a)Thanks to the capacity development activities, EFC employees are specialized and highly cognizant of entrepreneurs’ needs, their value chains and markets. EFCs analyze market segments (fisheries, transport, carpentry, etc.) and build-up “reference sheets”. This enables EFCs to close the information gaps. EFC employees are therefore able to offer informed management advice along with financial products specifically designed for entrepreneurs thus providing effective support as their businesses expand.
b)EFCs finance both informal and formal sector SMEs. While financing informal SMEs, EFCs aim to help them migrate towards the formal sector. Business expansion is hampered when informality is widespread and skills are lacking. Despite innovative ideas and penetration of previously unexploited markets, SMEs often stagnate because of low productivity, often a result of outmoded technologies or poor labor practices. In addition, financial services offered to these businesses are often overpriced or inappropriate. Informal SMEs face problems of development, competitiveness and expansion. In order to migrate from informal to formal business, SMEs need to have access to financing and improved access to knowledge and skills. EFC programming is providing both, thus fostering formal sector development.
c) EFC’s lending approach is based on SME capacity to produce and create value out of business opportunities. Collateral is not the leading lending criteria.
d)see c) above
e)see a) and b) above
f)EFC develops and provides tailor made financial products to SMEs.
g)Through this initiative, strong local institutional capacity is built while enabling local ownership. DID have 40 years of experience in transferring expertise and building local financial intermediaries capacities (i.e. IT solutions, instrumentation, training, coaching, tools, etc.).
h)Through decentralization of “business loan centres” (a DID innovation), EFCs reduce transaction costs and deliver financial products to the door steps of entrepreneurs. To further reduce transaction costs, EFCs also use cutting edge technologies (i.e. smart cart, VPN).
i)EFCs have a distinctive approach since they target low-end un-served/underserved markets. In that sense, EFCs are often seen as “market makers”. EFCs stimulate competition by demonstrating that deserving SMEs are viable business. EFC Zambia and EFC Panama are prominent examples.
j)Exit option is covered under the local ownership scheme i.e. developing local financial capacities. EFCs have access to local currency funding, either locally or internationally through currency risk mitigation strategies and mechanisms (existing or developed).
k)see a) and b) above. Most EFCs were and are deployed in countries rated 6 or 7 as per OECD country risk classification.
l)More than 40% of EFC clients are women.
m)The EFC program is based on market potential. All EFCs are licensed and regulated by local authorities and they also rely on strict internal controls embedded in the business model. EFCs are community-based institutions and are therefore best positioned to cope with local situations.