2009 Congressional Budget Justification
In 2004, USADF provided support to more than 95,000 African micro-, small-, and medium-sized enterprises.
The development of small and micro enterprises (SMEs) in Africa has broad macro and micro economic benefits, as well as social and environmental benefits. Because SMEs are a vital source of employment and income in most African countries, increasing their productivity and profitability is critical for broad-based economic growth and poverty alleviation. The development of SMEs can be particularly beneficial to improving the economic and social well being of women, youth and other disadvantaged groups. Since SMEs commonly have relatively strong backward and forward linkages in the domestic economy, they increase the income-earning opportunities for other small-scale producers. The development of rural and peri-urban SMEs provides non-farm economic alternatives that diversify incomes against the usual risks of agricultural production and help reduce pressure to over-use fragile lands.
In times of economic turmoil, SMEs become even more important as a safety net and an affordable supply of consumer goods for the poor. When jobs in the formal private sector and government are lost, the number of informal sector SMEs often increases because these enterprises have low barriers to entry and may be the only feasible alternative for many people to earn a living. Also, SMEs are usually at less of a disadvantage than larger firms when local currencies decline in value and imports become more costly because the goods offered by the SMEs typically have less imported content than those of their competitors. While SMEs are usually more labor-intensive, they require less skilled labor. As a result, the relative competitiveness of SMEs may even improve in a weak economy.
Some of the common constraints faced by SMEs in Africa include inadequate fixed or working capital, lack of information on better production methods and markets, lack of access to improved technologies, weak business management capacity, low product quality, and selection of low- value products. SMEs typically need both financing and business development services to increase their productivity, incomes, and employment. ADF can effectively provide both types of assistance.
By empowering Africa's poor to increase their incomes and productivity in sustainable ways and by fostering strong self-reliance and self-governance, the Foundation's program is an essential element of a U.S. foreign assistance policy that helps Africa take the road to greater prosperity and political stability.