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Creating Opportunities
for Small Business
IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing
private sector investment, mobilizing private capital in local and international financial markets, and providing
advisory and risk mitigation services to businesses and governments. IFC’s vision is that poor people have the
opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an
additional $3.9 billion through loan participation and structured finance for 299 investments in 69 developing
countries. IFC also provided advisory services in 97 countries. For more information, visit www.ifc.org.
Creating Opportunities
for Small Business
Table of Contents
2 Foreword
3 Approach
5 IFC and SMEs
7 Improving the Business Environment
11 Improving Access to Finance
15 Providing Access to Markets,
Business Skills, and Information
19 Creating New Opportunities
Through Innovation
21 Measuring Results
22 Frequently Asked Questions
23 Contact Details
24 Donor Partners
Creating Opportunities for Small Business 1
Foreword
IFC’s vision is for people in emerging markets to have opportunities IFC plays a catalytic and innovative role in developing small
to escape poverty and improve their lives. This vision drives all of businesses. We can tap the policy experience of the World Bank
our work to develop the private sector. These efforts range from and mobilize the resources of a wide range of partners, including
investing directly in businesses, to mobilizing private financing governments, other multilateral and bilateral agencies, academic
from other investors, to advising companies, governments, and institutions, foundations, nongovernmental and civil society
other stakeholders in private enterprises. organizations, as well as our client companies.
In most countries and regions where IFC works, small This report illustrates some of the strategic methods IFC
businesses generate the largest share of economic activity and employs to help SMEs. The larger framework includes broad
employment. Starting and expanding a small business is one of interventions to strengthen and improve the business environment
the most promising and sustainable routes out of poverty for as well as enhancements to the financial system that expand access
many millions of people. These entrepreneurs, and the people to credit. We have programs to improve business skills, enhance
they hire, stand a better chance of providing for their families, access to markets, and encourage competitiveness. We pursue these
sending their children to school, and leading a healthier life. A programs at a wholesale level, working with intermediaries that can
vibrant small business sector also creates choices for consumers provide information, training, and services to the broad business
and generates tax revenue that in turn improves public services. sector. This approach enables us to achieve a broader reach and
When I meet small business clients, I am struck by their drive increase the efficiency of our engagements. Where needed, however,
and the impact that they have on their communities. Because IFC can also provide more targeted assistance to specific, strategic
the benefits of small and medium enterprises (SMEs) are so far- sectors, so we can learn what works before launching a larger effort.
reaching and powerful, we are targeting them as one of the most IFC’s work with SMEs has accelerated steadily since 2000,
effective channels to help poor people in developing countries. both through our advisory programs and our investments in
Our vision is broad, but so are the challenges. Poverty banks, leasing companies, other financial intermediaries that on-
remains widespread, and the financing to fuel the growth lend to smaller businesses, and private equity funds with hands-
of smaller enterprises is often out of reach. Frequently, the on managers who add value by applying lessons from experience
business environment is confusing, with regulations posing and technology, not just capital. We refer continually to our
numerous and costly hurdles to start, register, or operate a strategy and work to ensure that the essential building blocks
business. Women and other underrepresented groups still face of private sector development are in place, especially a business
many barriers that exclude them from participating fully in enabling environment and access to finance.
their local economy. We have seen some encouraging results. In Lima, Peru, for
example, IFC worked with the municipality to reduce the time
to register a new business from two months to about six days.
As a result, in 2006, 8,500 new businesses were registered in the
city, a more than fivefold increase over 2005. Each year we ask
the banks to which we lend about their small business clients.
In 2006, 180 of these financial institutions disbursed $96
billion via 8.8 million loans to small businesses. This lending
is growing rapidly: overall, for institutions that reported in both
2005 and 2006, the volume of small loans grew 72 percent.
IFC’s work — including our efforts to measure results —
is about ensuring that private capital is put to work for the
benefit of people. This report not only points out what needs to
be done in developing countries, but also shows the many results
that have been achieved. Our work in helping SMEs achieve their
potential is steadily transforming from a long-term objective to a
solid accomplishment.
