Tunisia's Lending Program to SMEs: Anatomy of an Institutional Failure?

Tunisia's Lending Program to SMEs: Anatomy of an Institutional Failure? This paper studies a case of what in many respects is an institutional failure. It is the popular lending program in Tunisia known as FOPRODI, created in 1974 for the promotion of small and medium manufacturing enterprises (SMEs) and for the decentralization of industry. FOPRODI's announced aim was to help new entrepreneurs with insufficient capital to start their businesses and thereby to create new jobs. Because of an extremely low repayment rate, the program has failed in the sense that it became unsustainable and indeed finally collapsed in 1997. While there are some bases for believing that FOPRODI may have been more successful than it might seem in social terms, at this point it seems to have been a failure. The sources of its institutional failure are traced to inappropriate incentives attributable both to the institutional structure surrounding FOPRODI and its own rules. The findings are then used to generate policy recommendations on ways in which similar programs could be better designed, transaction costs reduced and the outcomes obtained more satisfactory. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Tunisia's Lending Program to SMEs: Anatomy of an Institutional Failure?

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1023/A:1012282023692
Publisher site
See Article on Publisher Site

Abstract

This paper studies a case of what in many respects is an institutional failure. It is the popular lending program in Tunisia known as FOPRODI, created in 1974 for the promotion of small and medium manufacturing enterprises (SMEs) and for the decentralization of industry. FOPRODI's announced aim was to help new entrepreneurs with insufficient capital to start their businesses and thereby to create new jobs. Because of an extremely low repayment rate, the program has failed in the sense that it became unsustainable and indeed finally collapsed in 1997. While there are some bases for believing that FOPRODI may have been more successful than it might seem in social terms, at this point it seems to have been a failure. The sources of its institutional failure are traced to inappropriate incentives attributable both to the institutional structure surrounding FOPRODI and its own rules. The findings are then used to generate policy recommendations on ways in which similar programs could be better designed, transaction costs reduced and the outcomes obtained more satisfactory.

Journal

Small Business EconomicsSpringer Journals

Published: Oct 3, 2004

References

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