IFC, MIGA and the World Bank should harmonize their SME approaches and make clear the objectives and analytic justification for targeted SME support, how it relates to systemic reform, where it is appropriate, what main forms it will take and how it will be monitored and evaluated.
For countries where SME development is a priority, any targeted support should be firmly grounded in the Country Partnership Framework/strategy, the relevant parts of the Systematic Country Diagnostic based on country analytic work, and other instruments which provide an analytic and strategic framework that identifies the sequence and mix of systemic and targeted interventions that will address systemic challenges to SMEs, building markets and access to services. The specification of the target for TSME projects should relate to country-specific conditions and in some cases address small and medium firms differently based on how they experience existing country conditions. While recognizing the different business models across institutions, shared country strategies that leverage and sequence the expertise and comparative advantages of the WBG institutions should ensure complementarity, maximize impact and reduce the potential for redundancies and inconsistencies. Targeted support for SMEs needs to be firmly rooted in a clear, evidence-based understanding of how the proposed support will sustainably remove the problems that constrain SMEs' ability to contribute to employment, growth and economic opportunity.
The M&E framework should be designed to capture the effect of project interventions in these dimensions – at the beneficiary, client and broader market level. At both levels, information is needed to understand the counterfactual – what would have happened without the project. This means, where possible, a rigorous, fact-based approach that generates information on the baseline, the post-project period, and control group. A longer-term timeframe may be required to collect data to evaluate sustainability of impact.
The evaluation finds that, at present, many targeted projects as defined in the approach paper supporting this evaluation are weakly justified, are weakly focused on SMEs, and/or have limited potential for additionality. Contributing to the resolution of systemic economic constraints leveling the playing field -- hence to better functioning of markets and institutions would allow SMEs to realize their full potential for generating jobs and growth in developing economies. Systemic priorities also include establishing the legal, regulatory and institutional environment supporting a deep, competitive and stable financial sector, where financial institutions seek SMEs as clients. The scale of gaps identified for SME services, especially finance, dwarfs the direct benefits WBG can deliver, so targeted interventions need to be strategic, leveraging resources to produce broader, sustained benefits for institutions and markets.
Inconsistencies and limited coordination across WBG institutions result in missed opportunities for institutions to leverage each other. The lack of institutional consensus on what constitutes an SME, when it is appropriate to support them, and what constitutes success seems especially inappropriate as the World Bank Group moves towards global practices crossing traditional boundaries under a "One World Bank Group" model.
WBG: Agree. The introduction of Global Practices offers an opportunity to improve the harmonization of the SME approach across the WBG. Thus, the detailed actions that Management will take to achieve this goal will be determined once the new governance structure is in place.
In countries where SME development is a priority, the introduction of SCD/CPF process will also help identify constraints and opportunities at country level that could be addressed by targeted SME support, granting these interventions an evidence-based knowledge of how WBG support could help remove constraints that limit contribution to economic growth and job creation.
IFCs engagement with the Global Practices, as it updates its recent discussion document on SME stocktaking and new directions, can provide a forum for discussion of some of the key issues raised in the report.
With regard to monitoring and evaluation, both IFC and IBRD/IDA are strengthening ME frameworks for SME and related activities and are also working to harmonize monitoring indicators. Management will explore the potential for further coordination on evaluation of impact from SME support projects, bearing in mind that clients between the two entities can be different in nature.
One important IFC initiative already planned will be the Global SME Finance Facility ME plan to help test new methodologies and learn about how best to measure outputs and impact. IFC Management will explore ME efforts focused on intermediate outputs, but also reaching to enhanced evaluative approaches, and impact evaluations. It must be noted that a counter-factual approach will not be feasible in many cases and Management has to be selective on impact evaluations as they are very resource intensive.
MIGA will work with IFC and IBRD/IDA in harmonizing the WBG approach to SMEs and seek clarity in objectives and analytic justification for targeted SME support. With regard to ME, MIGA will build on and learn from IFC and IBRD/IDA initiatives. MIGA will also examine the ME framework for SMEs as part of its ongoing internal review of SIP. Together with IEG, MIGA will assess the programmatic evaluation approach used for SIP in the current evaluation and extract Lessons of Experience.
Action 1A: Define a WBG common approach and establish accountability for coordinating SME work across WBG.
Indicator: An Approach Paper developed jointly by relevant GPs, IFC and MIGA on coordination SME work.
Baseline: SME work program dispersed across multiple fragmented WBG units.
Target: Harmonized approach and objectives
Action 1B: Agree on common scorecard monitoring indicators across WBG.
Indicator: Joint WBG Tier 2 Corporate Scorecard indicator which covers SME finance.
Baseline: Separate WB and IFC MSME finance measurement and indicators.
Target: Introduction of a joint WBG Tier 2 Corporate Scorecard indicator which covers SME finance.
Action 1C: Develop a SME Evaluation framework
Indicator: Complete the SME evaluation framework
Baseline: Lack of a SME Evaluation Plan
Target: 4-5 Evaluations
IEG notes the progress on discussions across WBG and a draft working paper, which appear to reflect some progress towards the promised actions. However, none of the actions have been formally achieved and it is difficult to judge institutional commitment to a draft paper.
Action 1A: Finance and Markets GP, Trade and Competitiveness GP, IFC's Financial Institutions Group and IFC's Cross Cutting Advisory Services formed a Working Group in FY15 Q3 to take stock and develop a coordinated approach for SME support. A detailed Working Paper has been shared with the senior management of each of these respective groups and includes: (i) a common view of support to SMEs and provides an overview of the package of WBG activities tailored to support SMEs; (ii) identified ways to exploit untapped synergies across complementary products and expertise; and (iii) identified knowledge gaps based on a review of existing literature and a coordinated research and evaluation agenda.
In addition, Finance and Markets GP and the Financial Institutions Group have formed a second working group to examine the harmonization of pricing across Lines of Credit provided by the two institutions. This working group is expected to present its assessment and recommendations in the fall.
Action 1B: Initial discussions have taken place to complete a corporate scorecard. This is a work in progress.
Action 1C: As part of the WBG SME working group document, a draft ME framework was prepared, outlining a causal result chain and proposed standard indicators which can be used across WBG operations. Once finalized, the ME will be disseminated to task teams.
In addition, a list of topics for scaled up evaluation efforts has been prioritized by the Working Group. Some of these efforts are underway, and others will need to be championed by individual teams who will also need to secure funding for these efforts.
In sum, the initial building blocks for greater harmonization between the main WB and IFC contributors have been put in place, building on important preliminary analysis and strategizing/prioritization. FY16 will be focused on operationalizing these initial steps further through some country pilots. MIGA's involvement to date has been minimal and also needs to be increased.