Lars Thunell congratulates the Mayor of Metropolitan Municipality of Lima, Lars H. Thunell
Dr. Luis Castañeda Lossio, on the city’s business registration simplification program. Executive Vice President and CEO, IFC
2 Creating Opportunities for Small Business
Introduction
In market economies, formal The practical consequences of an environment that treats
and informal, small and SMEs fairly is that more young people find jobs; women and
medium enterprises (SMEs) other underrepresented groups in developing countries can
account for more than 90 participate economically; rural and indigenous communities
percent of all enterprises. are better integrated into the modern global economy;
Typically, well over half the entrepreneurs have access to financing and better business skills
working population, especially and tools; and households, including the poorest, have better
poorer people, rely on SMEs choices when they shop for goods and services.
for employment and income.
In addition, SMEs play a major
role in serving the $5 trillion
market for goods and services to the 4 billion people at the
base of the economic pyramid. Michael Klein
Firms that start small but do a good job of responding to Vice President, Financial and
market demands become larger. With scale comes productivity, Private Sector Development
bringing better salaries for workers. Larger firms tend to thrive Chief Economist, IFC
for a longer period than smaller ones. The challenge, then, is
to create an environment in which new entrants with drive and
good ideas can get started in business, and good firms can grow.
Economic progress is associated with increasing average firm
size — a healthy, vibrant ecology of firms is needed, with firms
of all sizes participating.
In many emerging markets, small entrepreneurs face
substantial barriers to entering the market and competing.
As the World Bank Group’s Doing Business project
documents, the time and cost associated with starting a
business, registering property, or getting credit are onerous
in many developing countries. These barriers drive many
would-be entrepreneurs into the informal sector, where their
chances of expanding their businesses are more limited, and
their employees miss out on the protections and benefits of
formal employment.
In many developing countries, too, well-connected large firms
dominate, insulated by government patronage. Productivity
suffers as a result, and income growth is stunted: in large firms,
because they are sheltered from competition, and in small firms,
because they are held back. Effective competition — that is, the
ability of firms to enter, grow, and challenge incumbents on a
reasonably equal playing field — is essential for progress. By the
same token, failing incumbents must be able to exit quickly;
they should not be subsidized to the detriment of new, better,
and more innovative firms.
The objective of any program of SME support, therefore,
should not be to reward firms that happen to be small. Rather,
the objective is to ensure a functioning ecology of firms, in
which new ones can emerge, existing ones can grow, and large
and small ones can contract and work together. This objective
guides IFC in the design and implementation of its advisory
and investment programs targeted at SMEs.
Creating Opportunities for Small Business 3
I N T R O D U C T I O N
Supporting small and medium enterprises (SMEs) is a key factor to alleviating
poverty. To help countries spark sustainable growth in this vital area, IFC works with
other groups to assist entrepreneurs, drawing on both its investment and advisory
experience and the World Bank Group’s expertise. In addition, to monitor and gauge
the success of its interventions, IFC consistently measures and evaluates its programs.
The latest methodology is employed and the evaluation approach is constantly
benchmarked against leaders in the field.
Our work with SMEs falls into four broad themes:
1. Improving the business 2. Improving access to finance
environment
A significant barrier to the growth of SMEs in
IFC works with policy makers and other many developing countries is a lack of access
stakeholders to improve the business to affordable credit. IFC provides financing
environment, infrastructure, and financial and advice to banks and other lenders that
systems to help small businesses grow assist SMEs, and supports programs that
and prosper. target underserved markets and populations,
such as women in business.
3. Improving access to markets, 4. Creating new opportunities
business skills, and information through innovation
Working through intermediaries, IFC helps Unmet needs in the market provide
SMEs acquire the skills and services they opportunities for innovation. IFC is involved
need when dealing with local and in crafting and testing new products and
international regulations and markets to services, and then transferring these
achieve prosperity. Using intermediaries innovations to those who can deliver
allows IFC to achieve scale and thus reach solutions for underserved SMEs.
more small businesses.
4 Creating Opportunities for Small Business
I F C A N D S M E s
Support for SMEs includes financial investments and advisory services projects that provide information and
training. As at July 2007, investment-related support for SMEs includes almost $7.5 billion invested in more
than 600 projects.
189
780
Volume of SME Related Investments by Region
1729
(Disbursements $ million)
1229
Central and Eastern Europe
Latin America and Caribbean
South Asia
Sub-Saharan Africa
689
East Asia and Pacific
Middle East and North Africa 849
Southern Europe and Central Asia
582
World
1447
As at July 2007, SME-related advisory projects numbered over 1000, with a cumulative value in excess of $680 million.
Each of these projects has been working to benefit numerous SMEs, either directly or indirectly, in areas such as better
access to finance or improving the business environment.
