Summary: A decade ago, the United States authorized enterprise funds as an experimental model to support private sector development in Central and Eastern Europe as those countries moved from centrally planned to market-oriented economies. The funds, which are private, nonprofit U.S. corporations, are supposed to make loans to, or investments in, small- and medium-sized businesses in which other financial institutions are reluctant to invest. With the breakup of the Soviet Union in 1991, enterprise funds were established in the newly independent states. Ten funds now operate in Central Europe and the former Soviet Union, covering 19 countries with authorized funding of about $1.3 billion. Enterprise funds receive their funding through the U.S. Agency for International Development (USAID), which has primary responsibility for monitoring the funds' operations. This report determines (1) whether enterprise funds are assisting private sector development; (2) what factors have affected the funds' ability to carry out their activities; (3) whether funds still have a role in private sector development, in light of other private investment and international donor efforts; (4) whether the funds are more likely to recoup their authorized capital; and (5) whether the funds are complying with recent changing in USAID's reporting requirements.
