Sunday, November 23rd, 2014

The Obameter

Create a fund for international small and medium enterprises (SME)


"Building on the growing evidence that micro finance works, an Obama administration will provide initial capital for an SME Fund. Administered through the Overseas Private Investment Corporation, an independent U.S. government agency, the government will provide seed capital matched by a larger portion from the private sector. The SME Fund will be designed to provide seed capital and technical assistance to catalyze the establishment of job-creating small and medium enterprises, and to build the capacity of entrepreneurs to translate their ideas into viable businesses, including through the creation of regional 'SME Universities' supported by America's business schools."


Updates

Delivered on seed money, but not on technical support

As a candidate, Barack Obama promised to provide a new overseas fund for small and medium enterprises. The fund would be coupled with technical assistance to help entrepreneurs establish "viable businesses.” An official, centralized fund for that purpose never materialized, but a constellation of smaller funds with the same objective did.  

We checked in with the Overseas Private Investment Corporation, the independent agency Obama said would administer his small and medium enterprise fund. Since Obama took office, the corporation has invested $635 million in financing 11 different investment funds, which are designed to grow small and medium enterprises in "emerging markets,” such as Brazil, South Africa and Mexico.  

Timothy Harwood, the corporation's spokesman, said the initial investment aims to raise $2.2 billion in private money. So no official "SME fund” exists, but the administration seems to have met its policy goal through these smaller microfinance funds.

We were also interested in whether the administration incorporated technical assistance in its overseas investment funds for small and medium enterprises. The phrase "technical assistance” in the world of microfinance might mean a range of services. Based on a 2004 working paper from the University of Michigan Business School, the term usually refers to marketing analysis and training of the business owner and employees; some microfinanciers also provide legal and accounting support and might help an entrepreneur write a business plan.

Harwood said the corporation offers some oversight in terms of site visits and monitoring financial performance, but he didn't characterize those services as technical assistance. Neither the corporation itself nor American business schools, i.e. "regional SME universities,” provide the kind of management and consulting support the promise implied.

Given that the administration seems to have invested initial seed money in funds for small and medium businesses overseas, but never provided technical support, we rate this a Compromise.

Sources:

Email interview with Timothy Harwood, a spokesman for the Overseas Private Investment Corporation, June 19, 2012

The William Davidson Institute at The University of Michigan Business School, What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania, January 2004

Microlending funds establish for Latin America, Eastern Europe

 
On the campaign trail, Barack Obama promised to invest more in microfinance, small loans given to small businesses to help jump-start industry in developing countries.
 
We found a few instances where Obama has advanced his pledge.
 
First, world leaders attending the Asian-Pacific Economic Cooperation, including Obama, agreed to support and develop small and medium enterprises in the APEC region, according to a Nov. 15, 2009, press release on the White House Web site.
 
On Nov. 23, the Overseas Private Investment Corporation, an independent government organization tasked with attracting private investment to developing countries, announced it approved $125 million for a microfinance growth fund for Latin America and the Caribbean. The fund was established by Obama in April, while meeting with South American leaders.
 
On Nov. 30, OPIC announced a $25 million loan to ProCredit Holding, a lending institution, specifically for small- and medium-sized enterprises in Eastern Europe and elsewhere.
 
So, Obama has signaled support for the microloans he talked about on the campaign trail, and he has backed up the promise so far with symbolic agreements and funding. We'll wait to see if he comes through on his promise to create regional "SME Universities" and authorize more substantial funding. But the administration has done enough so far to earn an In the Works.

Sources:

 

Microfinance Focus, OPIC Board Approves $125 MN Microfinance Fund for Latin America, Nov. 22, 2009

Microfinance Focus, OPIC 25 million loan to ProCredit to Boost SME Lending, Nov. 30, 2009

The White House, Declaration by APEC Leaders, Nov. 15, 2009