4.1.2. Provide Finance Seekers with Advisory Support in Building Proposals
Banks and other finance providers often claim they are eager to increase their portfolios and make investments, but they rarely receive financing requests from prospective borrowers in an actionable form, with the data and analysis needed for them to make a financing decision. Individual entrepreneurs and small and medium-sized enterprises (SMEs) may have limited experience communicating financial analysis and projections. As such, USAID has a long history of providing Business Advisory Services (BAS) to enterprises to assist with financial proposal development.
- Ability of borrowers to provide the details/documentation needed to get a loan
- Appropriate capital to meet borrower needs
- Cash flow uncertainty
- Off-take risks associated with target sector/region
- Production costs associated with target sector/region
- Rate of return on lending in target sector/region
If borrowers are able to provide more complete and accurate information in their proposals to lenders, requests for capital may be more successful; proposal support also provides foundational training to finance seekers that can be utilized in future.
When proposal support is combined with other advisory services, the direct impact can be difficult to quantify; it is challenging to develop performance metrics for proposal support, and advisory services can come at a high relative cost for providers. Use of pay-for-results contracting with Advisory contractors (e.g. with payments based on # of successful loans or $ value mobilized) can help overcome this challenge.
MUST HAVE’S, CRITICAL POINTS, OR QUESTIONS TO CONSIDER
When considering this intervention and ways to measure its success, advisory service providers should ask: How do finance proposal standards differ across finance providers? Does the home country have specific requirements? What are the performance metrics? How many proposals need to obtain funding for the program to be determined a “success”?
VINGETTE: ASSISTANCE IN BUILDING AFGHANISTAN BY DEVELOPING ENTERPRISES (ABADE)
Started in October 2012, the Assistance in Building Afghanistan by Developing Enterprises (ABADE) program was a four-year project designed to strengthen the private sector in Afghanistan in order to sustain growth and create jobs in the country. The program’s specific objectives were to increase domestic and foreign investment, stimulate employment, and improve sales of Afghan products.
As part of the ABADE, the program included intensive intervention in developing the capacity of SMEs. Specifically, program stakeholders were given technical assistance and business advisory services aimed at improving operations and management, as well as support that improved SMEs’ ability to obtain financing.
Nearly $300 million in total investments generated, 86% from the private sector; trained more than 270 women in high-demand skills in information and communication technology, business systems, marketing and advertising.