project


Women's com-
ponent in a
larger project



Women receive all of the
project's resources and
benefits. Beneficiaries may
acquire leadership skills
and greater self-segregated
environment. Skills
training in nontraditional
areas may be much easier
without male competition.

The project as a whole enjoys
more resources and higher
priority than WID-specific
projects, which can benefit
the WID component. Women are
ensured of-receiving at least
a part of the project's
resources. Women can "catch
up" to men through WID

Women can take full advantage
of the resources and high
priority that integrated
projects receive. If women
form a large proportion of the
pool of eligibles, their
participation will probably
be high, even without detailed
attention given to WID issues.


Gender Issues in Latin America and the



These projects tend to be
small-scale and underfunded.
Implementing agencies often
lack technical expertise in
raising productivity or
income. WID-specific income-
generation projects rarely
take marketability of goods
or services into account and
thus fail to generate income.
Women beneficiaries may be
required to contribute their
time and labor with no
compensation. Women may
become further marginalized
or isolated from mainstream

The WID component usually
receives far less funding and
priority than do the other
components. These components
have tended to respond to
women's social roles rather
than their economic roles;
for this reason, domestic
activities may be emphasized
to the exclusion of any
others. Awareness of the
importance of gender in the
project's other components
may be missing.

Unless information on women's
activities and time use is
introduced at the design
stage, these projects may
inadvertently exclude women
through choices of promotion
mechanism, location and
timing of project resources,
etc. If women form only a
small proportion of the
pool of eligibles, they may
not be included in the
project. Women may be
competing with men for scarce
project resources and lose
out because of their lack
of experience in integrated
group settings and their
relatively low status in
the family and community.


Larger projects with a WID component are
attractive vehicles for assistance
because they tend to command greater
resources and attention from planners
and donors than women-specific projects.
In addition, the WID component has its
own budget and staff which simplifies
project monitoring and assessment of
impact with respect to gender. An
example of a WID component is a housing
project in which women receive access to
credit from a special fund designed for
women applicants only.

Mainstream projects integrate women
directly into their program of assis-
tance. An example would be a micro-
enterprise credit project that is able
to reach women because its collateral
requirements and review procedures are
appropriate for women.

Of the three approaches, the last has the most
potential for raising women's productivity and incomes.
Experience shows that it is more beneficial, from the
gender perspective, to promote SME projects designed
with a strong gender-integratioh approach than to
"segregate" women as project beneficiaries. This
manual therefore focuses on ways in which to bring
women into the development process by including them as
active participants in the micro and small-scale
enterprise development effort.

Step Two: Feasibility Studies/
Disaggregation of Data by Gender

Rationale for Feasibility

The next step in the design process is an in-depth
review of the state of the micro and small-scale


enterprise sector within the target region. SME
projects should be designed on the basis of an empirical
assessment of the SME sector in the given region or
city. Preliminary project studies, however, seldom
include data that permit realistic target setting. As
a result, most targets established for project per-
formance (number of loans, amount to be lent, recovery
rates, rollover of capital) and for impact (number of
jobs created, level of income/savings enhancement,
value added, firm expansion) are estimates, unreliable
projections, or approximations based on the performance
of projects in other countries.

The design phase of SME projects should therefore
include a sector assessment/feasibility study that
enables planners to develop more effective projects
with realistic targets. A feasibility study should

The economic context of region or

The main problems and strengths of the

The beneficiaries and their businesses

The implementing institution

The services to be delivered

The methodology on all aspects of data collection
for the feasibility study should include:

Involvement of staff in data collection;
this is an effective way of training


staff who will later administer the
project, and of establishing a strong
link with the community

Direct input from selected potential
beneficiaries, through interviews with
individuals, local associations, etc.,
to assess their needs and identify

A style of presentation that can serve
to educate donors, government agencies,
and implementing institutions on the
informal sector

Data disaggregated by gender

Disaggregation of Data by

A major obstacle to including women in small and
micro enterprise projects is that gender-related data
are almost never available and are difficult to
collect. Women tend to remain "invisible" in surveys
and official data collection efforts. Their enterprises
tend to be the smallest and, consequently, are
unregistered business units seldom subject to official
review. Moreover, women's work tends to be discounted
as not economically productive; indeed, many women's
enterprises are incorrectly regarded as subsistence
production instead of businesses in which the woman is

Disaggregation of data by gender is necessary
because in every society, differences in gender roles
exist. Depending on a range of cultural, political and
economic factors, women and men undertake different


tasks, face different constraints, and focus on dif-
ferent concerns. Distinct gender roles are often
overlooked or taken for granted, and yet they influence
all aspects of development, particularly productive and
other income generating activities.

