RECOMMENDATION 1: 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.
IFC's 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 M&E 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 M&E plan to help test new methodologies and learn about how best to measure outputs and impact. IFC Management will explore M&E 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 M&E, MIGA will build on and learn from IFC and IBRD/IDA initiatives. MIGA will also examine the M&E 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
Substantial progress has been made on action 1A through the completion of the approach paper as well as the continuing work of the SME Working Group to operationalize the approach. The endorsement of an action plan by management suggests the conditions exist for a harmonized approach.
It is unclear how much progress has been made towards the development of the corporate scorecard. While the statement indicates a draft exists, it is not clear how close this draft is to being approved by the various managers required for common WBG scorecard monitoring indicators. No Joint WBG Tier 2 Corporate Scorecard Indicator(s) exist.
Action 1C is presented as an un-resourced "struggle".
Action 1 A. In response to the need to establish a common WBG approach around SMEs a Bank-wide SME Working Group, comprised by representatives from Trade and Competitiveness (C), Finance and Markets (F;M), IFC's Financial Institutions Group (FIG), and the Cross-Cutting Advisory Solutions (CCAS) group of the IFC was constituted in FY15. Substantive progress was made in FY16 towards the operationalization of the Working Group. Among the actions undertaken, the Working Group approved and oversaw the implementation of SME Pilots. The objective of the project is to advance the World Bank Group's SME product offering by supporting task teams to design innovative and integrated solutions to support SME growth and productivity that draw upon the combined expertise and skills from the Working Group. Recognizing the importance of this mandate a corporate Global Engagement of $800,000 was made in FY 16 to support four innovative SME pilot projects in Pakistan, DRC, India and Kenya. To maintain a common approach, each pilot is been co-TTLed by joint teams and mentored by experts from different unit. Regular monthly updates contributed to provide learning across the various teams as well as the Working Group members.
Additionally, in FY16, Trade and Competitiveness GP led the development, with inputs from the F;M and the SME working group of the SME Growth and Productivity Action Plan (FY16-19) which provides the rationale for a revitalized approach to supporting World Bank Group programs for small and medium enterprises (SMEs) in client countries. The Action Plan consists of three main parts: I. The rationale for a new WBG approach to support productivity-led SME growth; II. A revitalized SME agenda to reposition the current portfolio; and III. A multiyear program of activities to strengthen the SME portfolio, sharpen diagnostics and research tools, and enhance the knowledge agenda through more effective internal and external partnerships.
This Action Plan was presented and endorsed by Management in January 2016.
Action 1B. The development of the corporate scorecard continues to be a work in progress. F;M Global Practice has been working with IFC to develop a set of common indicators, based on IFC indicators, which would help to more systematically capture learning from SMEs. This draft set of indicators has been presented and it is currently being reviewed by F;M management. Following their inputs, it will be shared more broadly with the other units within the WBG SME working group (IFC-FIG, C).
See attachments for more information.
Action 1C. The development of a SME Evaluation Framework indicator remains planned but teams are struggling with identifying dedicated resources to fund this. Some preliminary discussions with DIME are underway to explore whether DIME could finance the development of this work.
Unless DIME (or some alternative) funding can be secured for this expensive follow up -- it is uncertain whether we will be able to meet our obligations on this particular activity.
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 M;E framework was prepared, outlining a causal result chain and proposed standard indicators which can be used across WBG operations. Once finalized, the M;E 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.
Additional Information: See attachments