proposal to national multi-donor trust fund: sudan micro-enterprise development government of...
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Proposal to National Multi-Donor Trust Fund: Proposal to National Multi-Donor Trust Fund: Sudan Micro-enterprise DevelopmentSudan Micro-enterprise Development
Government of National Unity:Government of National Unity:
Central Bank of SudanCentral Bank of SudanMinistry of Finance and National EconomyMinistry of Finance and National Economy
Ministry of InvestmentMinistry of Investment
August 2006August 2006
Strategic ObjectivesStrategic Objectives
The strategic or development objective to promote broad-based, The strategic or development objective to promote broad-based, inclusive growth. This will be achieved through the sustainable inclusive growth. This will be achieved through the sustainable growth of microenterprise in Sudan, including its profitability, asset growth of microenterprise in Sudan, including its profitability, asset growth, and formalization. growth, and formalization.
The project has four supporting objectives:The project has four supporting objectives:
– To alleviate policy impediments to formalization;To alleviate policy impediments to formalization;
– To catalyze the provision of microfinance on a commercially sustainable basis, To catalyze the provision of microfinance on a commercially sustainable basis,
– To increase transfer of skills to the small scale and informal private sector through To increase transfer of skills to the small scale and informal private sector through business development services and linkages to larger firmsbusiness development services and linkages to larger firms
– To create a public-private partnership for low-income housing provision. To create a public-private partnership for low-income housing provision.
Component 1: PolicyComponent 1: PolicyReducing Barriers to FormalizationReducing Barriers to Formalization
Business is the main way out of poverty. Business is the main way out of poverty. But informal sector is not registered, faces harassment, lacks access to finance and competes But informal sector is not registered, faces harassment, lacks access to finance and competes
for low-wage temporary work. Asset of the informal sector not eligible for secured financing.for low-wage temporary work. Asset of the informal sector not eligible for secured financing. Large and growing informal sector due to IDPs caught in a poverty trap.Large and growing informal sector due to IDPs caught in a poverty trap.
Source: Voices of the Poor, D. Narayanan, World Bank 2002
Informality is partially a result of excessive Informality is partially a result of excessive proceduresprocedures
Cor
rupt
ion
Procedures to Start a Business
ALB
DZA
ARG
ARM
AUS
AUT
AZE
BGD
BLR
BEL
BOL
BIH
BWA
BRA
BGRBFA
CMR
CAN CHL
CHN
COL
CRI
CIV
HRV
CZE
DNK
DOM
ECU
EGY
ETH
FIN
FRA
GEO
DEU
GHA
GRC
GTM
HND
HKG
HUNIND
IDNIRN
IRL
ISR
ITA
JAM
JPN
JOR
KAZ
KEN
KOR
KGZ
LVA
LBN
LTU
MDG
MWI
MYS
MLI
MEX
MDA
MNG
MAR
MOZ
NPL
NLD
NZL
NICNER
NGA
NOR
PAK
PAN
PER
PHL
POL
PRT
ROM
RUSSAU
SEN
SER
SGP
SVK
SVN
ZAF
ESP
LKA
SWE
CHE
SYR
TWA
TZA
THA
TUN
TUR
UGA
UKR
ARE
GBR
USA URY
UZB
VEN
VNM
YEM
ZMB
ZWE
Info
rmal
Em
ploy
men
t
Procedures to Start a Business
ALB
DZAARG
ARM
AUS
AUT
AZE
BGD
BLR
BEL
BEN
BOL
BIH
BWA
BRA
BGR
BFACMRCAN
CHL
CHN
COL
CRI
CIV
HRV
CZE
DNKDOMECU
EGY
ETH
FIN
FRA
GEO
DEUGHA
GRC
GTM
HND
HKGHUN
IND
IDN
IRN
IRL
ISR
ITAJAM
JPN
JOR
KAZ
KEN
KOR
KGZ
LVA
LBN
LTU
MDGMWI
MYS
MLI
MEX
MDA
MNG
MAR
MOZNPL
NLD
NZL
NIC
NER
NGA
NOR
PAK
PAN
PER
PHL
POLPRT
ROM
RUS
SAU
SEN
SERSGP
SVK
SVN
ZAFESP
LKA
SWE
CHE
SYR
TWA
TZA
THA
TUN
TUR UGA
UKR
ARE
GBR
USA
URY
UZB
VEN
VNM
YEM
ZMB
ZWE
More CorruptionA Larger Informal Sector
Note: Partial scatterplots controlling for income per capita. Relationships are statistically significant at 5% level.