The first step in the process of gathering data is
to design data collection systems that allow infor-
mation to be accumulated along gender lines. Data
collected in this fashion can then provide at least the
following information:

Gender-related differences among
potential beneficiaries

Patterns or trends attributable to only
one gender

Limitations possibly determined by

Sex-disaggregated data allows one to determine,
for example:

The types of businesses in which women

Whether the use of business profit
(i.e., for consumption or reinvestment)
is related to gender

Whether women request credit in numbers
commensurate with their presence in the
informal sector

The second and more difficult step in data dis-
aggregation involves incorporating issues that are


particularly pertinent to women into the data collec-
tion process. Knowledge of these issues helps designers
to analyze the project's ability to benefit women.

Gender-Specific Studies

Independent studies, such as project-specific
feasibility studies enable the collection of accurate
data relevant to gender issues. These studies should
be carried out in several stages. One important caveat
is that in many countries there will be a paucity of
data on small and micro-enterprises. This makes the
collection of gender-specific data even more difficult.
The following discussions highlight some of the critical
issues to be considered.

The first phase should focus on the potential
beneficiaries of the project, and would furnish infor-
mation on such variables as:

Percentage of women who own enterprises

Number of female employees

Level of education, training, and

Percentage of households headed by women

Size of household

Amount of time spent on income-earning

Type of previous credit sources: money
lenders, family loans, banks, coopera-
tives, etc.


Difference in savings propensity between
men and women

Percentage of household income from
enterprise (determine level of
dependency of family on women's income)

Earnings level of women vis-a-vis men

The second phase should focus on gathering informa-
tion on the specific types of enterprise activities and
the ways in which women work. These studies should
generate information on:

Firm type: urban, semi-urban, rural,
number of employees, amount of fixed

Location: home-based, rented, owned,
shifting or fixed quarters

S Technology; semi-modern or modern

Inputs: use of raw materials, locally
produced inputs, backward linkages to
rural production, forward linkages to
large-scale .production

Types of activity in which women pre-
dominate: manufacturing, commerce,
distribution, transportation, processing

Sales volume/profits

Use of profit

Management record-keeping, accounting,

The third level of studies should focus on specific
market issues, including:


Client base: current demand source,
potential of increased access to addi-
tional consumers

Distribution: ability to reach markets

Pricing: how products are priced; is
there a difference between prices for
products produced by men and those
produced by women?

Market: urban, rural, household, export

The fourth phase should focus on the local institu-
tion to be charged with implementing the SME project.
These particular studies will illuminate issues such

Organizational structure: degree of
centralization in decision-making,
balance of men and women in senior and
mid-level positions

Income levels of beneficiaries of the
institution: institutions that work
with the lower strata among the poor are
more likely to be equipped to reach

Staff: level of sensitivity to gender
issues and knowledge of staff members
about women

Technical capacity: consideration of
gender issues in program planning and

In those cases where project studies and materials
have already been developed and contain no gender
analysis, the funding agency in conjunction with the
implementing institution must ensure that disaggrega-
tion of data by sex is completed prior to project


implementation. Finally, all data collected during the
course of the project should be disaggregated by sex.
This practice will enable project managers and evaluators
to assess if gender is a variable in the wide range of
factors that affect a project's performance and impact.

Step Three: Identification
of Implementing Institution

The provision of assistance to SMEs is rendered
difficult by several features. SMEs are small,
numerous, and (especially in rural areas) scattered
over long distances. In addition, they operate outside
the formal network of credit and training. For these
reasons, it is difficult and costly to work with them
directly, and it is preferable to work through existing
SME support organizations or institutions that demon-
strate the potential of acting as intermediary organiza-
tions. The creation of new institutions requires an
intensive mobilization of human and financial resources;
they also run a high risk of failure.

The choice of implementing agency is one of the
most important elements in project design. One might
assume that women's organizations are the best suited
to implement projects that include women. However,
experience with projects designed to reach women
indicates that the failure of programs is often traced
to lack of technical and/or managerial expertise on the
part of the implementing agency, and women's organiza-
tions are sometimes weak in this respect.


In general, women-oriented organizations are
locally based institutions with limited resources at
their disposal. Many rely on volunteer workers with
little technical expertise in development issues. The
charity/relief focus of most of these organizations,
moreover, does not prepare them to implement self-
sustaining SME projects. Indeed, the prevailing
approach of local institutions to reach women has been
to develop women-specific "income generating projects"
rather than to integrate them as beneficiaries in
larger SSE projects. Agencies with the capacity to
reach women are not necessarily capable of implementing
successful productive projects for women.

On the other hand, technically proficient implement-
ing institutions may be incapable of reaching women and
may not even consider the participation of women to be
important. These institutions often lack the ability
to recognize which aspects of their programs potentially
restrict women's access. Even with the best intentions,
such institutions may still exclude women from opportuni-
ties to improve their economic situation significantly.

Many different types of institutions in developing
countries that implement projects to assistance micro
and small-scale enterprises. Most have an existing
track record in community/cooperative organization and
social development and work directly with grass-roots
groups. Because of this grass-roots linkage, many
institutions begin SME projects with a good basis for a
strong and trusting relationship with the beneficiaries,
although the institutions may have limited knowledge of
financial and technical questions.