120
Dollar Value of SME Related Advisory Projects by Region
Total Funding as of July 31, 2007 ($, millions) 182
Central and Eastern Europe
Latin America and Caribbean 81
South Asia
Sub-Saharan Africa
East Asia and Pacific
63
Middle East and North Africa
Southern Europe and Central Asia
World 108
64
24 41
More than one-third of SME-related advisory services spending specifically targets “frontier countries”— that is,
low-income countries or countries rated high risk by investors and to which private capital flows are limited.
Dollar Value of SME Related Advisory Projects
in Frontier Countries
Total Funding as of July 31, 2007 ($, millions) 265 251
Frontier
Non-Frontier
Regional Projects
166
Creating Opportunities for Small Business 5
Improving the Business Environment
S mall firms face more obstacles than large firms and are not
as well equipped to overcome them. The greatest challenges
that small businesses face are obtaining financing and meeting
Understanding and simplifying regulatory
obstacles—The Doing Business Report
onerous regulatory mandates. Corruption and crime also IFC’s annual Doing Business report provides quantitative analyses
adversely affect small businesses. of business regulation and documents improvements in surveyed
To identify challenges in the business environment of a countries over time. The report ranks the ease of doing business in
178 countries. The database indicators can be used to analyze
specific country or region, IFC assesses the investment climate;
specific regulations that enhance or constrain investment,
surveys SME policies; and collates data on regulatory burdens,
productivity, and growth.
transaction costs, governance, and productivity. IFC then
Doing Business has shown that poorer countries impose
makes specific recommendations — often in collaboration with heavier regulatory burdens than wealthier countries. Burdensome
other agencies of the World Bank Group — to improve the regulations and weak property rights prevent poor people from
business environment for SMEs. entering the business sector. Reports have also shown, however,
IFC’s work tends to focus specifically on the cost of setting that the benefits of reform are quite substantial, which gives
up and running a business and includes regulatory simplification IFC and its partners the incentive to continue the push for such
(for example, business registration, licensing, taxation, collateral, reform. Since its launch in 2004, the report has been credited
access to land, and trade facilitation), alternative dispute with inspiring more than 100 reforms around the world.
resolution, and investment policy and promotion.
Case Study: Making it easier to start and register a
business in Lima, Peru
Obtaining an operating license to start a business was a highly
bureaucratic process in Peru, accounting for more than 60 percent
of the time it took to legally register a firm.
In January 2006, IFC worked with the central district in the city
of Lima to streamline business licensing.
Results
• In the first year after the reform was introduced, the municipality
registered more than 8,500 small businesses, more than in the
previous five years combined.
• The time to obtain a license was reduced from two months to six days.
• The number of inspections was reduced from five to one.
Improving the Business Environment
• License costs for small firms were cut in half.
Because of the increase in informal economic activities in Lima, simplifying administrative procedures was
an urgent priority to enable all entrepreneurs to have easier access to formalization and to generate
formal employment in this economically important city.
— Dr. Luis Castañeda Lossio, mayor of the Metropolitan Municipality of Lima
Creating Opportunities for Small Business 7
Improving the
Business Environment
Regulatory Reform Alternative Dispute Resolution
Establishing business forums and other stakeholder groups For a small business, resolving a commercial dispute quickly and
enables the private sector to play a more active role in fairly can mean the difference between growth and going out of
influencing policy and legislative reform. In addition, such business. In southern Europe, for instance, resolving a commercial
engagement helps governments identify problems in the dispute can take up to 500 days. Such delays cost time and money
investment climate and design workable policy solutions to that businesses could use to run their operations.
improve the business environment. Involving the private sector The Alternative Dispute Resolution Program focuses on
at the start makes policy reforms easier to implement. mediation rather than lawsuits to resolve commercial disputes.
A neutral third party (the mediator) helps the disputing parties
to negotiate a solution. Because the agreement is negotiated, it
can be more creative than a court-imposed judgment, and thus
Case Study: Working
is more likely to result in a win-win resolution.
with the private
sector in Tajikistan to
lobby government for
a more transparent
business inspection
process
Malika Kalandarova is a small-business owner in
Dushanbe. Since her mini-market opened in the Tajik
capital two years ago, it has undergone numerous
inspections by various authorities — almost all of
which ended with unofficial payments.
It was easier for me just to pay, because of my
own lack of legal knowledge…. None of the
inspectors provided me with information
about the inspection procedure or my rights.
