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NEWS ABOUT WORLD BANK GROUP SMALL AND MEDIUM ENTERPRISE INITIATIVES

I Vol. 1, No. 4 JULY 2000

Support for Small Business

IFC-Managed SME Facilities

I: B-REF echnical assistancefrom project development

- i facilities managed by the InternationalThro'gh 'isre fspcaie MEfclte

around ',' the world, ,'c a'ui it, p;. @rtner t 5,, 5. Finance Corporation (IFC) has been a major assetprovide local E -nrprenezirs wiktecmical to small businesses around the world. These

assistance needed to build commerciasly viable facilities typically operate in low-income countries

:.business-es. These facilities lp entrepreners with underdeveloped private sectors. They play a

attract necessaryfInancingfortheir venture; _useful role, both in helping SMEs directly and inp in -.rc g : wi pot to de creating local capacity to give them the technical

self -sutaining enterprises, generate and financial support they need. These facilities

-< - - .-- : --- - - - emplouyinen-.nces-klsg "shmLate: --eIn --- :--- skillst , and;.> stimulate also contribute by working with the World Bank-export earnigs. But theyu alsoproideother-;

t. a_ to improve local business climates that can be

research, and woSrk'-t. the Wor'd Bank to ' --. 'especially difficult for SMEs.

fame, and pro mote, p olicy eoita aimpre the loa sn l AFRICA PROJECT

DEVELOPMENT FACILIT'FIVeL regioanalfaclte r o noeain

with moree cd on e omi he Africa Project Development Facility

--.-.year, All are commiteto mkig theig r Se ME T(APDF) helps meet one of the continent'swork follow aodkto most important goals: greater job creation. It

others to ~~~~~does so by helping small business owners raise-:- -strengthen7ing theirrole int poertyredction. .- financing and improve their competitiveness

in the global marketplace.

Set up in 1986, APDF is a joint venture ofis a pub1icatio~ o~ the IFC, the African Development Bank (AfDB),

and the United Nations DevelopmentSMEiYeiirfm~~~~~~~~~nt~~~ Programme (UNDP). ]IFC is the executing

agency responsible for managing the facility,Harnid Roeen with the AfDB acting as the regional sponsor.

APDF draws on the support of 15 donorFor Informatio-, countries to finance operations in 34FC t I LE C P YSub-Saharan countries, and has assisted

~<Rbwiz i i more than 240 projects, leading to $546 million

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IFC-Managed SME FacilitiesORGANIZATION OFFICES IN COUNTRIES SERVED STARTED DONORS

Africa Project Abidjan, Accra, Harare Sub-Saharan Africa 1986 AfDB, IFC, UNDP, Belgium, Canada, Denmark,Development Johannesburg, Finland, France, Germany, Italy, Japan,Facility Nairobi Netherlands, Norway, Sweden, Switzerland,

United Kingdom, USA

African Management Accra, Amsterdam Sub-Saharan Africa 1989 AfDB, IFC, UNDP, World Bank, Belgium,Services Co. (AMSCO) Harare, Nairobi Denmark, France, Finland, Germany, Italy,

Netherlands, Portugal, Sweden,Switzerland, United Kingdom, USA

South Pacific Port Moresby Fiji, Kiribati, Marshall Islands, 1990 Australia, Fiji, Japan, Kiribati,Project Facility Sydney Federated States of Micronesia, New Zealand, Samoa

Palau, Papua New Guinea, Samoa,Solomon Islands, Tonga, Vanuatu

Mekong Project Hanoi, Ho Chi Minh City Cambodia, Lao PDR, 1997 EU, IFC, Australia, Finland, Japan, Norway,Development Facility Phnom Penh, Vientiane Vietnam Sweden, Switzerland, United Kingdom

Balkans Enterprise Banja Luka, Sarajevo Albania, Bosnia, Kosovo, 2000 To be announcedFacility Skopje, Tirana FYR Macedonia

Private Enterprise Kiev, Minsk, Moscow, Armenia, Belarus, Georgia, 2000 Canada, Denmark, Finland, Japan,Partnership Tbilisi, Yerevan Russia, Ukraine Netherlands, Norway, Sweden, UK, USA

