Improving Framework Conditions in the Private and Financial Sector in Mozambique

Project description

Title: ProEcon – Improving Framework Conditions in the Private and Financial Sector
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Mozambique
Lead executing agency: Ministério da Indústria e Comércio (MIC)
Overall term: 2010 to 2019

Context

Mozambique is still one of the world’s poorest countries. The majority of the population, 70 per cent of whom live in rural areas, have not benefited from the high growth rates of recent years. The income of more than half of the people is still below the national poverty line. Micro, small and medium-sized enterprises (MSMEs) are neither creating sufficient jobs nor providing the population with adequate goods and services to meet their daily needs. This is caused by a variety of factors, including excessive bureaucracy, corruption, insufficient infrastructure, inadequate services, especially in rural regions, and a desperate lack of entrepreneurial skills. There are virtually no financial services for SMEs in rural areas. Businesses are unable to expand and therefore unable to create jobs or income for the population. To combat poverty in Mozambique, impetus for development must therefore be created for MSMEs.

Objective

MSMEs are using better framework conditions for growth that benefits all sections of the population. Through inclusive growth driven by the private sector, employment in Mozambique is rising, incomes are increasing and poverty is on the decline.

Approach

The project focuses on three areas of activity:

  1. It is working with the Ministry of Industry and Trade and with provincial and municipal governments to improve the policy framework for SMEs.
  2. It is cooperating with the private sector to promote business models for SMEs that take into account disadvantaged population groups and micro enterprises.
  3. It is working with banks to improve the financial system, thus enabling SMEs to access financial services faster and more easily.

The project supports the Ministry of Industry and Trade, the Central Bank of Mozambique and selected municipalities. It advises and supports them in the creation and implementation of the national strategy to improve the business climate. Through training, workshops and organisational advice the partners in the Ministry, Central Bank and municipalities gain the knowledge and expertise required to implement the necessary reforms.

In development partnerships with the private sector, the project works with both national and international companies. Here, the partners integrate SMEs into agricultural value chains and the tourism sector as well as upstream and downstream commodities industries.

In the area of financial system development, new financial services are being developed and implemented for SMEs in rural areas through innovative sales models. The project advises the central bank on improvements in consumer protection and financial literacy.

The consulting firms AFC Consultants International/Akademie Deutscher Genossenschaften and Como/Mierke Investment support the implementation of the project.

Results

The project can build on results achieved in previous years. Working with the Ministry of Industry and Trade, the private sector and civil society, key reforms to improve the business climate have been identified and implemented.

The project has supported the simplification of business licensing at the national and provincial levels. The number of licensed business in Mozambique has risen by more than 37,000 since 2013. The process of granting construction permits has been simplified and piloted in eight municipalities.

Almost without exception, the companies participating in the 15 development partnerships have become more competitive. The successfully developed, inclusive business models can now be replicated and synergies harnessed between the various models.

In the area of financial system development, the legal foundations have been established for the creation of private credit information offices. The project has also encouraged the development of ties between savings and loan groups and banks, and fostered the creation of a network of agents for banks in order to secure formal financial services for those living in rural areas. As a result, more than 11,000 people in rural areas who have previously been excluded from the formal financial system, including over 7,500 women, now have access to financial services.