— Malika Kalandarova
In Tajikistan, a typical entrepreneur endured more
than a dozen inspections in 2005, at a cost of
approximately seven business days and 9 percent of
Saving small businesses time and money through mediation
annual profits in fines and unofficial payments.
Using mediation to resolve disputes has benefited companies
In discussions, entrepreneurs, business
throughout southern Europe. Since its introduction in late 2003,
associations, inspecting agencies, government the Alternative Dispute Resolution Program is credited with the
officials, and donors voiced their views about following achievements:
the inspection process. • Nine mediation centers have been established in Bosnia and
Herzegovina, the former Yugoslav Republic of Macedonia,
The Results and Serbia and Montenegro
• The discussions resulted in widespread • Sixty-two trained mediators have resolved more than 2,700 cases
agreement on the need for reform and • $60 million in assets have been released
defined the key areas to be addressed. Because of its success, the program is being replicated across
Improving the Business Environment
• A new law on inspections was adopted in July 2006. the region.
• The new inspections law will free up more than
All four of the disputes concerning my company were
$7 million per year for Tajikistan’s SME sector.
resolved in less than three hours. The mediation process resulted
For Kalandarova, the new law means that
in nearly $2 million being freed up for my business — so, in my
“the unofficial payments, which unfortunately case, this quick turnaround time literally translated into millions
became standard practice, will disappear from of dollars, which I am now able to reinvest in my business.
my financial plan.” — A businessman taking part in a focus group in southern Europe
8 Creating Opportunities for Small Business
Improving the Local Infrastructure
Poor infrastructure constrains opportunities for all businesses. 46 developing countries. Many of these investments have
In the absence of adequate telecommunications, electricity, improved road and transportation networks, and electricity,
transport, and other infrastructure, small businesses are gas, water, and telecommunications infrastructure, further
restricted in their ability to carry out their operations. enhancing the environment for business and allowing
Since the early 1990s, IFC has arranged private SMEs to grow.
infrastructure deals worth nearly $4.8 billion in more than
Improving the Business Environment
Creating Opportunities for Small Business 9
Improving Access to Finance
A ccessing credit is a make-or-break issue for many SMEs
in the developing world. SMEs are major contributors
to the gross domestic product and employment in economies
financial products to setting up full SME banking operations in
commercial banks. Nearly half of 178 FIs surveyed had received
advisory services from IFC.
around the world, yet their financial needs are underserved,
which holds back their growth. Where financing is available, Volume of Micro Small and Medium Enterprise
it is usually out of reach because of short payback periods Disbursements = $96.4 Billion (Chart in Millions)
and excessive collateral requirements. Nonbank financing
options, such as leasing, are not always available. In many
66,181
developing economies, certain segments of the population, 21,484
primarily women, are excluded from business activity, because Micro Loans ($)
traditionally they do not own land, which is often the preferred Small Loans ($)
collateral for loans. Medium Loans ($)
8,813
Increasing Lending to Small Businesses
IFC primarily finances small businesses indirectly, through
financial intermediaries, such as investment funds and local Number of Micro Small and Medium Enterprise
financial institutions (FIs). FIs include commercial banks, Disbursements = 8.8 Million (Chart in Thousands)
microfinance institutions, and leasing providers. Over the past
five years, IFC’s investment commitment has increased fivefold 7,930
— to nearly $2 billion in fiscal year 2007, with an outstanding 752
portfolio of almost $4 billion. Micro Loans (#)
184
Small Loans (#)
IFC’s Micro and SME Commitments in FIs Medium Loans (#)
1,958
2,000
1,600
1,416
US$ Millions
1,200 1,086
Identifying and Sharing Global Best Practices in SME Banking
IFC is reviewing how banks service SMEs. This review identifies
800 721
key success factors in SME banking; examines the relationships
509
among the business models, processes, and tools used; and
400 identifies how the relationships affect the performance of these
banks and their SME clients. The review has shown that fierce
0 competition and declining margins in the corporate and retail
FY03 FY04 FY05 FY06 FY07
banking sectors have been key considerations in banks’ decisions
to enter the SME market. In addition, despite its challenges,
Improving Access to Finance
The FIs use these funds to help many small businesses. SME banking is considered a high-margin business with strong
In 2006, these institutions disbursed almost 9 million loans potential for profitability, cross-selling, and risk diversification
totaling more than $96 billion. opportunities. The next phase of the review will develop a set of
IFC provides advice to strengthen the capacity of FIs benchmarks to help FIs in emerging markets further expand
to provide lending, leasing, and related financial services to into SME banking.
small businesses. Advisory projects range from developing new
Creating Opportunities for Small Business 11
Improving Access to Finance
Case Study: Improving access to finance for women
entrepreneurs in Africa
Women entrepreneurs represent a large, untapped market for
African banks. Financing them is good for business — and good
for long-term sustainable development. Yet, most African banks are
reluctant to provide finance to women.