Project designers can increase the chances of
reaching women by choosing implementing agencies with a
blend of appropriate technical expertise and a commitment
to developing or recruiting expertise on women's issues
relevant to the project. In cases where the best
technical institution lacks experience in reaching
women, the project implementation plan's design should
provide for technical assistance to the institution
from outside consultants or organizations to improve
women's participation in the project. Institutions
that have not directed intervention toward enhancing
the productive role of women in the past should not be
excluded outright.

Step Four: Identification of
Constraints Faced by Female
Small and Micro Entrepreneurs

Social and Cultural

Constraints on women's participation in project
activities should be considered in the design of all
projects. Many of these constraints are rooted in the
social, cultural, and economic fabric of the society
and require structural and institutional changes that
projects can address.

In many developing countries, women -- particularly
those who are the sole economic support of their
households -- are over-represented among the poorest
low-income groups. Project interventions that identify
the poorest of the poor as the target group will
therefore automatically include a large percentage of

Project features to be considered in order to
enhance women's participation include the location of
activities and services and the timing and duration of
activities. If, for instance, agricultural training
programs involve long-term, residential training, there
is little chance that women will be able to partici-
pate, given their household responsibilities and
societal norms that typically restrict rural women's
travel away from home.

When there is a low proportion of women in the
pool of eligibles for project assistance, women's
participation tends to be low, in spite of active
efforts to include them. Three steps can be taken to
prevent this type of de facto selectivity from

Expand the eligibility criteria.

Consider developing a special women's
component designed to respond to the
constraints that render women ineligi-

Institute an active recruitment program
for women (particularly effective when
implicit exclusion, based on cultural
perceptions, reduces the number of
eligible women; explicit exclusion is
the contrary state).

The distinction between increasing women's activi-
ties or work and improving the returns of women's
activities or work must be considered when planning
project components and expected outcomes. In agri-
cultural projects, for example, the involvement of


women in soil preparation or weeding of certain crops
increases the demands upon women's time and labor, yet
women may not share in the proceeds of crops sold
through male-based cooperatives. Thus, women may
refuse to participate in components that increase their
work without increasing their returns; this factor
enormously increases the potential for project failure.
Project components must focus on increasing women's
access to and control over project resources as well as

In addition, cultural mores, determined by
tradition and religion, may affect such behaviors as
the gender-based division of labor, and can have a
critical impact on project success. There are wide
variations in behavior across countries and even from
community to community. Some cultural constraints can
be addressed through program or project interventions.
Resistance to involving women in new productive programs
seems to decrease when the program increases household
income. For example, in a village in rural Guatemala,
women are accustomed to helping in the fields only
during the planting season. However, the introduction
of contract farming on horticultural crops, with its
promise of increased income, influenced women to
contribute 2-3 days/week of labor on the vegetable
crops. It goes without saying that a project focus on
the country's prevailing sexual division of labor is
more likely to be viewed as deriving immediate benefits
for female project participants.


The Policy Environment

A recent study prepared by Haggblade, Leidholm and
Mead concludes: "In most countries of the third world,
the general policy environment is skewed distinctly
against small producers." There are a number of
policies, regulations, and business practices which
have an adverse impact on small enterprises, and women
as owners of the smallest of enterprises are dispropor-
tionately affected by this negative impact. Several of
these policies are discussed below.

Banking Policies

Collateralization of bank loans. Most banks
extend credit according to the ability to meet collateral
requirements. Small and micro entrepreneurs rarely
have the necessary collateral, due to undercapitaliza-
tion and low incomes. This is especially true for
women, who are less likely to own property. In many
countries there are legal restrictions on women's
ability to own land or property; in others there are
socio-cultural constraints on female ownership. These
customary constraints on female ownership presents a
critical problem for women who are widowed, divorced,
or single heads of households.

Interest rates. The smallest entrepreneurs are
viewed as a high risk, high cost group by bankers.
Bankers weigh the probability of default against the
potential gain in income from interest and set the
interest rates accordingly. In certain instances, the
rate thus derived surpasses the interest rate ceilings


imposed by the central bank. This effectively eliminates
the possibility of obtaining credit from the formal
financial system.

Transaction costs. Women, as owners of the
smallest businesses, tend to borrow smaller amounts on
a frequent basis. The small amount increases the cost
per loan processed and the increased cost discourages
bankers from loaning to women.

Application process. A large portion of female
entrepreneurs are illiterate and ill prepared to deal
with the formal banking sector. The loan application
process is complex and entails a certain level of
financial sophistication beyond many women. Applying
for a loan might also require that the women travel
away from their homes. This presents obstacles in
terms of time spent away from the home or business and
expense involved in getting to the lending institution.

