The World Bank Group's Review of Small Business Activities produced by its small and medium enterprise (SME) Department and released yesterday, shows that the group provided a total of $1,5 billion in SME support last year—$940 million from the World Bank itself and $540 million from IFC.

The review asserts that one of the most challenging limitations to SME growth in poor countries is the difficulty small businesses have in raising capital from formal sector financial institutions.

The report also emphasizes the need to build sustainable capacity. The SME Department and its partners like Latin America’s FUNDES have been working to make high-quality SME support services available, affordable and sustainable. In the past year the SME facilities have trained consultants or trainers, using various approaches to make the local consulting industry more small business-friendly.

Another key theme is to partner with unconventional stakeholders. Grassroots groups are being provided with expertise to build viable commercial income-generating businesses. In Cambodia, the Mekong Project Development Facility (MPDF) is helping the nonprofit Hagar Project spin off its traditional handicrafts business into a high value export-based registered company, Hagar Design. Similar approaches are being tried in India.

The report highlights work in Nigeria, Cambodia, and Mozambique. In Nigeria, the IFC is working to help the Manufacturers Association of Nigeria (MAN) become a stronger voice for policy reform and has established the Support and Training Entrepreneurship Program (STEP) for the informal sector. The African Project Development Facility (APDF) provided business plans which helped SMEs raise $1,8 million in financing.

In Cambodia, training and technical assistance by the Mekong Project Development Facility (MPDF) and an IFC-led investment package has helped ACLEDA, a former nongovernmental organization, to secure $2 million in financing and become a full-scale microfinance bank with 84 000 borrowers. The IFC is also using Australian trust funds to support a business-government-donor dialogue on proposed policy reforms to help improve the business environment. And in Mozambique, APDF supported a new SME Linkages and Empowerment Program around IFC’s single largest investment project, the $2,3 billion Mozal aluminum smelter, that has led to $4 million in new contracts for local SMEs.

The IFC now also provides $6,9 million a year to the five established multi-donor SME facilities it manages —up from $2,4 million only three years ago—plus another $7,1 million a year to its SME Capacity Building Facility, which supports small business pilots and partnerships. In fiscal year 2002, at least 90 percent of this $14 million in combined funding went to SMEs in IDA-eligible countries.

The SME Department supports IFC’s mobilization of donor resources in this area, launching a $5,6 million partnership with the Netherlands and working with other donors on similar arrangements. Seven new large company/small company linkage projects have also been established in frontier markets such as Chad and Mozambique - World Bank Group.