United Kingdom, USA

N/A = Not available

in investments. Many were done in close collaboration In Ghana, for example, Fay International Limited,with the African Management Services Co. (AMSCO), a woman-sponsored firm manufacturing hygieneanother joint initiative of IFC, the AfDB, and UNDP products, sought APDF assistance in securing loansthat provides contract managers and customized needed to buy new machinery and move to a largertraining services. factory. APDF's support helped the company receive

$450,000 in loans from a U.S.-based health careAPDF contributes to private sector development in financier and a local bank. As a result, Fay Internationalmany ways. Among them: was able to preserve 31 jobs and to continue working

toward its primary goal of improving health and* helping entrepreneurs turn their ideas into viable hygiene among Ghana's women.business plans that can obtain local or foreign financing

In South Africa, Newave is a start-up joint venture* giving small firms the guidance and, in some cases, between two local printers and a Danish partner thataccess to consultants and technical and managerial will provide state-of-the-art printing and documentservices needed to bring projects into full operation management services. It will use the Intemet to allow

customers to order online, and will also provideassisting with management information systems, print-on-demand services. APDF helped the company

human resources development and team-building obtain a major portion of its funding from a localneeds financial institution, MseleNedventures, resulting in

creation of 23 jobs and considerable technology* being a catalyst in the privatization process by transfer.helping African entrepreneurs interested in acquiringlocal state-owned enterprises 1 Agribusiness:

kESESESES '0 l E:A vital industry* strengthening local consulting companies by using fo Africa.their professionals on APDF projects businesses like

this poultry farmIn 1999 APDF had its most successful year, securing in Zimbambwefinancing for 44 investment projects representing total often needinvestment costs of about $50 million. The industries outside helpsupported ranged from fish farming to Internet services to grow.to toothpaste production. Each brought a needed boostto the local economy

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PRIVATE ENTERPRISE PARTNERSHIP

W ith strong support from donors, IFC has attracting more foreign direct investment. To meetprovided $87 million of technical assistance to these challenges, IFC's technical assistance program

private enterprises in Armenia, Belarus, Russia, and needs more stable funding and a more permanentUkraine since 1991. This work has led to creation of structure. In recognition of these needs, IFC hasreplicable models and establishment of unique partner- recently consolidated its assistance under the new nameships among donors, local officials, and enterprises. of the Private Enterprise Partnership, to be fundedSome of the most significant results include: jointly from its own resources and those of donors.

* transfer of nearly two million workers to the private This work will include a broad range of advisorysector activities related to the twin goals of supporting SMEs

and microenteprises and attracting foreign direct* creation of more than 140,000 small businesses investment. Included will be privatization andthrough fair and open auctions of state-owned property post-privatization work; project development facilitiesin Belarus, Russia, and Ukraine, notably that of the pri- and business advisory services; and foreign investmentvatized trucking sector, which has spun off hundreds advisory service. As with other recent efforts, newof small transport businesses technical assistance projects will be developed with

widespread public participation at the national and* privatization of 3,100 large enterprises through local levels. Initiatives will continue to focus onvoucher auctions in Russia and Ukraine identifying a problem, locating a region receptive to

assistance and reform, introducing a pilot project, and

* privatization of 650 state farms in 19 regions of then implementing it.Russia, involving 300,000 farm members and twomillion hectares of land Activities along these lines to date have included

privatizing small, medium, and large companies and* establishment of five organizations in Russia that farms, opening business support centers, reorganizingprovide advice and training in land reform, and that farms, and providing advice to central and local gov-are reorganizing an estimated 160 farms a year ernments. Contributing to the initiative's success has

been IFC's long-term presence in the region and its* establishment of programs in manager training relationships with local business people and govern-and corporate governance. ments. Another critical factor has been the collaboration

of local staff, who combine technical expertise withDespite these initial successes, important challenges understanding of the region, with outside experts whoremain for technical assistance-providers in this region. bring significant private sector experience. TheseThey include strengthening and consolidating privati- factors will continue to play an important role in thezation, developing transparent business practices, and challenging years ahead.