Price Controls

Price controls generally have an adverse impact on
the smallest businesses. The larger businesses can
compensate for fixed prices by producing more goods,
but the smaller businesses do not have the opportunity
to mitigate the impact of price controls. Moreover, in
many countries household and food goods are subject to
price controls; micro enterprises are heavily involved
in the production of those goods.


Exchange Rates

In countries where there is an over-valued exchange
rate, the price of imported goods is lower than those
produced domestically. This eliminates the import-
substitution opportunity for small-scale enterprises.
Reduced prices for imported goods often favor the
larger businesses which rely on imported goods for
inputs and machinery.

Tax Policies

Many countries offer tax exemptions to larger
businesses to encourage industrialization. The small
businesses are not granted these exemptions and find it
difficult, if not impossible, to compete with the
larger firms. On the other hand, the smaller firms
often evade taxation entirely.

Labor Policies

In many developing countries, there are regula-
tions regarding the number of hours women can work and
the specific businesses in which they can work. Laws
requiring businesses to provide for maternity leave and
child care facilities can be disadvantageous, as they
discourage employers from hiring women.

Legal Constraints

In many countries, there are legal restrictions
which limit women's participation in economic activi-
ties. For example, women are often required to have


their father or husband co-sign for a loan. As men-
tioned earlier, there may be legal restrictions against
women holding title to land or property.

Summary of Constraints

In each project setting, these constraints must be
analyzed to understand how they might restrict women
more than men. Figures 6 and 7 summarize some con-
straints that are gender related and have an effect on
women entrepreneurs.

The limitations that the majority of societies
impose on women, particularly poor women are high-
lighted in Figure 6. The constraints are varied and
they affect many facets of a woman's life (including
level of education, ownership patterns, roles within
the family structure and status within society). These
constraints, listed in order of priority, in the
aggregate place women in a disadvantaged position
vis-a-vis men, and make women 'less attractive as
potential clients of enterprise projects. Some of
these constraints, if addressed at the design and
implementation stages, can be overcome. This can lead
to appreciably greater participation by women in the
distribution of available resources. Those projects
where the constraints are not taken into account
ultimately exclude -- albeit unintentionally -- a large
number of women from the group of project beneficiaries.



Gender Constraints*


1. Societal norms and attitudes
create stereotypes that
devalue women's work and con-
tribute to family income

2. Women-owned enterprises tend
to be among the smallest

3. Lower levels of formal educa-
tion; often semi or illiterate

4. Less likely to own land or
property (often for legal and
socio-cultural reasons)

5. Dual role of income earned
and housekeeper

6. Increasing percentage of rural/
urban households are headed by

SProject designers and planners
do not recognize the real
value of women's economic

SWomen borrow smaller amounts
and need loans more often
(working capital)

. Greater reluctance to approach
an institution for credit of
technical assistance

SGreater difficulty in complet-
ing application forms and

. Less able to meet collateral
requirements that are based
on ownership

SSignificantly curtails time
and mobility

. Households depend soley on
female labor for income

SWomen are over-represented
among the poorest sectors of

FIGURE 6 (continued)

Result in terms of access to*
project assistance

1. There is no relationship
between reaching project
targets -- increased income,
job creation -- and integrat-
ing women as project

2. Transaction costs for credit
and extension are higher and
make it less cost effective to
lend to women

3. Self-selection process occurs
even'before a woman approaches
the institution

Women not eligible for credit
or other resources available
through the project

Project Design Features
Addressing These Problems

SRequire that a specific
percentage of project bene-
ficiariesbe women

. Use quick and simplified loan
procedures that require less
staff time and increase over-
all loan volume

SRely on simple application
forms supplemented by inter-

. Encourage group formation
among women borrowers who
will be responsible
collectively and indivi-
dually for loan repayment,

Offer small, short term
loans for working capital

5. Women cannot travel to project

6. Group least likely to partici-
pate in project benefits

Delivery channels and require-
ments may exclude this group

. Use branch offices to provide
project services at the local/
village level

. Develop a flexible schedule
for the delivery of project
services to encourage female
participation after work hours
or during periods of slow


Gender Issues

in Latin America and the



Institutional and
project constraints*


1. Less likely to conduct out-
reach and promotion through
channels accessible to women

2. Management does not consider
gender an important policy

3. Feasibility step: sample
seldom disaggregates by sex;
inclusion of women entrepre-
neurs not part of methodology

4. Delivery systems selected for
project not take into account
time and other constraints
women face

5. Staff lacks capacity to
address gender issues

6. May use census data or national
statistics which undercount
women's economic activity,
especially in the informal

SWomen do not learn of
project's resources

SInclusion of gender is not
an institutional priority
SStaff is not rewarded for
addressing gender

. Project designers fail to
learn of women's constraints
and needs

. Requirements and procedures
may unknowingly exclude a
large number of women

. All technical assistance is
designed in a uniform manner

. Women remain invisible, or
their productive roles are
grossly underestimated and


