AGENCY FOR INTERNATIONAL DEVELOPNlENT 
UNITED STATES OF AMERICA A. I. D. MISSION 
TO EL SALVADOR 
C/O AMERICAN EMBASSY. 
SAN SALVADOR, EL SALVADOR. C. A. 
ACTION MEMO FOR THE MISSION DIRECTOR 
. I . -..i : 
FROM : Mary C. Ott, SO1 Team Leader / ; ,,& !. . 
J 
SUBJECT: Close-out Report of the Microenterprise Innovation Program 
(Cooperative Agreement No. 940-0406-A-00-5246) with Catholic 
Relief Services (CRS). 
In accordance with ADS 203 Managing for Results: Monitoring and Evaluation 
Performance, and USAID/El Salvador Policy (MOM 680 and 7701, attached is the 
Close-out Report for the Microenterprise Innovation Program with Catholic 
Relief Services (CRS). Completion date was February 28, 1999. 
Attachment: Close-out Report 
Drafted by: SLDuarte , 
Cleared by: BPaige, OCG 
8 FBreen, CONT 
d ~&orth, SDO 
DMcFarland, date 
MIP I PACR 
MICROENTERPRISE INNOVATION PROGRAM 
COOPERATIVE AGREEMENT No. 940-0406-A-00-5246 
CLOSE-OUT REPORT 
Summarv of the Proiect 
In December 1994, five Non-Governmental Organizations (NGO1s) interested in 
improving administrative capacity for credit projects and avoiding 
duplication of efforts, developed strategies, goals and objectives for 
coordination which resulted in the development of a Microenterprise 
Strengthening Proposal. Catholic Relief Services (CRS), on behalf of the five 
participating NGO1s, prepared a proposal for submission to the Global Bureau, 
Economic Growth Division, Office of Microenterprise Development, for 
financing under the PRIME Fund, one of three components of the Global 
Bureaus' Microenterprise Improvement Program. After some changes, the 
proposal and final LOP funding level of US $600,000 was finally approved by 
USAID/W on July 17, 1995. 
A Cooperative Agreement was signed between CRS, a U.S. PVO, and USAID/El 
Salvador on September 28, 1995 to implement the Microenterprise Innovation 
Program (MIP) . The original completion date was September 28, 1998. Two 
no-cost extensions were granted. Final completion date was February 28, 
1999. 
The original entities participating under this Cooperative Agreement were the 
National Secretariat of the Family (SNF), 
Support Center for ~icroenterprise (CAM), 
Catholic Relief Services (CRS), 
Integral Communitarian Foundation (FINCA\E~ Salvador), 
and Association for Entrepreneurial and Female Assistance (OEF) . 
In the following years, the Cooperative for Assistance and Relief Everywhere 
(CARE EL SALVADOR), the Jos6 Napole6n Duarte Foundation and two programs 
from the European Community: the Program for the Development of 
Microenterprises in Marginal Zones(FOMMI), and the Program for Employment 
Creation in the Informal Sector of San Salvador (GENES1SS)joined the group. 
Two dropped out during the life of the Project, FINCA\El Salvador and FOMMI. 
In June 1998, the MIP was subject to an external assessment performed by 
independent consultants Iris Villalobos Barahona, Ligia Orantes Aguirre and 
Erick Ulloa. 
The main achievements of the Project were providing an opportunity for team￾work and interchange of ideas among the diverse microlending institutions. 
An exchange of experiences took place and a certain level of trust among the 
participating institutions have been developed. The Credit Bureau started 
functioning during MIP I and assistance to develop a financial monitoring 
system also took place. 
The indicators included in the Cooperative Agreement were very broad. Since 
the indicators to be reported to Washington were defined by the Mission in 
1997, they did not match exactly with those reflected in the C.A.. The 
results of this Project have been reported through the narrative in the R4, 
but not through the official outreach indicators (such as number of new 
active borrowers, number of loans under $300, etc). The impact of MIP is 
more at the level of the microlending institutions rather than at the level 
of the end-users. Specific results are outlined on the next pages. 
