Assessment of the Impact of USAID's Ten Years Of

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Assessment of the Impact of USAID's Ten Years Of Assessment of the Impact of USAID’s THISTen YearsTEXT of Assistance REPRESENTS in Micro-lending, THERural PUBLICATION Credit, Mortgage, and Equity TITLE Investment THIS TEXT REPRESENTS THE SUBTITLE Romania’s Unique Financial Mechanisms Assisted by USAID August 2007 MONTH YEAR This publication was produced for review by the United States Agency for International Development. It was preparedThis bypublication Banyan Globalwas produced in collaboration for review with by DAI. the United States Agency for International Development. It was prepared by DAI. Assessment of the Impact of USAID’s Ten Years of Assistance in Micro-lending, Rural Credit, Mortgage, and Equity Investment Romania’s Unique Financial Mechanisms Assisted by USAID The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. CONTENTS ACKNOWLEDGEMENTS ................................................................ VII ABBREVIATIONS ............................................................................. IX EXECUTIVE SUMMARY.....................................................................1 ASSESSMENT METHODS .....................................................1 THE PRIVATE SECTOR THEN AND NOW.............................1 KEY FINDINGS........................................................................2 THE ENABLING ENVIRONMENT...........................................4 SUCCESS FACTORS AND LESSONS LEARNED.................4 REMAINING GAPS AND CHALLENGES ...............................5 BACKGROUND ..................................................................................7 USAID PROGRAMS................................................................7 INVESTMENT FINANCE .............................................7 MICROFINANCE AND SMALL BUSINESS LOANS....8 RURAL CREDIT...........................................................9 MORTGAGE MARKET DEVELOPMENT ....................9 ENABLING ENVIRONMENT........................................9 OVERVIEW OF THE ROMANIAN PRIVATE SECTOR– THEN AND NOW ..............................................................................11 THE ROMANIAN FINANCIAL SECTOR: A LANDSCAPE TRANSFORMED FROM 1994 TO 2007......12 THE FINANCIAL SECTOR AT THE OUTSET OF USG ASSISTANCE....................................................12 MACROECONOMIC FACTORS INFLUENCING THE EVOLUTION OF THE FINANCIAL SECTOR ....12 PRIVATIZATION, STABILIZATION, AND GROWTH OF THE BANKING SECTOR....................13 INVESTMENT FINANCE ...........................................16 IMPACT OF ROMANIA’S UNIQUE FINANCIAL MECHANISMS ASSISTED BY USAID i PRIVATE SECTOR FIRMS: SLOW BEGINNINGS TO STRONG, STABLE GROWTH ..............................................17 PRIVATIZED AND NEWLY CREATED LARGE FIRMS...........................................................17 MICROENTERPRISES AND SMALL AND MEDIUM-SIZED ENTERPRISES...............................18 THE AGRICULTURAL SECTOR ...............................19 THE ENABLING ENVIRONMENT: LEGISLATIVE AND POLICY REFORMS AND BUSINESS SUPPORT NETWORKS.....................................20 KEY REFORMS AND LEGISLATIVE DEVELOPMENTS......................................................20 DEVELOPMENT OF BUSINESS SUPPORT NETWORKS...............................................................23 REMAINING CHALLENGES AND GAPS .............................24 ACCESS TO FINANCE..............................................24 CONSUMER CREDIT AND MORTGAGE FINANCE..............................................25 SME SECTOR............................................................25 RURAL MARKET STRUCTURE................................26 EU ACCESSION ........................................................26 ENABLING BUSINESS ENVIRONMENT ..................26 MICROFINANCE INSTITUTIONS..............................27 BANKS .......................................................................27 THE MORTGAGE MARKET ......................................28 ASSESSMENT METHODS ...............................................................29 RESEARCH OBJECTIVES ...................................................29 ANALYSIS FRAMEWORK....................................................29 METHODS .............................................................................29 USAID PROGRAMS – 1996 TO 2007 ..............................................31 ASSESSMENT FINDINGS: THE IMPACT ON FIRMS ..........31 RESPONDENT PROFILE–MICRO, SMALL AND RURAL ENTERPRISES ....................................31 FINANCING SOURCES AND USES OF FUNDS ......32 FIRM PERCEPTIONS................................................32 FIRM IMPACT............................................................34 RESPONDENT PROFILE–MEDIUM AND LARGE