The Small Enterprise and Informal Sector Promotion project was implemented in Cambodia between May 1992 and December 1995. It was one of three projects in the UNDP-funded, ILO-executed Employment Generation Programme, which was itself part of the international community's response to the urgent need for social and economic rehabilitation after more than 20 years of war and civil strife.

The project aimed at contributing to Cambodia's long-term socio-economic development and raising the living standards of the disadvantaged, war-affected population groups. This was to be realized by promoting local economic development through the design and implementation of a programme of financial and non-financial services for micro and small enterprises. As such a programme did not exist, it had to be set up from scratch. Local Economic Development Agencies (LEDAs), which delivered the services, were eventually established in nine provinces, and to start with, district branch offices were set up. At the beginning of 1993, the LEDAs formed a national NGO, the Association of Cambodian LEDAs (ACLEDA), which became the project's counterpart organization.

A strategy was then developed and implemented, aiming at realizing a significant direct impact on services provided to enterprises and resulting in increased income and employment, as well as a high degree of sustainability of ACLEDA. Services consisted of a package of related elements, including business-training, credit, and counselling. Separate programmes were developed for micro and small enterprises.

The sustainability of ACLEDA was addressed comprehensively, based on the project's analysis of the four aspects of sustainability: organization, managerial, technical and financial. Key interventions included supporting ACLEDA in the development of a strategic plan, in which all its staff were involved, and the establishment and implementation of a schedule for transferring authorities from the project to ACLEDA. This schedule was the basis for planning other interventions, in organizational and human resources development.

During the project period, ACLEDA assisted some 10,000 clients. Income increases were realized in an average of 45 per cent in micro and 65 per cent in small businesses. Employment in small businesses increased by an average of 1.8 jobs, at a cost of US$126 per job. The cost of lending US$1 was about US$0.61, over the entire project period. The last year, 1995, saw an exponential growth in productivity and a decrease in costs, as a result of greater routine and standardization, and a reorientation of outputs and targets in terms of lending rather than an integrated package of services. This took place in the context of ACLEDA's strategic decision to work towards becoming a micro finance institution for the poor. Training and counselling did, however, remain key components of the programme, as ACLEDA judged them to be essential for the successful use of credit.

Increased productivity also came with ACLEDA setting full self-financing as a long-term goal. In terms of organizational, managerial and technical sustainability, much was achieved over the project period, and the project's largest investment was made in this area. ACLEDA had become a fully autonomous organization, which was highly respected by its clients, the Government and Cambodian NGOs, and international organizations. The project had been scaled back in size, and only played a limited advisory and technical assistance role, especially for programme development and expansion.

With regard to financial sustainability, during 1994, ACLEDA's income amounted to 18 per cent of its total costs. Projections indicated that some 50 per cent of self-financing could be realized if the then current trends continued. This was not acceptable to ACLEDA management which, supported by the project, set in motion a process of reorientation towards micro finance services as the heart of the programme, and set full self-financing as a long-term goal. This goal was achieved in 2000. A follow-up project supported the transformation of ACLEDA into a commercial bank targeting micro and small enterprises. ACLEDA Bank Ltd. is a profitable enterprise. With 49 offices and more than 60,000 active clients it is by far the largest microfinance institution in Cambodia. External management support and technical assistance have been phased out, except such consultancy services as ACLEDA decides to buy itself. Sustainability has therefore been reached in all respects.

The most important lesson that may be learned from the Small Enterprise and Informal Sector Promotion project stems from its choice to develop and implement a strategy which addressed issues of institutionalization and sustainability from the very inception. In spite of the urgency of realizing an immediate impact, sustainability was not seen as a secondary issue, but was placed right at the heart of the project's strategy. The programme thus never actually functioned as a project, but operated from the start as a (nascent) organization. By ACLEDA's realization of a high degree of autonomy and sustainability in a short period of time, the project has demonstrated the feasibility and appropriateness of this approach.

The most important factor in post-war situations, where considerations of a quick impact are often uppermost in the minds of donors and politicians, is that the project was still able to assist large numbers of enterprises. The project has demonstrated that the objectives of immediate impact and sustainability can well be combined, if they are considered as two mutually reinforcing aspects of project interventions.

The project's approach towards institutionalization has been comprehensive, by addressing all aspects of sustainability. Interventions were designed and implemented to address all ACLEDA's needs as an organization, including in areas which had very little to do with enterprise development. The project and ACLEDA have demonstrated that this is a relevant approach. Projects which aim at the sustainability of an enterprise development programme should include thorough organizational audits, followed by a comprehensive programme of capacity building and organizational development.