The evaluation report recommended conducting a second phase Project. After 
months of working together and on behalf of the participating NGOts, CRS 
submitted a proposal to USAID on September 8, 1998 requesting a one-year 
extension to the existing activity. The main objective of this second phase 
was to achieve self-sufficiency for the Credit Bureau. The proposal also 
included specific activities to develop a Credit Information System and some 
training activities. The final proposal submitted to USAID on January 19, 
1999 was approved as a follow on Project in the amount of $250,000 under the 
Rural Financial Markets Project (No. 519-0435) 
A. Goal and Purpose of the Project 
The Project was to contribute to the goal of broad-based economic growth in 
El Salvador through research, training, coordination, and information sharing 
activities. 
The purpose of the Cooperative Agreement was to provide funds to enable the 
Recipient to conduct a program of assistance to improve services to clients 
of credit projects in El Salvador. The purpose would be achieved by: 1) 
increasing institutional capacity to efficiently provide financial services; 
2) improving monitoring, information and impact systems; and 3) creating and 
exploiting new microenterprise markets. 
B. Project Components 
The Project had four components: 1) improve the capacity of five 
organizations participating under the Project to monitor and evaluate the 
social and financial impact of credit; 2) conduct research to locate and 
exploit new microenterprise markets, identify rural credit demand and 
evaluate the capacity of the organizations to manage sustainable and 
efficient credit programs; 3) coordinate Project activities and transfer of 
information, technologies; and 4) administrative support. 
C. Analysis of the Present Status of the Project 
By the end of the Project, great expectancies had been placed in the self￾sustainability of the Credit Risk Bureau, one of the main accomplishments of 
the Project. The institutions were still learning to work with each other 
and adapting to this type of relationship, since they all have different 
methodologies, interests and situations. The plan is to separate the Bureau 
from CRS management to make it an independent organization that would allow 
all participating institutions to feel more comfortable with sharing their 
information. 
11. FINANCIAL STATUS 
As of 01/31/00 the activity's pipeline is zero. This includes $532,083 
already expended and $67,917 in accruals, according to the following chart: 
According to CRS, they have spent the full $600,000.00. Any differences 
appearing in the present day financial records are due to the fact that CRS 
works with letters of credit, therefore the information is posted in our 
system through AOCs (advises of charge), months after the expenditures take 
place. 
Original estimated counterpart contribution: US$ 156,926. 
CRS was to contribute a portion of its indirect costs, $65,030, and $56,896 
in cash, and the participating institutions $35,000 in kind. 
PIPELINE 
0 
0 
0 
0 
0 
0 
0 
Total Counterpart Contribution provided: US$ 165,837.47 
This amount corresponds to approximately 105% of the CRS original estimated 
counterpart contribution. 
111. PROJECT ACCOMPLISHMENTS 
EXPENDITURES 
253,436 
56,896 
155,104 
66,303 
344 
0 
532,083 
OBLIGATIONS TO DATE 
253,436 
56,896 
155,104 
66,303 
43,261 
25,000 
600,000 
1 
2 
3 
4 
5 
6 
A. Brief Review 
ACCRUALS 
0 
0 
0 
0 
42,917 
25,000 
67,917 
PROJECT ELEMENTS 
OPERATIONAL COST 
OVERHEAD 
CONSULTANCIES 
CAPITAL EQUIPMENT 
OTHER DIRECT COSTS 
EVALUATION 
PROJECT TOTALS 
A major result of this effort is the new way the different NGO1s are working 
in coordination, identifying common trouble spots and jointly addressing 
issues that may have never been possible to address as individual 
institutions. The executive directors meet at least once a month to discuss 
project implementation and goals. 
In general, the results of the Project are: 
a) Design and implementation of the Credit Bureau for NGO1s in seven MIP 
institutions (database of 5,800 delinquent clients); 
b) Completion of the diagnostic of the management information systems; 
C) Installation of the Evaluation and Impact System in 4 MIP institutions; 
d) Development of training sessions; 
e) Served as liaison with other institutions regarding research, lobby, 
technical assistance and forums for the sector; 
d) Completed eight sectorial and other studies. 
Also, meetings were held for interchange of points of view and information 
transfer. Forums and training seminars on software management and two 
national conferences on microenterprise were held. Quarterly bulletins for 
information exchange was produced and a Documentation Center was created. 
