Washington October 21, 2002
—The International Finance Corporation (IFC), the private sector arm of the World Bank Group, announced the launch of the SouthAsia Enterprise Development Facility (SEDF). The new multidonor initiative will support the growth of small and medium enterprises (SMEs) in Bangladesh, northeast India, Nepal, and Bhutan.
This target region includes a population of 200 million and is one of the poorest in the world. It is home to about 200,000 registered private companies that often have poor growth prospects or opportunities to become more competitive due to a weak business environment and services sector, as well as limited access to long-term financing. These factors keep most local small and midsized businesses from reaching their business potential and thus limit their ability to create jobs and contribute further to poverty reduction.
“Our goal to help reduce this region’s persistent poverty by stimulating the profitability, growth and sustainability of its SMEs,” said Anil Sinha, SEDF general manager and a former manager of a similar IFC initiative for Vietnam, Cambodia, and Laos. “We will be working closely with a wide range of partners to help strengthen these firms’ competitiveness and productivity.”
SEDF will offer firms a broad array of support packages to help fill gaps they face in the local market. The facility will draw on IFC’s extensive experience with similar SME initiatives in other regions and access to business-friendly policy expertise as a member of the World Bank Group.
SEDF formally kicked off operations on October 20 in Bangladesh’s capital, Dhaka. Tom Davenport of the World Bank Group SME Department chaired the first strategy meeting, which was attended by representatives of SEDF’s existing donors (IFC and the development assistance agencies of the Netherlands and the United Kingdom) and other organizations considering additional funding.
About half of SEDF’s five-year budget of up to US$30 million is expected to be dedicated to support for businesses in Bangladesh. The country already has strong assistance to large companies and microenterprises, so SEDF will focus its attention on the “underserved middle.” It will target companies with assets of between $175,000 and $5 million. Rather than providing financing, the facility will work to build these access to local business advisory services and financing. SEDF will also work to improve the local business climate, where smaller businesses are constrained by weak corporate governance, and other legal, regulatory and financial issues.
SEDF’s support package is expected to focus on four broad areas:
Business Enabling Environment:
Working to ease the regulatory burden on SMEs; creating awareness about the benefits of good corporate governance through business associations or by assisting firms directly in providing transparent accounts, filing annual audited financial reports, and developing management structures; helping SMEs develop good environmental practices and social sustainability; improving cross border trade and sourcing of raw materials.
Capacity Building Services:
Building partnerships with local firms and training institutions such as universities, Internet portals and consultancies to deliver high quality training to SMEs on topics such as quality management and human resource management; working with local information technology (IT) providers to develop or adapt, train, and implement IT services in local companies; creating subsector-specific SME portals to provide electronic access to government regulations and enable business-to-business trade; developing partnerships with selected business associations to advocate changes in policies and legal framework.
Access to Financial Services:
working with private sector banks and nonbank financial institutions, such a leasing companies and equity firms, to increase their lending to SMEs; partnering with banks to develop new financial products targeting the needs of SMEs; assisting firms on a cost-sharing basis to improve diagnostics, financial planning, accounting systems, and purchasing and inventory management systems.
Special Projects:
developing firmer links in the local economy between SMEs and large corporations; providing technical assistance to improve sourcing of raw materials from local SMEs; providing services geared toward specific subsectors such as garment and agribusiness.
SEDF is the seventh IFC-managed SME facility, joining the Africa Project Development Facility, the African Management Services Company, the Mekong Project Development Facility, the China Project Development Facility, Southeast Europe Enterprise Development, and the South Pacific Project Facility. Managed by the SME Department (a joint imitative of IFC and the World Bank), together these facilities have approximately 330 field-based staff and a combined annual budget of $31 million. Cost-recovery is steadily rising through fees these facilities charge for their services.
IFC’s mission (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