FIGURE 7 (continued)

Result in project-
specific terms*

Project design features
to address these problems

1. Assumes all entrepreneurs
are reached with no gender

2. No policy and administrative
mechanisms are in place to
guide projects

3. Project design does not
reflect data pertinent to
women entrepreneurs

Project design does not
include effective systems to
reach women

4. Project does not benefit women
in a numerically significant

5. Project does not provide
women who participate with
the full benefit of

6. Design based on incorrect
assumptions and/or on incom-
pleteinformation regarding
the client population

SProvide for greater inter-
action between staff and
project beneficiaries by
requiring staff members to
live near the village/rural
offices. Use female staff
members to promote project

SHire a full-time coordinator,
(or designate an existing
staff member as such) to
ensure that gender-related
mechanisms (policy and
administrative) are operating

SUse specific outside techni-
cal assistance, if necessary,
to collect, analyze and
incorporate gender issues into
project design

SInvolve women who are knowl-
edgeable of local conditions
and the schedules of working
women in the design of project
delivery systems and proce-

SEmploy female staff members
and train male staff members
to incorporate gender con-
cerns into the project

. Collect data disaggregated by
sex during the design phase


Gender Issues in Latin America and the



Institutions, by ignoring gender issues, often
create projects that, by design or oversight, exclude
women. The crucial points at which an institution can
err in its approach to women are outlined in Figure 7.
The philosophy that underlies project creation, the
data used to formulate projects, and the means selected
to implement these projects all can affect whether
women are consciously or inadvertedly excluded from a


This section has discussed the key factors (sum-
marized in Figure 8) that must be considered at the
design stage of SME project development. Particular
emphasis was given to those factors which affect women.
It is clear that there is no one set model for design-
ing SME projects. Careful planning and research, as
well as realistic strategies and targets, are the best
ways to increase the effectiveness of project assis-
tance and to enhance the chances of successfully
reaching female small and micro entrepreneurs.


Women-specific project
WID component of project
Mainstream women into project

Areas of economy in which
women predominate
Types of businesses they run

Institution with technical
expertise and ability to reach


Identification of types
of WID assistance

SME sectoral assessment

Data disaggregation by

Institutional selection

Address constraints of
target groups

Design project



Economic context
Beneficiary profile
Institutional profile
Strengths and weaknesses of
the sector

Technical assistance




The integration of gender concerns into the design
of an SME project is not sufficient to ensure that
women will significantly benefit from the project. The
implementation of the project must focus on integrating
women entrepreneurs into the overall enterprise assis-
tance effort. The integration of gender concerns in
the implementation of the project will necessarily
entail including a gender focus in project monitoring
and evaluation.

Project Implementation

This section discusses the key factors in project
implementation that directly affect the number of women
reached and the quality of assistance provided by the
project. The discussion covers:

Project promotion


Technical assistance and training


Project Promotion

It is critical that project promotion be conducted
in the communities where the beneficiaries live and
work. Advertising a project's resources through
newspapers or formal institutions, for example, may
restrict access to the project to the "better off"
businesses. In poor communities, information about
available resources spreads through word of mouth, in-
formal associations or networks, and the work of
churches, schools, and social service agencies.

Careful and targeted promotion of project activi-
ties may be time consuming at first. Experience shows
that if the promotional program is responsive and
effective, less investment of time will be required as
the project grows.

Women have their own informal associations through
which they exchange information. Project promotion
efforts must therefore identify the channels of informa-
tion most accessible to women and include these in all
information dissemination efforts. Women may be more
reluctant than men to ask questions of the project
promoter, especially if that person is male. Well-
trained staff should be sensitive to this fact and be
capable of eliciting questions and presenting informa-
tion in a "non-threatening" way.


The extension of credit to small and micro entre-
preneurs involves considering such matters as:

S Loan requirements

S Loan review procedures

Loan disbursement and repayment

Interest rates

Loan Requirements

The credit experience of most participants in SME
projects consists primarily of transactions with local
moneylenders or family. Many lack experience with
application procedures and formal lending requirements
and, as discussed earlier, collateral requirements
exclude many entrepreneurs, especially the smallest and
neediest. Conversely, most formal institutions lack
experience with this category of clients and are unable
to develop assessment procedures suitable for small
entrepreneurs. Alternative ways of assessing a person's
reliability or potential creditworthiness include:

S Character references from community

A selection process that involves the

Formation of small groups that mutually
guarantee each other's loans

S Keeping initial loan amounts small to
minimize risk

Simple economic analysis to verify the
viability of the firm

Some projects specify the number of women they
will attempt to reach with services. In this way, it


is more likely that mechanisms will be created to reach
women. This does not necessarily mean that these
projects ignore issues of firm viability or credit-
worthiness; it simply means that setting gender-specific
targets results in designs that better reach qualified
women entrepreneurs (see Figure 9).

