Ecuador, located between two of the world’s leading producers of coca and cocaine, faced the threat of a rapidly growing illicit drug economy. Although Ecuador has sound agricultural production, its high rural poverty levels indicate a need for targeted rural economic development to mitigate the effects of the narcoeconomy.
To address these needs, ACDI/VOCA, under FHI 360’s Financial Integration, Economic Leveraging, Broad-Based Dissemination (FIELD-Support) Leader with Associates award, implemented the USAID-funded Local Business Development program (locally known as PRODEL, for Programa de Desarrollo Económico Local) to increase incomes and create employment for families along the northern and southern border areas by facilitating the expansion of private enterprises, and by strengthening local private producer groups and associations. The program recognized the importance of both private and public sector actors in overcoming obstacles to long-term growth such as physical isolation, lack of knowledge of end-market requirements, difficulty in accessing financing for working capital or investments, or difficulty in attaining economies of scale for profitable participation in value chains.
To achieve the program objectives, PRODEL used a value chain approach, identifying and addressing major opportunities and constraints to growth while ensuring sustainable impact at the household level. Specifically, the program targeted interventions at lead firms (or anchor firms) and the linkages within that anchor firm’s business system, reaching ultimately to microenterprises and their families. Program interventions addressed constraints to the anchor firm’s ability to grow while facilitating the growth of its suppliers and buyers, hence impacting the whole value chain.
PRODEL used its Enterprise Partnership Fund to provide technical and cofinancing assistance to anchor firms, tailored to their specific needs. The assistance packages included a combination of market development, financing, accounting, management assistance and skills training depending on the specific challenges facing each firm. PRODEL collaborated with banks, finance companies and microfinance institutions to facilitate the provision of additional credit to participating anchor firms and producer groups.
Due to PRODEL’s success, USAID awarded an extension in 2009 to continue program activities for an additional three years. The second phase of PRODEL focused on five key areas:
- Promoting anchor firm and value chain competitiveness
- Upgrading vertical and horizontal linkages
- Fostering the provision of financial services
- Expanding and transferring the value chain model
- Pulling in local service providers
PRODEL’s enterprise development strategy aimed to have a broad, sustainable impact in the target populations. The program generated new and more lucrative opportunities for families to develop their own businesses or obtain jobs within the legal sectors of the economy. Ultimately, PRODEL strived to foster a competitive private sector environment in Ecuador that stimulated and promoted employment and increased incomes in the northern and southern border regions to combat the effects of the expanding drug economy.