B. Achievement of Project Purpose 
According to the Cooperative Agreement the End-of-Project expected results 
were : 
1. 56,500 beneficiaries indirectly benefited. 
By February 28, 1999, credit information provided by the MIP institutions 
showed that there were 34,463 active customers being served by participating 
Credit Institutions. In general, we can say this specific result was reached 
considering an estimated four family members are indirectly benefited per 
each loan. 
The overall portfolio did not show a great increase of active clients. More 
than that, some institutions showed fewer clients at the end. One of the 
reasons for this is that some institutions, following best practices, 
implemented write-off exercises. For instance, in June 96, the CAM showed a 
decrease in active clients from 30,000 to 16,566 after their first write-off 
exercise. Another case is FINCA/El Salvador, another member that faced 
financial problems mainly in their Housing Program and decided to leave the 
MIP. FOMMI, the European Community Program, also dropped out. In the case 
of CRS, it made an important change in its portfolio. Originally, it was 
supposed to work with twelve counterparts. In 1997, it initiated a new 
credit program called ENLACE, in alliance with only five of the former twelve 
CRS counterparts. 
In general, the results of this effort are more qualitative than 
quantitative. The intention of the Executive Directors of the participating 
microlending institutions has been mainly to improve the quality and variety 
of the offered services. 
2. Computerized financial information systems operational in five 
microlending institutions. 
The Project elaborated a diagnosis of the portfolio information systems of 
the MIP institutions. Elements necessary for the planning of the systems 
improvements in the areas of software and hardware were provided, taking into 
account the respective needs of each organization studied. 
OEF, SNF, CRS, CAM and FINCA received technical assistance and equipment in 
order to improve their credit control systems. Neither software nor licenses 
were bought. The Project funded a programmer in each institution during the 
life of the Project. 
Two systems underwent a diagnostic study. The first one took place in 1997 
and it was performed by CONSISA. The diagnosis elaborated an analysis of 
each institution's situation and it focused on the type of equipment each 
institution had and what needed to be replaced. The second one was carried 
out in February 1999 by TECNYSOFT. It updated the information systems of 
GENESISS Foundation, Duarte Foundation, OEF and SNF. The results have been 
useful to plan the migration of data to other computerized systems according 
to the needs of each organization. Among the weaknesses encountered were the 
lack of integrated information between the portfolio, finances and accounting 
systems and limitations in hardware and software regarding Y2K compliance. 
3. Centralized credit bureau database operational for beneficiaries for five 
microlending institutions. The database will control and reduce loan 
duplicity and delinquency among each agency's clients. 
The Credit Risk Bureau (CRB) was designed as an information system, 
accumulating data on delinquent borrowers. Focusing on customers with credit 
records since 1996, the database was able to accumulate 37,300 registers by 
February 1999. This achievement involved a process of collection, 
processing, interchange and consultation of the information among the 
participating institutions. Sharing of information started in 1996. The CRB 
as an independent self-sufficient institution is expected to exist during the 
second part of this effort. 
Eight programmers of the MIP institutions were trained in the use and 
management of the CRB. Manuals were developed. Equipment was bought and the 
consultation program was installed in MIP institutions. Quarterly reports 
were submitted. 
4. Five microenterprise development studies were conducted in coordination 
with participating microlending institutions. 
a. A Nation-wide study on Credit Demand (December 19961, 
b. An analysis on the processing and sales of food products (a study of the 
following sub-sectors: bakery, dairy products and processed meat). 
c. Technical and Economic Feasibility Study of a Sausage Processing Plant. 
d. Feasibility study to convert wood-burning ovens to liquid gas ovens in 
small bakeries. REDES, CIS, CARE, FOMMI 11, AMPES, MIP and Tropigas 
participated in this study. 
e. Marketing Study of the Salvadoran Microenterprise, which included a 
diagnosis of the most important marketing problems faced by 166 
microentrepreneurs of the subsistence sector. 
The Project also contemplated the elaboration of marketing planning 
methodology and the development of a forum to present the diagnosis results 
as well as basic software to elaborate projections and to control sales. 
This software was developed by the IBC consulting firm. 
Other studies were: 
- A study on institutional sustainability of the MIP members. The MIP 
members were not totally satisfied with the results of this study. A deeper 
analysis would have been desired. 