Source: Doing Business 2004
Component 1 Will focus on removing Legal Component 1 Will focus on removing Legal and Policy Impediments to Formalizationand Policy Impediments to Formalization
Informal Economy StudyInformal Economy Study– A need to better understand informal sector. What are the barriers to A need to better understand informal sector. What are the barriers to
becoming formal? What are the sources of social capital and traditional legal becoming formal? What are the sources of social capital and traditional legal systems? What economic activities undertaken? Which can become viable systems? What economic activities undertaken? Which can become viable sources of growth? Sources of market information?sources of growth? Sources of market information?
Regulatory StreamliningRegulatory Streamlining– Building on FIAS and informal economy study, the component would finance Building on FIAS and informal economy study, the component would finance
legal and institutional reforms to reduce barriers to becoming formal.legal and institutional reforms to reduce barriers to becoming formal.
Asset registryAsset registry– The design of a database, community interface systems, community The design of a database, community interface systems, community
outreach in order to begin to register the business assets of economically-outreach in order to begin to register the business assets of economically-active poor to be security for loans.active poor to be security for loans.
Component 2: MicrofinanceComponent 2: Microfinance
Bank of Sudan has engineered recovery through FDI consolidationBank of Sudan has engineered recovery through FDI consolidation– Despite increasing deposit and credit growth, smaller firms still find it difficult to Despite increasing deposit and credit growth, smaller firms still find it difficult to
obtain credit, particularly medium termobtain credit, particularly medium term– But microfinance relatively under performing. Few banks able to achieve 10% But microfinance relatively under performing. Few banks able to achieve 10%
microfinance policy target.microfinance policy target.
Microfinance vision now drafted – to be presented September 25Microfinance vision now drafted – to be presented September 25 thth 20062006
Sudan Banking Sector Growth
-
200
400
600
800
1,000
1,200
2001 2002 2003 2004 2005
0%2%4%6%8%10%12%14%
Bank Deposits - SDDBillion
Credit to PrivateSector - SDD Billion
Capital Adequacy
Component 2: Led by Central Bank of SudanComponent 2: Led by Central Bank of SudanWill focus on establishment of sustainable Will focus on establishment of sustainable microfinancemicrofinance
Microfinance Policy AdvisorMicrofinance Policy Advisor– Establishment of Office of Microfinance Policy in Bank of SudanEstablishment of Office of Microfinance Policy in Bank of Sudan
Financial sector legislative specialistFinancial sector legislative specialist– To support enactment of key financial sector laws and the publication of new microfinance To support enactment of key financial sector laws and the publication of new microfinance
licensing procedures.licensing procedures.
Microfinance units of existing commercial banks (“Downscaling facility”)Microfinance units of existing commercial banks (“Downscaling facility”)– Technical assistance packages to existing, sufficiently capitalized commercial banks to help Technical assistance packages to existing, sufficiently capitalized commercial banks to help
develop microfinance units. Training for loan officers, organizational and strategic support, develop microfinance units. Training for loan officers, organizational and strategic support, assistance in product development, information systems design.assistance in product development, information systems design.
MFI Institution building program (“greenfield”)MFI Institution building program (“greenfield”)– Subordinated debt up to $800,000 for new microfinance institutions wishing to locate in Subordinated debt up to $800,000 for new microfinance institutions wishing to locate in
Sudan, meeting criteria of Office of Microfinance Policy. After establishment and successful Sudan, meeting criteria of Office of Microfinance Policy. After establishment and successful operation, debt convertible to equity.operation, debt convertible to equity.
