Driving Access to Finance in Tunisia: A CLA Approach
The USAID Business Reform and Competitiveness Project’s (BRCP) Access to Finance component achieved breakthrough results (equity and credit deals leveraged) in Tunisia, utilizing an innovative CLA (collaborating, learning and adapting) approach. The project has leveraged $33,377,876 in equity and credit capital for 16 enterprises through three implementation years, representing a cost-effective leveraging ratio of 40:1 for resources spent.
BRCP learned early that the institutional environment in the banking sector was more conservative and resistant to change than commercial finance systems in many emerging market environments in which USAID operates. The impact of this factor on SME outreach through the banking system had been reinforced by the capital adequacy and liquidity pressures associated with the post-Arab Spring slowdown in economic growth and macro-financial imbalances caused by (1) instability in the political and security environment; and (2) the continuing post-financial crisis economic malaise in Europe (the country’s chief export market). Thus, it became clear that focusing on working directly with banks to improve their service strategy toward and product offerings to SMEs was likely to yield limited increased access to finance for SMEs. Despite intensive collaboration and apparent motivation on the part of partners, there was no increase in actual deals closed. Through a structured process of adaptation, driven by results, BRCP pivoted to focus on working with the relatively advanced investment banking community in Tunisia to jumpstart development of structured debt/equity deals to drive increased investment in private equity deals as the project’s access to finance strategy for the SME sector.