Emerging Practices of Economic Development in Transition Economies:

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Emerging Practices of Economic Development in
Transition Economies

• Experiences From Mercy Corps in Central Asia and
  the Balkans
• Pamela Eser
• Director, Microenterprise and Economic
  Development
• InterAction
• May 9, 2002

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Mercy Corps exists to alleviate suffering,
poverty and oppression by helping people build
secure, productive and just communities.  Since
1979, Mercy Corps has provided more than 640
million in aid to 74 nations.  The agency
currently reaches more than 5 million people in
over 30 countries.  More than 91 percent of the
Mercy Corps' resources are allocated to programs
thathelp those in need.
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Central Asian Republics after dissolution of
Soviet Union

• Hyperinflation
• Barter economy
• Collapsed banking system
• Corruption
• Tax and legal hurdles to small business
  development
• Remnants of centralized economy

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Mercy Corps in CAR

• Began work in CAR in 1992-93
• Initial economic development programs were
  in-kind repayment
• All economic development programs have
  transitioned to best practice
• Currently work in all five Central Asian republics

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BISAMP Program in Uzbekistan

• Situation state-run agriculture cooperatives
  uncompetitive, government quotas on crops
  (particularly cotton), no currency conversion,
  known market available in Russia
• Program Bulungar Institutional Strengthening and
  Microcredit Project (BISAMP) implemented April
  1997 to March 2001

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BISAMP

• Donor DFID Know How Fund, Mercy Corps
• 4 year, 960,000 project (100,000 loan fund from
  Mercy Corps)
• Organized 11 independent farmers groups (5-25
  members) with democratically elected leaders
• 9 of these banded together to form Madadkor
  farmers association (71 farm enterprise and 50
  women entrepreneurs)
• Democratically elected Board
• Provides access to credit, training, marketing of
  members products, assistance in obtaining
  inputs, advisory and legal services

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BISAMP Credit Program

• 100,000 revolving fund services approx. 120
  members (40 women)
• Loan size 200-1,000 for 12 months or less,
  issued in local currency
• Loan purposes seed purchase, fertilizer, fuel,
  livestock , poultry
• Madadkor negotiated credit line with Tashkent
  bank to increase loan fund

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PVO/Other Coordination

• Winrock Farmer to Farmer
• Tacis trainers
• Peace Corps volunteers
• DFID agriculture consultant

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Results of BISAMP

• Increased income through
• Expanded area under production
• Planted more profitable crops
• Joint purchases/sales
• Accurate market information
• Exported product to new market in Russia

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BISAMP Lessons

• Located favorable political environment
• Located fertile land with no quotas
• Found entrepreneurial and energetic farmers
• Provided market linkages

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Womens Microcredit Program in Uzbekistan

• Location Namangan in Ferghana Valley
• Donor British FCO Conflict Prevention Fund
  (300,000)
• Program womens microcredit training
  advocacy/association building

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Why Ferghana Valley?

• High population density and unemployment
• Three countries meet in FV
• Ethnic diversity
• Prolific agricultural production (represents the
  largest percentage of each countries agriculture
  production)
• History of ethnic and religious conflict
• Mercy Corps household survey in 1999-2000

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Program Description

• 10 months in operation (begun June 2001)
• Solidarity group (6-10 women)
• Loan amount 45-150 for 3-6 months
• Some clients already ready for individual loans
• Active portfolio 1,717 loans for 93,000 (2,185
  loans disbursed for 153,000)
• Headquarters in Namangan with 3 branch offices
  near Kyrgyz border
• Clients of Uzbek, Tajik and Kyrgyz ethnicity
• Full support of local government
• Leadership training of clients resulted in
  steering committee to found NGO re advocating
  for women entrepreneurs issues

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PVO/Other Coordination

• Mercy Corps, UNDP, ACDI/VOCA, USAID collaborating
  on legislation to legalize microfinance
  operations
• Loan officers trained by Mercy Corps Kyrgyzstan
  WMC and UNDP Uzbekistan
• Counterpart training for staff in Facilitation
  Skills, Social Partnership and PRA methods
• Winrocks Farmer to Farmer program providing TA
  to clients involved in cattle/cow breeding
• Winrocks Womens Integrated Legal Literacy to
  provide trainings on Legal Rights, Leadership,
  Domestic Violence, Recognizing Violence,
  Effective Communication
• Pragma/Mercy Corps designing training courses to
  increase clients business skills

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WMCP Lessons Learned

• Need for credit plus programming
• Possible to alleviate high ethnic tensions with
  economic livelihood programming

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Mercy Corps in the region

• Tajikistan post-conflict environment, 80 of
  population below the poverty line, working
  through local partner NABW, (headquartered in
  FV), purchased 2 other offices, PVO coordination
  WB, CGAP, all other MFIs
• Kyrgyzstan WMC working through four local NGOs
  and direct implementer of SME lending
• Kazakhstan founded Asian Credit Fund (SME
  lending) new loan product mortgage lending
• Turkmenistan implementer of SME lending

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Mercy Corps in the Balkans

• Bosnia-credit for all (multi-ethnic inter-entity
  organization)
• Kosovo, Serbia, and Macedonia-economic inputs for
  re-establishing business relationships
• Montenegro-partner with local NGO

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Overall Lessons Learned

• Scan the environment, dont use set models
• Respond to identified situation and need
• Use credit plus programming
• Exploit market linkages
• Use economic development programming to ease
  ethnic strife and rebuild communities
• Use local partners whenever possible