Establishment of Credit Programme - Brief Description


International experience has proved that entrepreneurship promotion and small business development is an effective approach for creating new jobs, reducing unemployment, and generating income. Small enterprises are an important and integral sector in the market economies of developed countries as well as transition countries.

In countries in transition, many micro-entrepreneurs lack access to working capital.  Without adequate working capital, entrepreneurs’ abilities to expand their businesses, create an inventory, and overcome short-term cash flow problems are severely restricted.  Field studies have shown that most entrepreneurs believe that money alone will solve all their problems. They are often unaware of other important success factors (see Figure 1).   Few entrepreneurs trust commercial banks and most are reluctant to seek bank assistance. Even if bank lending was readily available and in demand, most new small businesses cannot post the collateral necessary to obtain a loan.  Although credit is often available from moneylenders, the interest rates are prohibitive, ranging from ten to twenty percent per month. 

Entrepreneurs with access to Micro Finance (MF) programmes can access an array of services which are required by the MF as part of the loan packages,

In rural areas a significant portion of the population in transition countries derive their livelihoods from rural income-generating activities: these may include animal husbandry, market gardening, and crop production, etc. Newly privatized land is often under-utilized as farmer’s lack the resources to procure the necessary inputs.  For most of the rural population, it is difficult to obtain financing to expand rural businesses. The expansion of rural production is also limited by the lack of market outlets for produce.  Processing facilities for primary products to add-value are few and far between.

Under such circumstances, the implementation of a tailor-made credit programme as an (integral) part of regional economic and rural development projects can be particularly beneficial as it disburses capital directly to needy target groups.