Loan Review Procedures

In some projects, the loan approval procedure is
cumbersome, involves many people from different depart-
ments in the institution, and centralizes decision-
making in the hands of board members or a committee.
In other cases, the loan application form is complicat-
ed and time consuming. It may require over a dozen
visits by the promoter to the loan applicant and, in
the final analysis, may not provide very useful informa-
tion or result in appreciably better repayment rates.
Both approaches to the loan review process may result

Dissatisfaction among loan applicants,
whose businesses may suffer and whose
commitment to timely repayment may

Increased program costs because staff
time is not used in a productive way and
less interest income is generated

Delaying the disbursement of credit

The last outcome is the most serious, because an
important factor in the success of microenterprise
credit lending projects is the speed with which they
move credit. Speed in credit lending and loan review


PROGRESO, a micro enterprise credit program started in 1982 by Accion Com-
munitaria del Peru, operates in the barrios on the outskirts of Lima.

PROGRESO has two client groups and operates on a different basis with each. In
the case of microentrepreneurs with a fixed place of work, individual loans are made
subsequent to interviews and an on-site visit by a PROGRESO staff member. In the
case of street vendors and the like, loans are made to self-selected groups which are
collectively responsible for loan repayment.

During its five years of operation, PROGRESO has made over 40,500 loans to 3,499
microentrepreneurs and 1,978 solidarity groups. Loan amounts ranged from $50 to
$1,000 and were for working capital. The loan repayment rate is 95 percent for
microentrepreneurs and 96 percent for solidarity groups.

Over 50 percent of the microentrepreneurs assisted are women. Approximately 80
percent of the solidarity groups are also women. As the program continues to expand,
PROGRESO seeks to maintain a consistently even proportion of loans to women by:

S Promoting program services through informal networks and by word of mouth
(PROGRESCO offices are located in the barrios)

S Stipulating a maximum of two men per solidarity group (women represent the
majority of market vendors)

S Offering social support to women (since 1984, PROGRESO has been working
with local women's educational/development organizations to provide skills
training in health and nutrition to female participants)

S Imposing no collateral requirements (a co-signer serves as a guarantee if
the microentrepreneur defaults; the group structure insures loan repayment
amongst market vendors)

S Requiring very few office visits (a total of three pre-loan visits;
subsequent visits are once a month or less)

S Offering technical assistance, such as accounting or managerial advice,
prior to loan disbursements and courses on small business administration in
conjunction with the loan disbursement-repayment process


is most often maintained when all or many of the
following systems are in place:

Loan application forms are designed to
gather only the needed information, and
kept short (3-4 pages)

Entrepreneurs applying for second or
subsequent loans undergo a more simpli-
fied review process, or are granted a
"line of credit"

Various procedures for reviewing loans
are established, to speed up the review
of the smaller loans

Staff are involved in making decisions
on loans, whether as teams or committees,
not just in making recommendations

The institution understands the impor-
tance of striking an appropriate balance
that does not sacrifice speed for
judicious analysis, and is willing to
adapt its systems as the program grows
and the needs of the beneficiaries

Gender issues to be considered include the fact
that women may have less experience in completing
application forms and may need more technical assis-
tance in this area. Moreover, women may be unable to
travel to a central office because of child care,
household, and other responsibilities or cultural

Loan Disbursement and Repayment

In early SME projects, many institutions assumed
disbursement and collection responsibilities, typically
operating through a window in their offices. Some


implementing institutions disbursed funds for fixed and
working capital direct to the supplier (through a "pur-
chase order" system), from whom the borrower picked up
his/her goods. The loan repayment was then made direct
to the institution. Insisting on a "purchase order"
system, however, increased the costs of production for
the entrepreneur, who could usually secure inputs on an
"informal" basis at a lower cost.

In more recent projects, arrangements are made
with banks or other financial institutions to facili-
tate and/or oversee both the disbursement and repayment
processes. Experience shows that when borrowers must
deal with a commercial institution as part of the loan
transaction, they become more adept at directly approach-
ing a bank for credit. Some projects require that the
borrower open a savings account and set aside a certain
percentage of earnings periodically. This requirement
mobilizes savings, familiarizes the borrower with a
formal lending institution, increases his/her sense of
commitment to the project and gives him/her greater
access to further commercial credit.

Loan repayment rates vary considerably from
project to project. Many projects fail to define
arrearage and default and lack simple mechanisms to
determine the delinquency rate over time. The most
"successful" have an arrearage rate below 15 percent
and sometimes as low as 5 percent. Default rates
(loans written off) are below 10 percent. In general,
projects that tailor the loan terms and payback
schedules to the borrower's experience tend to have


fewer repayment problems. Successful projects also
tend to emphasize working capital loans and frequent
loan repayments. Built-in incentives for repayment
include the prospect of larger future loans, simplified
procedures, and individual technical assistance.