Component 3 Led by Ministry of Investment Component 3 Led by Ministry of Investment will focus on SME Capacity and Linkageswill focus on SME Capacity and Linkages
FDI has grown 223% since 2002. Banking, energy, retail, food sectorFDI has grown 223% since 2002. Banking, energy, retail, food sector But insufficiently linked to local economy and small investorsBut insufficiently linked to local economy and small investors
Foreign Direct Investment in SudanUSD Million
-500
1,0001,5002,0002,500
2001 2002 2003 2004 2005
Source: BOS
Foreign Direct Investment as % of GDP
0%
1%
2%
3%
4%
5%
6%
7%
8%
2000 2001 2002 2003Source: WB Global Development Indicators 2005
SUDAN
KENYA
ETHIOPIA
VIETNAM
UGANDA
WORLD
S.S. AFRICA
Component 3 subcomponentsComponent 3 subcomponents
Entrepreneurship awareness buildingEntrepreneurship awareness building– To allow rural and urban poor to become aware of microenterprise opportunities.To allow rural and urban poor to become aware of microenterprise opportunities.
SME investment capacity in Ministry of InvestmentSME investment capacity in Ministry of Investment– Domestic investment facilitation program.Domestic investment facilitation program.– Monitoring capacity to understand impact of investment on domestic sector.Monitoring capacity to understand impact of investment on domestic sector.
Administrative investment reformsAdministrative investment reforms– Building on FIAS study, to build government capacity to serve domestic investors by Building on FIAS study, to build government capacity to serve domestic investors by
reducing adminstrative barriersreducing adminstrative barriers
Linkage Development FundLinkage Development Fund– Technical assistance facility to enable domestic firms to serve as suppliers to foreign Technical assistance facility to enable domestic firms to serve as suppliers to foreign
invested firms (linkages)invested firms (linkages)– Improve cost, quality and delivery terms with techical help of foreign company’s Improve cost, quality and delivery terms with techical help of foreign company’s
purchasing department/supply chain manager.purchasing department/supply chain manager.
Component 4 – to be undertaken in Phase Component 4 – to be undertaken in Phase 2 - Self-Help Housing Pilot2 - Self-Help Housing Pilot
The lack of assets of poor contributes to poverty trapThe lack of assets of poor contributes to poverty trap
Economically active poor to be targeted for emergence from Economically active poor to be targeted for emergence from povertypoverty
Home ownership is one of the key ways to build assets, which Home ownership is one of the key ways to build assets, which may then be used as collateral for a business.may then be used as collateral for a business.
Component 4: Self-Help Housing PilotComponent 4: Self-Help Housing Pilot
A public-private partnership to build housing assets of the poor, A public-private partnership to build housing assets of the poor, based on Botswana, Sri Lanka, Aceh and Mexican self-help housing.based on Botswana, Sri Lanka, Aceh and Mexican self-help housing.
Land plots contributed by state governmentLand plots contributed by state government
Project provides for a competitive process to provide packages of Project provides for a competitive process to provide packages of self-help materials that are provided to qualified families. self-help materials that are provided to qualified families. Qualifications include 20% down payment on cost of materials.Qualifications include 20% down payment on cost of materials.
Materials, design, and supervision.Materials, design, and supervision.
Labor contributed by community, with small payments from family.Labor contributed by community, with small payments from family.
Project may also provide a mortgage for 80% of cost of materials.Project may also provide a mortgage for 80% of cost of materials.
PSD Steering CommitteeCBOS, Ministry of Finance + all relevant Min/Agencies
Bank of SudanDr. Sabir Hassan, Governor
ProcurementMonitoring &Evaluation
Executing Agency
Project CoordinationUnit
Policy Guidance
Min FinanceBarriers
To Formalization
CBOS
Microfinance
Ministry of Investment
CapacityBuilding
ProjectMgmtUnits
Project management structureProject management structure
MTDF RequestMTDF Request
Component Phase 1 Phase 2 Total
1 Microenterprise Policy 800,000 2,400,000 3,200,000
2 Microfinance 2,800,000 2,950,000 5,750,000
3 Capacity Building 2,000,000 3,000,000 5,000,000
4 Self-Help Housing 200,000 1,400,000 1,600,000
5 Management, Monitoring and Evaluation
168,000 400,000 568,000
Total 5,968,000 10,150,000 16,118,000
Government ContributionGovernment Contribution
Component Phase 1 Phase 2 Total
1 Microenterprise Policy 800,000 2,400,000 3,200,000
2 Microfinance 650,000 2,650,000 3,300,000
3 Capacity Building 2,060,000 3,290,000 5,150,000
4 Self-Help Housing 0 2,000,000 2,000,000
5 Management, Monitoring and Evaluation
0 0 600,000
Unallocated 2,000,000 300,000
Total 5,510,000 10,640,000 16,150,000
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