The Big Business of Small Enterprises: Evaluation of the World Bank Group Experience with Targeted Support to Small and Medium-Size Enterprises, 2006-12 (Independent Evaluation Group Studies)

The World Bank Group promotes small and medium enterprise (SME) growth through both systemic and targeted interventions. Targeting means focusing benefits on one size-class of firms to the exclusion of others. Targeted support for SMEs is a big business for the World Bank Group, averaging around $3 billion a year in commitments, expenditures, and gross exposure over the 2006 12 period.In the context of broader reforms, such targeted support can be a powerful tool. Targeting SMEs is not an end in itself, but a means to create economies that can employ more people and create more opportunity for citizens to achieve prosperity. A thriving and growing SME sector is associated with rapidly growing economies.A central challenge is to level the economic playing field by ensuring dynamic markets; strengthening market-support institutions; and removing constraints to participation. IEG found that financial sector development can have both a pro-growth and propoor impact by alleviating SMEs' financing constraints, enabling new entry of firms and entrepreneurs and better resource allocation. Layered on top of this are targeted forms of assistance; these interventions may build on a foundation of more systemic reforms, may come in tandem with them, or may in fact be a means to build systemic reforms from the bottom up.Any credible justification of targeted support to SMEs must be focused on establishing well-functioning markets and institutions, not simply providing a temporary supply of benefits to a small group of firms during a project s lifespan. Thus, targeted interventions need to leverage resources to produce broader benefits for institutions and markets.To make targeted support for SMEs more effective, the World Bank Group needs to do several things: Clarify its approach to targeted support to SMEs. Enhance the support's relevance and additionality. Institute a tailored research agenda. Strengthen guidance and quality control for such support. Reform MIGA's Small Investment Program.