It should be noted that changes in the economic
situation of countries in Latin America (i.e., devalua-
tion, high inflation, shortage of inputs or any force
that alters product supply and demand) tend to affect
repayment rates more strongly than do lending criteria
(such as interest rates or frequency of payback).

As with loan review, speed in disbursement and
collection is important. If disbursement is not
timely, borrowers lose interest; if collection is
delayed, the project loses income, has less capital to
lend, and is less likely to recover its loans. A short
payback term is crucial, as it avoids misuse of loan
money and over-purchasing of raw materials. It also
recognizes that the borrowers' previous credit trans-
actions with moneylenders probably requires daily or
weekly payback.

We have seen that women tend to own smaller
businesses and require smaller amounts of short term
credit. Women predominate in commercial/service
sectors and tend to require credit for working capital
only. In most programs where data are available, women
have as good or better repayment rates than men and
have proven to be "good risks." Mechanisms for select-
ing female beneficiaries and screening their needs
should be developed and incorporated as criteria of the


credit program to ensure that it is not simply used by
the better-off (usually male) entrepreneurs.

Interest Rates

In SME projects, few borrowers identify high or
market level interest rates as barriers to obtaining
credit. In addition, market interest rates are not
perceived as a key factor in situations of high delin-
quency rates. As explained above, delinquency rates
are most likely to be affected by a downturn in the
economy, unrealistic sales projections, increased costs
of production, poor management, etc. Most small
entrepreneurs rely on moneylenders for short-term
credit, and are accustomed to paying the going market
interest rate.

There has been a gradual shift from projects that
offer subsidized interest rates to those that charge
market or commercial or near-market rates. Most
funders and project implementors are increasingly
interested in supporting programs that:

Do not subsidize interest rates; sub-
sidies can lead to dependence and

Are able to achieve an "acceptable"
level of self-sufficiency

Prepare the borrower to assume the
market cost of borrowing

In most cases, interest income, even at the
commercial rate, can only cover part of the costs of


operating an SME credit and technical assistance
program. NGO institutions well-versed in financial
matters are more likely to insist on charging market
interest rates. Volunteer and other organizations that
have a social welfare approach to development (and are
more likely to work with women) frequently subsidize
interest rates. Their approach has been criticized on
the grounds that:

It creates increased dependence on the
part of women beneficiaries

It does not prepare women to "graduate"
to mainstream programs or to approach
commercial institutions

Subsidized interest rates tend to
decapitalize a credit fund and decrease
the potential long-term impact of a

It assumes that the project will con-
tinue receiving grants to cover its
operating costs and its depleting credit

Nevertheless, credit subsidization may be neces-
sary when beneficiaries are at the pre-entrepreneurial
stage, as is the case with many women. In this case,
up-front training and technical assistance should be
required even before any financial resources are made
available, and loans may be "soft" during the start-up
phase of productive activities.

Technical Assistance and

Technical assistance is generally provided to
complement the credit component of SME programs.


Technical assistance is a broad term that encompasses a
variety of activities ranging from assisting small and
micro entrepreneurs in typical business functions such
as accounting, inventory, and marketing to more specific
assistance in production methods and appropriate types
of technology.

Most SME projects offer both group training
sessions and individual technical assistance. Project
staff are usually responsible for conducting both,
although they may lack the training skills needed to
develop curricula, select training methodologies, and
conduct sessions.

The costs of training are often undercalculated in
the project budget. Since most training yields little
or no income, it is one project component that usually
requires total outside funding. However, experience
has shown that it is beneficial to charge a minimal fee
for training; this ensures a certain interest level on
the part of the trainees and helps to reduce operating

The direct relationship between technical
assistance/training and project success (in terms of
repayment rates, firm expansion, job creation, income
enhancement, and "graduation" of clients to other
credit sources) is difficult to establish and has not
been proven empirically. Many argue that technical
assistance is not needed for a successful SME project,
while others consider it an essential investment for
long-term impact. Experience to date indicates that
some training offered parallel to credit, and in areas


where microentrepreneurs have expressed real need, may
enhance the economic development of a firm and increase
its ability to sustain or generate employment.

A training component is most effective when it:

Responds to the beneficiaries' needs

Does not demand that all project clients
follow pre-established rules on how to
run their businesses

Combines one-to-one with small group
technical assistance

Clearly differentiates between skills
specific to the type of firm (food
processing, furniture making) and skills
necessary for all businesses (manage-
ment, planning, accounting, marketing)

Is provided parallel to credit

Does not rely exclusively on project
staff to prepare and conduct all train-
ing, but includes experts in non-formal
adult education and training (academics
or "big names" do not necessarily fit
the required qualifications for effective

Charges a "fee for service" for the
assistance provided

Because women tend to have a lower level of formal
education and business experience, they may require
more technical assistance in all areas of business
development. Household and child responsibilities and
transportation constraints may prevent women from
attending group training sessions held in the evenings,
thereby decreasing the potential impact of the training.