In Africa, IFC has promoted several programs to ensure that women
entrepreneurs have better access to capital.
In Uganda, dfcu Group commercial bank is supported by a $6 million
IFC credit line, of which at least $2 million is dedicated to the women’s
program. The program was launched in February 2007, and the entire
credit line was disbursed within three months. Thirty percent of dfcu
loans now go to women, compared with 10 percent before the
program was launched. The lending program is supplemented by
expert advisory services and training for women entrepreneurs.
In Nigeria, a $30 million IFC credit line for Access Bank for on-lending to women entrepreneurs has resulted
in more woman-friendly internal credit ratings and more flexible collateral options. Additionally, more than
350 women have been trained in business management skills, and more than 100 woman-owned businesses
have received nearly $11 million. Access Bank is replicating this program in The Gambia.
In Tanzania, Exim Bank is the first financial institution in the country to dedicate a line of credit to women
entrepreneurs who run midsize companies. IFC has provided advisory services and a $5 million credit line to
finance the program and increase structured financing offered to women entrepreneurs. The program trains
women in application processes, business planning, and management. In the short time since its launch in
early 2007, the program has
• disbursed $800,000 to 10 woman-owned SMEs;
• committed $1 million to a woman-owned microfinance institution
targeting 30,000 women;
• begun training women owners of SMEs; and
• promoted greater flexibility in collateral requirements through
emphasis on structured financing.
Women-owned SMEs contribute jobs to our communities, and women have shown themselves to be
good payers in many countries. Yet the banking sector has done little to help them in Tanzania. Our
Women Entrepreneurs Finance Program is more than just good business — it’s a chance to show our
innovative approach to the market.
— R.R. Chandramouli, general manager, Exim Bank Tanzania
Building Financial Infrastructure to Benefit SMEs
Collateral requirements and credit ratings are key elements of collateral laws and asset registries improves the functioning of
of the financial infrastructure needed for SMEs to efficiently credit markets, particularly for SMEs. IFC is undertaking this work
receive financing. In the developing world, land is often the in China, Vietnam, and elsewhere in Asia, and will expand into
Improving Access to Finance
only acceptable form of collateral, whereas in other markets, new regions, such as Africa.
about 70 percent of SME lending is secured by assets such as Credit bureaus compile and distribute credit rating information
cars or business equipment. on borrowers, which makes lending to small businesses less risky. To
IFC is working to improve this aspect of financial date, IFC has helped create credit bureaus in 6 countries; Romania,
infrastructure in emerging markets. The reform and development Costa Rica, Nicaragua, Guatemala, Honduras, and South Africa.
12 Creating Opportunities for Small Business
Leveraging IFC Capital through Funds
In addition to providing broad-based loan financing to small In Africa, IFC works through Business Partners International
business through local FIs, IFC provides direct equity to finance (BPI), a fund management group with a business model adapted
SMEs through private equity funds. Groups that specialize in to smaller SMEs. The BPI model provides SMEs with integrated
guiding and advising SMEs manage many of these funds. IFC’s packages of financing, advisory services, and market information.
commitments through these private equity funds currently total $1.7 The financing comes in a variety of forms best suited to the
billion, which includes some $90 million in SME specialist funds. requirements of those small businesses. Each investment is structured
The IFC portfolio contains more than 100 funds that have to meet the financing needs of the entrepreneur, the risk profile of
SMEs as a significant part of their portfolio. In addition, 20 of the investment, and the cash flows of the business.
these funds also specialize in SMEs.
Case Study: Madagascar: an
integrated approach to developing
small businesses
Assistance to smaller businesses in
Madagascar shows the potential gains
when financial products and advisory
services combine in support of the
SME sector.
• The IFC SME Solution Center
teamed up with South African fund
managers Business Partners Interna-
tional to set up the BPI risk capital
fund. The $10 million fund for
Madagascar (to which IFC
contributed more than $3 million)
has already made eight investments
averaging $125,000 each.