FIRMS...........................................................37 ii IMPACT OF ROMANIA’S UNIQUE FINANCIAL MECHANISMS ASSISTED BY USAID FINANCING SOURCES AND USES OF FUNDS ......37 FIRM PERCEPTIONS................................................38 FIRM IMPACT............................................................38 HOW USAID IS DIFFERENT .................................................45 SUCCESS FACTORS................................................45 LESSONS LEARNED ................................................46 ROMANIAN-AMERICAN ENTERPRISE FUND (RAEF) .......47 ORIGIN AND EVOLUTION ........................................47 APPROACHES AND STRATEGIES..........................47 RAEF MAJOR TRANSACTION PROGRAM – CLIENT PERCEPTIONS............................................49 INSTITUTIONAL PERFORMANCE AND SUSTAINABILITY ......................................................49 CONCLUSIONS: LESSONS LEARNED....................51 SMALL ENTERPRISE ASSISTANCE FUNDS, TRANS-BALKAN ROMANIA FUND (SEAF–TBRF).............52 ORIGINS AND EVOLUTION......................................52 APPROACHES AND STRATEGIES..........................52 INSTITUTIONAL PERFORMANCE AND SUSTAINABILITY ......................................................53 CLIENT PERCEPTION AND FIRM-LEVEL IMPACT......................................................................54 CONCLUSIONS: LESSONS LEARNED....................54 RAEF MICRO-LOAN PROGRAM (MLP)...............................55 ORIGINS AND EVOLUTION......................................55 APPROACHES AND STRATEGIES..........................56 CLIENT PERCEPTION AND IMPACT.......................57 INSTITUTIONAL PERFORMANCE AND SUSTAINABILITY ......................................................57 CONCLUSIONS: LESSONS LEARNED....................61 CHF-EXPRESS FINANCE.....................................................62 ORIGINS AND EVOLUTION......................................62 APPROACHES AND STRATEGIES..........................62 CLIENT PERCEPTION ..............................................63 INSTITUTIONAL PERFORMANCE AND SUSTAINABILITY ......................................................64 CONCLUSIONS: LESSONS LEARNED....................66 IMPACT OF ROMANIA’S UNIQUE FINANCIAL MECHANISMS ASSISTED BY USAID iii RURAL FINANCE AND LEADER DEVELOPMENT (RFLD) PROGRAM ...............................................................67 ORIGINS AND EVOLUTION......................................67 APPROACHES AND STRATEGIES..........................67 PROGRAM PERFORMANCE....................................68 STAKEHOLDER AND CLIENT PERCEPTIONS .......69 PROGRAM SUSTAINABILITY...................................69 CONCLUSIONS: LESSONS LEARNED....................70 MORTGAGE FINANCE AND MARKET DEVELOPMENT ....70 ORIGINS AND EVOLUTION......................................70 APPROACHES AND STRATEGIES..........................71 INSTITUTIONAL PERFORMANCE AND SUSTAINABILITY ......................................................71 CONCLUSIONS: LESSONS LEARNED....................72 RECOMMENDATIONS .....................................................................73 CONCLUSIONS ................................................................................75 ANNEX 1: LIST OF REFERENCES..................................................77 ANNEX 2: LIST OF CONTACTS ......................................................81 ANNEX 3: RAEF FINANCIAL PERFORMANCE OF MAJOR TRANSACTION PROGRAM EQUITY INVESTMENTS....................85 ANNEX 4: RFLD PROGRAM RESULTS..........................................87 ANNEX 5: CHF–EXPRESS FINANCE INSTITUTIONAL ASSESSMENT ..................................................................................89 ANNEX 6: CENTER FOR ENTREPRENEURSHIP AND EXECUTIVE DEVELOPMENT (CEED) INSTITUTIONAL ASSESSMENT ..................................................................................95 ANNEX 7: CASE STUDY POLICOLOR ...........................................97 ANNEX 8: BANCA ROMANEASCA S.A. CASE STUDY.................99 ANNEX 9: TELEZIMEX CASE STUDY...........................................101 ANNEX 10: CASE STUDY FROM CHF-EXPRESS FINANCE.......103 iv IMPACT OF ROMANIA’S UNIQUE FINANCIAL MECHANISMS ASSISTED BY USAID TABLES AND FIGURES TABLE TABLE 1: ROMANIA BANKING SYSTEM & STRUCTURAL INDICATORS ....................................................................................15 TABLE 2: FINANCIAL INSTITUTIONS (JULY 2007).......................15 TABLE 3: SME DEFINITION ............................................................18 TABLE 4. ACTIVE PRIVATE SMES, BY SIZE.................................18 TABLE 5: ACTIVE PRIVATE SMES, BY SECTOR OF ACTIVITY ..19 TABLE 6: SME DEMAND BY REGION AND URBAN AND RURAL LOCATION ........................................................................................24
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