In June 2004, the International Finance Corporation approved the creation of the Mozambique SME Initiative, a $12 million program supported by the Swiss and Finnish Governments. MSI provides financing and technical assistance to SMEs and aims to build the Mozambican economy's "missing middle" targeting local firms with pre-investment net worth of $50,000 to $500,000 equivalent and annual revenues between $100,000 and $2 million equivalent. It will provide them with long-term funding of up to $1 million, hands-on partnership, and support in key business functions, including marketing, management, human resources, and information technology.
Mozambique's largest population (17.7 millions) and low per capita GDP ($220 a year) require the country to work on many fronts fight deep-rooted poverty. Sound economic management has brought encouraging results in recent years, including high sustained annual average economic growth of 9 percent, and foreign investments in flowing to a few high-visibility projects. But many needs remain.
Several effective programs already serve microenterprises, the most basic level of the local private sector and the only employment options for many of the poor. But there are enormous unmet needs at the next level.
These business can do many things microentreprises cannot: generate new tax revenues, export their products, join together to form competitive local industries and more, They can also offer workers longer-lasting and better-paying jobs, as well as opportunities for training, potential for career advancement, health and safety protections in the workplace, and pension and insurance benefits. In almost every country that has substantially reduced poverty and created a sound middle class, the local SME sector has played a critical role.
Today, however, three key factors keep Mozambique entrepreneurs from doing all they could to create employment and share the benefits of growth more widely through the economy: a complex, bureaucratic business environment; a near-total lack of financing from local banks; and difficulty obtaining necessary technical assistance.
Run from IFC's Maputo office, the initiative is working to build a portfolio of viable client companies, whose improved client operational and financial results over the next five years should in turn stimulate interest from new investors in the country's SMEs. It is the latest in a long series of SME partnership between donor partners and IFC, in an organization whose strong implementation capacity derives from more than 600 full-time small business development specialists in the field worldwide and a Washington-based headquarters staff with expertise in business and finance as well as development. Switzerland and Finland are also contributing resources to the initiative, with others expected to join in the near future.