-A Technical and Financial Feasibility study of the Credit Risk Bureau, by 
UCA (October 1998). 
-A study on an "Independent Administration of the Credit Bureau," by 
Guillermo Bolafios (Feb. 99) . 
The following two studies were not originally contemplated in the MIP Project 
but were carried out due to demand institutions for additional information 
from the MIP institutions: 
-A study for the creation of a nation-wide credit supply data, by Luis 
Sanchez Zimmerman and Rodrigo Goitia. 
-An Environmental Impact Study for microenterprises, in coordination with and 
financed by CRS and PROMICRO. 
5. System to measure overall socio-economic impact of microenterprise credit 
projects developed and implemented. 
HECO CONSULTORES designed the Impact Evaluation System (IES) as an impact 
evaluation methodology for the credit programs targeting the microenterprise 
sector. It consisted of a series of economic indicators in the case of the 
enterprise, and social indicators in the case of the customer and their 
family group (40 in total) . 
The survey was designed and conducted. Staff was trained and the program for 
the evaluation was installed in each MIP member institution. 
6. Two microenterprise development conferences held to disseminate Project 
achievements. 
In October 1997, the first "Conference on Salvadoran Microenterprise" took 
place. 
In October 1998, the second conference was organized in coordination with 
FOLADE, an international organization. Two hundred and fifty people from 
different countries attended the invitation. 
IV. EVALUATIONS AND AUDITS 
A. Status of Evaluations 
The evaluation of the Microenterprise Innovation Program was carried out by 
external evaluators Iris Villalobos Barahona, Ligia Orantes Aguirre and Erick 
Ulloa and submitted to the Mission in June 1998. It was based on the review 
of documents generated in the Project execution process and interviews with 
Project personnel and with the microlending institutions1 directors. The 
evaluation methodology was oriented towards measuring the level of 
fulfillment of the activities, components and the impact at the level of 
Project purpose and overall Project goal. 
Different weaknesses were pointed out in the evaluation. Each MIP director 
took measures regarding their institution. The general conclusion was that 
the purpose and overall goal proposed in the Cooperative Agreement were too 
broad in relation to the products generated by the Project. The Project has 
strengthened the institutions, allowing them to give better services but can 
not be precisely measured. Results are more qualitative than quantitative. 
The evaluator's recommendations were: 
1. Financing of a second stage of the MIP Project. Within this second 
stage, the priorities are considered the search for self-sustainability in 
the coordination process, the consolidation of the credit bureau database and 
the implementation of the results of the studies. 
2. In order to strengthen the leadership of the participating microlending 
institutions, the strategic component should be considered in future 
coordination efforts. The operative part should be delegated to the 
coordinator so that the MIP Board does not tire in investing energies and 
time in aspects, which could be assumed by the coordinator. 
A second stage of the Project was approved. A one-year follow-on financed 
under Activity 519-0435, Rural Financial Markets for the amount of $250,000 
is in progress (MIP 11). The Mission recommended concentrating efforts on 
the Credit Risk Bureau. Activities regarding the credit information systems 
and training and information interchange were also accepted but no more 
support was approved for research and studies or for the documentation 
center. 
Other than MIP 11, USAID/El Salvador will not take any further key actions or 
decisions based on the final evaluation findings and recommendations of 
Microenterprise Innovation Program (MIP, 940-0406). 
B. Audits 
CRS as a US PVO is subject to A-133 audits. Since the relation with the 
counterpart institutions is still ongoing under the follow-on, should any 
issue arise, it will be solved between CRS and USAID/ES accordingly. 
In February 1999, a financial review was performed by USAID/CONT of the funds 
provided to CRS under the Micro 2000 and MIP activities, upon request of the 
Project Manager. It covered the twelve-month period ended 12/31/98. There 
were some findings that CRS is already taking care of. For instance, the 
accumulated counterpart contribution shown on the final report submitted by 
CRS is already in accordance to adjustments made, taking into account the 
remarks obtained during the USAID financial review. 
V. SUMMARY OF KEY LESSONS LEARNED 
A. For a project to be funded by USAID/Washington and managed by USAID/E~ 
Salvador, communication and coordination between the two parties is one of 
the most important components. The responsibilities and oversight should be 
clearly defined. 