• In May 2007, equity investments of
more than $1 million each were made in two new microfinance institutions.
• The project includes advisory support. So far, IFC has provided advice to more than 80 companies and has
trained 350 entrepreneurs.
• A joint International Development Association (IDA) and IFC financing model that mobilizes local currency
lending for SMEs launched its first project in Madagascar in June 2006. The project is a partnership between
two local banks, IDA, IFC, and the Government of Madagascar. Under this program, the two banks
receive credit risk coverage on their portfolios of new SME loans, as well as advice and training to ensure
sustainability of the program. The banks have already disbursed $11 million in local currency loans to about
475 small businesses through the program.
• The IFC World Bank Investment Climate team for Africa recently launched a comprehensive reform program
in Madagascar to make it easier for small businesses to operate. The program will initially focus on
reforming the country’s licensing and tax laws, with a special emphasis on the tourism sector.
Improving Access to Finance
Creating Opportunities for Small Business 13
Providing Access to Markets, Business Skills,
and Information
A reasonable business environment and access to financing
are not enough. Small business owners just starting out
need advice on running a business and information about local
IFC has partnered with
firms in extractive industries
to establish linkage programs
Achievements of the IFC
Linkages Program as of
December 2006:
regulations and potential new markets. around the world — from BP
• Almost 1,300 new small
in Azerbaijan and Georgia, to business contracts
Linking Small Businesses to Markets ExxonMobil in Chad, Cairn had been awarded,
in India, and Newmont in with a total value of
Linkage programs are designed around selected IFC investments Peru and Ghana. close to $1 billion
to increase the participation of local small businesses in the project • Some 170 small
and to bring additional benefits to surrounding communities. At Providing Information businesses had received
the same time, these programs may reduce costs to investors and and Training for SMEs financing totaling
enhance their ability to be responsible corporate citizens. over $20 million
IFC linkage programs achieve these objectives by Many small business owners • More than 500
small businesses had
the following: in developing countries need
received advice
• Improving the technical and business skills of SMEs advice on managing and
• More than 7,000 small
to help them qualify for new contracts (selling higher- expanding their business.
business owners and
quality goods and services) to generate new sources These needs include writing their staff had received
of income a business plan, assisting with training
• Facilitating access to finance for local suppliers marketing and bookkeeping,
• Strengthening local supply and distribution networks managing cash flow and
• Supporting community development projects with employees, and exporting.
health, education, and infrastructure programs Business owners need this information in their local languages,
• Focusing on frontier countries and regions where tailored to local conditions. To meet this need, the SME Toolkit,
fewer options exist for local enterprises a free online program, provides information and communication
Case Study: Helping small businesses access new
procurement opportunities Providing Access to Markets. Business Skills, and Information
In December 2005, ExxonMobil turned to IFC for support in
extending its e-procurement system. E-procurement is a Web-
based initiative to reach local suppliers through IFC’s Global
Linkage Program. IFC used its enterprise center in Chad (in
partnership with the local chamber of commerce) to address
limited Internet accessibility, low computer literacy, and
language barriers between potential SME suppliers.
To date, 16 contracts worth more than $30 million have been
awarded to local firms. This e-procurement effort is part of a
larger local business opportunity project that includes assessing
potential suppliers, training, and mentorship. The results of this
partnership look promising: the average local contract has grown from $100,000 in 2004 to $800,000
in 2007.
Creating Opportunities for Small Business 15
Providing Access to Markets,
Business Skills, and Information
technologies to help owners of small businesses in emerging IFC has partnered with IBM to bring state-of-the-art
markets learn and implement sustainable business management business information, tools, and training services to small
practices. businesses. IBM has dedicated more than $1.6 million
Since setting up the Toolkit in 2002, IFC has rolled it to transform the Toolkit and rebuild it on an innovative
out in 22 countries, in 13 languages — in each case with local open-source platform. The Toolkit will soon include features
partners. Usage has grown rapidly and has reached 2.5 million such as live chat, online forums, directories, and survey
visits a year. Participating countries include Nepal, Madagascar, capabilities.
Zambia, Mongolia, Bhutan, Belarus, Ukraine, and Indonesia,
as well as regional sites in the Caribbean and Latin America.