Furthermore, women may be more reluctant to speak up in
group situations, especially if men are present.
Sensitivity to this issue will help elicit questions
and observations that will otherwise go unaddressed.

Project Monitoring

SME projects require a more systematic and up-to-
date recordkeeping mechanism than most development
programs. Most SME projects lack appropriate monitor-
ing systems that can provide the institution and the
founder with updated information on the project's
performance. An effective program must keep track of
at least the following, some on a daily basis:


Number of applications and transactions

Delinquency rates

Loan capital available

Income interest earned

Costs of operation

Amount lent and number of borrowers per

Technical Assistance and Training

Frequency and timing of technical
assistance/training sessions

Attendance rates

Availability of training materials
Training fees collected


In addition, the program staff must use this
information to formulate basic ratios and to determine
the overall status of the project.

A detailed record-keeping and monitoring system
should be developed as part of the project design
phase. Funders must review such a system carefully
prior to funding, to make sure that it is:

Easily kept up-to-date

Based on data drawn from loan applica-
tion, repayment records, and other data
collection instruments already in place


An effective monitoring system forces the imple-
menting institution to determine what information is
useful and what mechanisms are needed to collect it.
For example, indicators useful to monitor project
progress may include:

Ratio of current assets to liabilities

Debt to equity ratio

Six months' profit calculation

Semi-annual profit and loss statement

Quarterly financial summary

Loan delinquency rates

These indicators allow the institution to ascertain
whether the project beneficiaries are able to produce
more, earn greater profits, expand their operations or
start up in new locations.


Data collected as part of record-keeping and
monitoring should be disaggregated by sex to allow
staff to trace project benefits to women. A properly
designed monitoring system will assist project staff to
determine if the project is reaching its established
gender-specific objectives. The project staff should
review data generated by the monitoring system on a
monthly or quarterly basis.

Project Evaluation

An effective monitoring system will allow for
project evaluations that produce important data on all
aspects of the program -- from design flaws and weak-
nesses in the delivery of technical assistance and
training to problems in credit disbursement and recovery.

The evaluation of the project will be based on the
data collected during the life of the project. There
should be sufficient data to judge project performance
by comparing gender goals and targets to the final
project outcome. The evaluation should include:

Number of loans

Number of borrowers

Arrearage and default

Amount lent

Adequacy of terms and procedures

Status of the credit portfolio

Institutional capacity to reach women in
the organization implementing the


In addition to assessing project performance in
terms of objectives achieved and targets met, the
project should also be evaluated in terms of its
impact, both on the beneficiary level and the broader
community level.

At the beneficiary level, project performance in
three critical areas must be assessed.

How has the project affected women's
access to, and control over, productive








What, if any, benefits has the project
brought about?

Changes in income (firm profit-

Firm sustainability

Capacity for firm expansion or
diversification of production

Strengthening of existing jobs or
creation of additional jobs

- Savings mobilization


How has the project affected women's
use of resources?

Added income

Credit sources

Savings utilization

On the community level, issues to be considered by
a project evaluation include:

Has the project helped form or strengthen
community associations and increased
their leverage/power?

Has the project helped to reduce exist-
ing biases against women?

What impact has the project had on local
institutions or government policies?

Figure 10 depicts a model for a monitoring and
evaluation system which was adapted from experience
under the USAID PISCES project.


This final section of the guidebook was a natural
extension of the previous section. Integrating gender
concerns into project design must be accompanied by
operationalizing these issues during the implementation
stage. Moreover, the project monitoring system must be
developed and used in such a way as to track the
project's performance and monitor its impact on female
entrepreneurs. Finally, project evaluations provide a
clear picture of the progress of the project and




Reach female entrepre-

Increase income

Increase employment

Reduce transaction cost
to beneficiaries

Provide a place to save

Upgrade business skills

Reduce operational costs

Reach a large number of
female clients

Minimize late payments

Monitoring Data

Percentage of females
who are entrepreneurs

Percentage of increase
in income

Number of new jobs

Time required by bene-
ficiaries to receive

Savings per client

Business skills taught
that are adopted

Operational costs as
percentage of the value
of loans granted

Number of female
clients reached

Percentage of loans
late; percentage of
loans defaulted

Evaluation Themes

Can women be reached?
Are these groups of women
that are left out (i.e.,
the very poor)?

How is additional income

Are jobs marginal? What
skills are learned?

How could the program be
fine-tuned to better
meet client needs?

How are savings used?

Do new business skills
result in better managed

How can project efficiency
be improved further?

How can the project grow
more quickly?

What are the client's
reasons for late payment?

Source: The PISCES II Experience:
Micro Enterprise Development.

Local Efforts in


provide early warning signals so that adjustments and
modifications can be made to make the project more
responsive to the credit, technical assistance and
training needs of women small and micro entrepreneurs.




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