B. When different institutions will participate under the same project, each 
of them has to have a clear understanding of the purpose of the project and 
their participation. Institutions should share common interests and commit 
themselves to the fulfillment of the goals. Each member should feel a direct 
commitment to the project. 
C. Not all projects can be measured by the same indicators, specially when 
expected results are based on broad activities not well integrated and 
indicators are more on the financial area and very specific. Considering that 
many institutions were involved since the beginning, more focused and 
integrated activities were necessary. 
D. Adjustments or project reorientation for the achievement of planned goals 
and/or concentration of efforts in fewer areas could have led to obtaining 
better results in less time. 
The contractor's report reflect the following lessons learned: 
E. "The decision-making process related to different aspects of the project 
assumed by the MIP Board took place by consensus or by majority vote. This 
aspect allowed the appropriation of the project by its member partners, as 
well as the renovation of commitments to work on joint ventures." At the end 
of the three years, a better coordination had developed. 
F. "The tactical levels of the operation were the most systematized by the 
project and regulated by the Board by the means of its monthly meeting. A 
strategic level was taken during the last phase of the project, identifying 
priorities according to accumulated abilities and to common interest within 
its member partners." This exercise was very productive because the different 
institutions were able to express their perspectives and to suggest 
changes/reorientation of activities. 
G. "The institutional profiles were important during the development of 
confidence and institutional ties. On the other hand, the leadership of 
people involved in this coordination effort allowed a substantial and 
detailed decision-making process, allowing a full debate within a framework 
of respect for the game rules established." 
H. "Confidence within the partner institutions was achieved with some 
resistance when it involved the sharing of information related to the 
partners' operations." A good coordination and the development of trust are 
critical elements for the achievement of planned goals in this type of 
effort. 
I. "The assessments of the strategies should have taken place at least once 
every year in order to carry out further adjustments to the project taking 
into account both, the changing environment as well as the partners1 
satisfaction. The budget should have also been adjusted in order to 
emphasize strategic activities with greater impact." 
VI. RECOMMENDATIONS 
USAID concurs with the recommendations made by the external consultants, 
which are quoted as follows: 
A. "A relevant point to consider is that in the coordination process a 
diversity of institutions are presented, which represent a variety of 
approaches, methodologies and objectives for which it is fundamental to 
consider which are the common interest points of the members. The need for 
MIP to adapt itself more and more to the changes in surroundings and in the 
institutions is emphasized as a way of guaranteeing the level of interest of 
the participating institutions." 
B. "It is fundamental to give a more active decision-making role to the 
project coordinator, focusing the MIP Board's efforts towards a vision of 
strengthening the coordination process on the medium and long term. 
Responding to the changes in the surrounding context is visualized as a 
priority with the objective of maintaining the interest of the participating 
microlending institutions in the process. It is convenient to contemplate 
the possibility of negotiating some of the project components with the 
financing agency in order to be able to respond to the changes in context and 
the priorities of the microlending institutions." 
C. "Recommendations to improve the functioning of the MIP include the 
following: 
-Define the executive and operational role of MIP. 
-Strengthen commitments of the participating microlending institutions for 
the development of the project. 
-Design a strengthening strategy of the facilitating team of MIP. 
-Strengthen interchange and evaluation spaces of the MIP project members. 
-Review the operative structures of MIP and the implementation strategies 
according to the project components, seeking contemplation of the different 
program areas. " 
D. "Regarding the studies realized by the MIP Project, they are considered 
to be of a good technical level and contribute important elements to improve 
service to the clients. But it is important to point out that in order to 
achieve a greater impact, it is necessary to reinforce the dissemination of 
the study results and to design an implementation plan within each of the MIP 
microlending institutions. The MIP Board should give follow-up, so that the 
coordinating body is strengthened. Study results at the implementation level 
were limited." 
VII. POST-PROJECT MONITORING AND FOLLOW UP ACTIONS 
An additional year was granted to the MIP under Activity 519-0435, Rural 
Financial Markets, and regular monitoring will be performed during the life 
of this Activity. 
Drafted by: SLDuarte, SO1 Date: %-,7-00 
u:/econopub/docs/mippacr