Context
Mozambique has been experiencing an economic boom for around ten years, but the population has benefited little. This is mainly because economic growth is primarily attributable to exports of raw materials, whereas the majority of the population works in the low-productivity informal sector and in agriculture.
In order to combat poverty in Mozambique, impetus for development must therefore be provided for micro, small and medium enterprises (MSME). Further challenges for the private sector include limited access to adequate financial services and a lack of trained personnel.
Objectives
The legal, political and institutional conditions for sustainable economic development are improved. The competitiveness of companies, particularly in rural areas, is enhanced.
Access and use of financial services, particularly in rural areas, are increased.
Inclusive economic growth, driven by the private sector, increases employment in Mozambique and leads to higher levels of income, thereby reducing poverty.
Approach
To ensure as broad an impact as possible, the project takes a multifaceted approach, focusing on three areas of activity:
Improving framework conditions at national and local level
Promoting local economic activity in rural areas
Supporting an inclusive financial sector, i.e. poorer population groups also gain access to formal financial services
By advising the Ministry of Industry and Commerce and the Mozambican Central Bank (Banco de Moçambique), the project helps improve the business climate. The project provides advice on the development of effective communication and monitoring instruments for implementing reforms both at national level and in the provinces. It also strengthens dialogue between public and private-sector actors.
In addition, the project focuses on promoting an inclusive financial sector. Through innovative sales models, such as mobile banking, financial services are becoming increasingly available in rural areas. The rural population and micro and small businesses are therefore able to expand their business activities.
Results achieved so far
80 per cent of the adopted Strategy for the Improvement of the Business Environment (EMAN I) had been implemented by 2012. Thanks to new legal conditions for simplified licensing and one-stop shops, companies and business start-ups can complete all necessary steps in just one day through a single trip to the authorities. The taxation of small businesses has also been simplified. This has already benefited 40,000 companies.
The World Bank’s latest Doing Business Report 2014 reflects this progress: in 2013 Mozambique rose from rank 146 to rank 139. A discernible improvement has been achieved, above all, in the category ‘cost of starting a business’. This is due, among other things, to simplified licensing and one-stop shops. To drive reforms forward, the Mozambican Government adopted a new Strategy for the Improvement of the Business Environment (EMAN II/2013–2016) in 2013.
Strengthened by better internal organisation, seven business associations supported by the project in Manica, Sofala and Inhambane are representing the interests of their members in public-private dialogue with the provincial authorities. In a survey conducted at the end of 2012, 62 per cent of association members said that they felt adequately represented by their association – a 40 per cent improvement compared to the initial value from the beginning of 2010.
The project has strengthened the capacity and performance of the Mozambican Central Bank with regard to the regulation and supervision of microfinance institutions. The joint development of manuals and guidelines for banking supervision was a key milestone on the path towards improving the framework conditions for a stable and inclusive financial sector. A new legal framework is currently being prepared for credit information agencies. This is expected to significantly improve access to affordable credit.
In recent years, the project has provided support to some 7,000 members of informal savings and credit groups, more than half of whom are women. In the current project phase, measures are being taken to integrate these groups into the formal financial sector. Initial projects aimed at integrating savings and credit groups through mobile banking are under way.