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

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  • Bechri, Mohamed
  • Najah, Tijani
  • Nugent, Jeffrey B
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    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. Copyright 2001 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Small Business Economics.

    Volume (Year): 17 (2001)
    Issue (Month): 4 (December)
    Pages: 293-308

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    Handle: RePEc:kap:sbusec:v:17:y:2001:i:4:p:293-308

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