 Joint IDA-IFC MSME Program for Africa
Overview Africa's Private Sector Development department, IFC/Bank Small and Medium Enterprise Department, IFC Africa, and IFC Financial Markets developed a joint program that brings to bear the respective expertise and resources of each into an integrated approach to development of micro, small, and medium enterprises (MSMEs). This innovative approach will enable the World Bank Group to respond more effectively and holistically to African client countries’ growing demands for assistance to put MSMEs in the forefront of private sector-led growth and employment generation. Program descriptionThe joint IDA/IFC Program to support MSME development in selected Sub-Saharan African countries responds directly to the need to accelerate and promote pro-poor private sector growth and market development. It is a multi-country initiative that focuses explicitly on microenterprises and SMEs which, taken together, account for the vast majority of private sector activity in most African countries. T his initiative establishes a framework within which up to seven pilot country projects have been designed and are being implemented. The pilot Program will undergo a mid-term review, and if successful, will be replicated to other countries. The Program aims to increase the contributions of MSMEs to employment and national growth by supporting three complementary main pillars: (i) access to financial services; (ii) access to business development services, including strengthening inter-firm linkages (both domestic and foreign) and access to information; and (iii) improvements in the business environment for MSMEs. The components of individual country projects will depend on the country-specific circumstances and are detailed in the individual country Project Appraisal Documents approved by the Board. Specific goals are to: (i) increase the number of fully financially sustainable MFIs ; (ii) increase the size and profitability of MSME portfolios among selected financial institutions; (iii) establish several funds to provide risk capital investments to MSMEs; (iv) develop sustainable private BDS markets, through upgrading selected BDS providers and/or through demand-driven subsidies to MSMEs; and (v) reduce the cost to MSMEs of regulatory compliance, in particular the cost and time to register a business (one of the IDA triggers). Summary of Progress to date - All seven of the new IDA pilot projects ($280 million) are now approved and include Nigeria, Kenya, Uganda, Mali, Madagascar, Tanzania and Ghana. The 7-country IDA total is $280 million, more than double the original estimate of $130 million. Refer to the links below for the Project Appraisal Documents for the pilots that took place in the seven countries noted.
- Of the total IDA funding, access to finance accounts for about 20%, capacity building and business environment components account for about 35% each, and project management and M&E about 10%.
- As of January 2006, $8 million of directly linked IFC investments have been approved. In addition, there are nearly $80 million of potential/pipeline IFC investments.
- Also, to date nearly $50 million of ‘associated’ IFC investments have been committed and there are about a further $15 million of potential/pipeline associated investments.
- Innovative joint financing (IDA & IFC) has been developed as a result of the Program, including a SME risk capital fund (quasi-equity) as well as IDA-IFC Partial risk guarantee instruments
Specific IFC investments identified/tagged during design of the MSME program in each country, and where specific complementary IDA support has been allocated. These investments are not directly linked to the joint IDA/IFC program, but have been supported/facilitated by program preparation activities, and which are eligible to apply for IDA TA matching grant support. Related Links |
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