Diego had already shown that he had what it takes to be an entrepreneur. After losing his job as an accountant in Léon, Nicaragua, he started a bakery in his home and was soon employing six people. The bakery was a success, but Diego wanted to grow it further and to do that he needed financial assistance.   

Under a project financed by the World Bank Group, Diego won a competitive selection for a matching grant to buy new equipment. He also received training on using his accounts as a business management tool, and on how to reorganize his bakery to improve energy and technical efficiency. Diego dramatically increased productivity, doubling his staff from six to 12, while reducing work shifts to eight hours a day. He also expanded his product line, which especially pleased him since it created jobs for his wife and daughter.

The World Bank Group promotes the growth of small and medium size enterprises (SMEs) through both systemic interventions that work to level the playing field and targeted interventions that aim to deliver financing, training or other benefits to individual SMEs. In fact, targeted support for SMEs is a big business for the World Bank Group, worth an average of $3 billion annually in recent years.  

We know that financial sector development can have both a pro-growth and pro-poor impact, in part by disproportionally alleviating SMEs’ financing constraints. 

In Kenya, for instance, the World Bank and the International Finance Corporation (IFC) worked together to create a new market in equity investments for SMEs.  They helped the finance company get started, and seeing that it was profitable other companies soon followed, creating a whole new source of investment finance.

These interventions are clearly having an impact, but our evaluation also raised some key questions.

Achieving maximum Bank Group impact through targeting

Our evaluation found that, given the huge gap between what SMEs are estimated to need and the amount of aid that is provided, the only way to have a significant impact is to intervene in ways that permanently expand the supply of services, such as creating a new market for SME finance or providing training that can operate long after the project is complete. 

The Bank Group has more impact near the “frontier” – in less developed economies, and with client groups, such as women and people living rural areas, who are not adequately being served by existing markets. The IEG evaluation found that by building markets or addressing market failures, the Bank can make an enduring contribution to SME development.

What are the limitations?

Often interventions do not appear guided by a clear enough understanding of the specific challenges of local SMEs or a clear understanding of how to fix them.

Learning from experience is challenging. The evaluation found that the World Bank Group doesn’t collect enough information to know if its interventions are working to help SMEs or build markets.

Too often opportunities for collaboration are not exploited. Coordination among World Bank Group institutions could be improved with more frequent communication and shared strategic objectives.

Taking a different approach?

To better help the World Bank Group assist SMEs, IEG made a number of recommendations. Among them were to:  

  • Harmonize and clarify its approach to supporting SMEs. Targeted support should be firmly rooted in a clear understanding of how it will permanently remove the limitations affecting the SMEs' ability to contribute to employment, growth, and economic opportunity.
  • Enhance added value by shifting benefits from better-served firms and markets to frontier states, frontier regions, and underserved segments such as female-led SMEs.

The evaluation also uncovered some surprising findings:

  • Many projects that say they will help only SMEs don’t define what an SMEs is; require that benefits go to these enterprises; or monitor whether the SMEs actually received the benefits. 
  • The main advantage of Bank Group interventions is not for the SMEs directly served, but for the building of institutions and markets that can serve many more SMEs.

Do you work with, support or run a small or medium size business? We’d love to hear your thoughts.


Submitted by Carmen Gomez-Trigg on Tue, 04/01/2014 - 03:00

Andrew, this article clearly articulates my experience in the field. Too often, not enough attention is paid to the circumstances of a particular region, and a cookie cutter approach is used with the excuse, it worked this way in another country / continent, so it will work here as well. No, not so! As development professionals, we must study our target beneficiaries, as each country / region has its peculiar quirks. Collaboration with other group institutions would certainly help here. But is it just me, or do I detect a jostle for who should "own" the project and get the kudos if / when successful? Institutional rivalry, perhaps? With regard to the data collection, many times the persons setting the indicators, (the analyst, perhaps) have just a nodding acquaintance with M&E, and sometimes the indicators are superficial. How many times are the beneficiaries checked post project to actually determine the success of the initiative? Or do we take the reports of the institutions with which we liaise, without questioning? I could go on and on, but will stop here. It's just enough for me to reiterate that you report has resonated with me. The question remains....as an internal market failure, how do we correct this?

Submitted by Mario Martinez on Tue, 04/01/2014 - 04:19

Well, I have worked with SMEs development programs for over 10 years and have found that even with technical assistance going to beneficiaries the main issue is "quality" or effectiveness of the assistance provided. Also I have observed that there is no that huge demand for business development service -SMEs are not willing to pay 100% of assistance not even a small protion of the cost. These comments are based on my experience in El Salvador. In recent years I've seen a slightly improvement in demand for BDSs given an improvement in the quality of assistance.

Submitted by Ketan Mandani on Wed, 04/02/2014 - 01:02

I am a consultant - an Investment Advisor / Investment Banker and many SMEs approach me for funding requirements. Normally we guide them through local banks. What are the criteria / benchmark of funding to SMEs? which sectors are eligible for funding and what is the minimum & maximum amount / ticket size? How to approach world bank for SME financing? what are the terms of financing (tenure / Interest rates / profitability parameters required etc.)?

Submitted by Andrew H. W. Stone on Wed, 04/02/2014 - 07:09

Thank you very much for these comments. Carmen Gomez-Trigg -- thank you for confirming some of our observations based on your experience. Typically after a major evaluation, IEG agrees with the Management of the World Bank Group on actions to address the major recommendations a few months after the evaluation is issued, so efforts to address the identified problems will be committed to and monitored over the next three years. Mario Martinez -- thank you for sharing your experience in El Salvador. Certainly there are questions whether some services are "supply driven" or reflective of genuine demand by SMEs. And your point about quality is key. Ketan Mandani -- We are evaluators rather than service providers, but typically the World Bank Group works through intermediary institutions and does not directly finance individual SMEs. Thus eligibility for an IFC-funded private intermediary (e.g. a bank or equity investment fund), for example, would be specific to that instiution.

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Submitted by Thomas Tangeni… on Tue, 04/21/2015 - 02:29

I found this so helpful especially meeting the needs not only for an individual but nations world wide especially in the area of education (early childhood development) and agriculture (food production). I believed this will be helpful also for my country (Namibia) in the area of community project and small business interprises when it come to financial support. Thank you for making impact and changing the lives of many nations.

Submitted by Andrew Stone on Wed, 04/22/2015 - 06:56

In reply to by Thomas Tangeni…

Thank you for sharing the situation in Namibia. Certainly, a wide combination of factors affect the success of small enterprises, including education, linkages to key value chains such as agriculture, and the availability of essential financial and business services. As we note in the report, many of these challenges need to be approached systemically, and targeted programs need to focus on building sustainable systems that can provide services over the long term. IEG is currently discussing with World Bank Group management steps that can make its support to SMEs more strategic and effective, in accordance with the recommendations in our recent evaluation, "The Big Business of Small Enterprises."

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