SOUTH PACIFIC PROJECT FACILITY

E stablished by IFC in 1990, the South Pacific Project feasibility and market studies to assess the viabilityLFacility (SPPF) supports development of viable of business proposalssmall and medium-sized private sector businesses inthe Pacific Island countries. It has been active in Fiji, * negotiating debt and equity finance for SMEs on the

Kiribati, the Marshall Islands, the Federated States of best available termsMicronesia, Palau, Papua New Guinea, Samoa, theSolomon Islands, Tonga, and Vanuatu. * identifying clients' technical and managerial require-

ments and, if required, sourcing technical partnersThe real benefit of SPPF's work comes in helpingentrepreneurs build successful businesses with new * assisting in selection of business partners andmanagerial skills. This comes through provision of a investorsrange of services, including:

* advising on buy-outs of foreign shareholders* evaluating business concepts on an objective, and state-owned enterprisesconfidential basis

* advising governments on privatization of public* developing business plans and, where appropriate, sector enterprises and other private sector initiatives. 3engaging expert technical advisers to carry out

MEKONG PROJECT DEVELOPMENT FACILITY

Launched in 1997, the Mekong Project MPDF also is active in non-investment operations,Development Facility (MPDF) works in Vietnam, raising the awareness of the Vietnamese government,

Cambodia, and the Lao People's Democratic donors, and the public about the importance of theRepublic. It promotes development of the formal domestic private sector. One way it does so is byprivate sector in these three countries by: promoting positive business role models through the

sharing of success stories of the entrepreneurs it has* providing viable SMEs with improved access helped.to long-term capital and technical and managerialassistance MPDF-sponsored training in management practices

also helps build Vietnam's emerging private businesses.* promoting partnerships among local firms and The facility currently organizes management trainingfinancial, technical, and domestic partners at home for local entrepreneurs on a full cost-recovery basis ator abroad business schools in Hanoi and Ho Chi Minh City. Since

July 1999, 574 people have taken these courses.* helping improve the local business environment.

Other current objectives ranking high on MPDF'sA good example of MPDF's contribution on the agenda include:investment side is its recent work with Thai Hoa, atea firm located 85 kilometers north of Hanoi that was * bolstering local lending capacity by providinglaunched in 1997. The company came to MPDF with specialized training to local private commercial banksa goal of increasing its exports from 2,000 to 3,000 tonsper year. MPDF support helped it install an additional * establishing the first regional SME fundprocessing line as well as a fiber extractor for asecondary plant, leading to employment for 110 work- * expanding existing programs in managementers. The project is expected to generate 45 additional training, with special initiatives for the tourismjobs in the future, mostly for women. The improved and garment manufacturing sectors and in distanceproduction capacity is also helping Thai Hoa charge learning.higher prices for a higher-quality product.

BALKANS ENTERPRISE FACILITYJn the summer of 2000 IFC established the Balkans * preparing, structuring, implementing, andlEnterprise Facility (BEF) to serve Albania, Bosnia monitoring investment projectsand Herzegovina, Kosovo, and FYR Macedonia. It will * helping with privatization of selected firms andhave offices in Banja Luka, Sarajevo, Skopje, and introducing high standards of corporate governanceTirana, and will establish a Kosovo office if needed.

* upgrading environment, safety, and energy efficiencyThe facility is expected to have a five-year life. Its standards in companies supported by the facilitydesign draws heavily on IFC's experiences withprivate sector investment in the Balkans, as well as its * helping SMEs access available financing sourcesexperiences managing and supporting project develop-ment and related facilities in other regions. BEF will * promoting new SME financing initiatives.contribute to other multinational initiatives alreadyunderway in the Balkans and will play an important The facility will develop local managerial, consultant,role in promoting reconstruction in the region. and related service capacities, paying particular

attention to environment and gender issues. It willBalkan SMEs not only lack access to capital, but have promote opportunities to involve private-sector servicealso displayed only limited abilities to use what capital providers in those efforts where feasible. BEF will alsoand other imputs are available to them efficiently. New advocate key reforms in areas such as property rights,financial products and, in some instances, improved collateral and mortgages, corporate governance, laboraccess to medium and long-term capital will be helpful. relations, and business registration and reportingKey objectives for BEF include: procedures.

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