Case Study: IFC creates an internet
information resource for
Belarusian entrepreneurs
According to a recent IFC survey of
Belarusian enterprises, 90 percent
of respondents considered a lack
of information one of the greatest
barriers to private business
development in the country, and
70 percent of polled SMEs had
internet access.
Using IFC’s global SME Toolkit
(www.smetoolkit.org) as a model, IFC
designed a Russian-language Web
portal — BEL.BIZ (www.bel.biz) —
to meet SME information needs in
Providing Access to Markets. Business Skills, and Information
Belarus. BEL.BIZ provides up-to-date
legal and regulatory information and practical advice on creating and operating a business. The portal holds
online forums and runs a large-scale question-and-answer service with the help of 60 partners, including
government institutions, business associations, legal and consulting firms, banks, and media.
Inna Titenkova is a BEL.BIZ user who received assistance through the portal. Titenkova had dreamed of
opening a video production studio but was reluctant to take the plunge in such a difficult business environment.
Today, she runs a flourishing video studio and is grateful to BEL.BIZ for providing the information she needed to
start and run a business.
I have more information and confidence. The legal updates are particularly useful. The decision to start up
a business was a difficult one for me, but now I know that I can always turn to BEL.BIZ for help.
— Inna Titenkova, BEL.BIZ user
16 Creating Opportunities for Small Business
Business Edge
Business Edge is a comprehensive SME management training methodology, and a business advisory component. Business Edge
program focusing on common functional and operational has reached more than 28,000 participants through more than
deficiencies. It consists of 36 management courses on five topics 800 management training courses delivered in the Mekong
(marketing, human resources, production and operations, Delta, China, and the Middle East and North Africa.
finance and accounting, and productivity skills), a delivery
Case Study: Business training in Kabul, Afghanistan
Many Afghan entrepreneurs have not been exposed
to basic business skills needed to run a profitable
enterprise, largely because of the lack of training. IFC
has partnered with Kabul University to introduce a
course in basic business skills using the SME Toolkit
and Business Edge. The Kabul University Business
Skills Project was designed with two
main objectives:
1) To demonstrate the viability of, and demand for,
local business training
2) To build the capacity of Kabul University to provide
business training on a sustainable basis
The project included a training needs assessment survey, content develop-
ment and translation, four three-week training courses with progressive
involvement of Kabul University professors as trainers,
Providing Access to Markets. Business Skills, and Information
and a plan for continuing the program after IFC’s involvement ends.
Results
Four training courses were conducted between July and November 2006.
• 260 Afghans were trained, including 110 students,
120 representatives from local businesses, and
30 representatives from the government
• 35 women took part in the training
• 16 instructors were trained to provide additional business capacity building in the country
• More than 80 percent of the trainees said the training topics were highly relevant and useful
This has been one of the most successful programs at Kabul University. It is also a best practice for
international cooperation. We look forward to working with IFC to produce more such examples
of good practice.
— Chancellor Abdul Hai Nazifi, head of Kabul University
Creating Opportunities for Small Business 17
Creating New Opportunities Through Innovation
A key role of IFC in developing SMEs is to support innovation.
This includes determining unmet needs in the market,
crafting and testing new products and services, and transferring
Using IFC advice and loans from financial intermediaries, the
program develops sustainable market opportunities for small
businesses whose activities benefit the global environment.
these innovations to others who can deliver them to the wider Since its inception in 1996, the program has committed
SME community. more than $18 million to 24 intermediaries that have on-lent
Successful innovation requires knowledge of local markets, or supported SMEs in 25 countries. These SMEs have reduced
global expertise, and a strong network of partners that can their consumption of fossil fuels, thereby mitigating climate
complement IFC’s efforts and extend its reach. These partners share change, or have conserved biodiversity by using natural resources
valuable knowledge of “what works” in many specialized areas. sustainably. The program provides innovative financing for
SMEs in sectors that local banks typically perceive as too risky,
1. Going Green — Financing Businesses That such as renewable energy (including solar, hydro, and biomass),
Benefit the Environment energy efficiency, sustainable timber harvesting, sustainable
agriculture, sustainable coffee cultivation, and ecotourism.
The Environmental Business Finance Program is an innovative Sustainable coffee and organic fruit projects fall under
model of SME financing that focuses on the environment. this program.
Case Study: Energy efficiency in Russia
Innovative approaches to linking energy efficiency with finance have helped
Kazan-based sewing factory Adonis compete against rival suit manufacturers. The
company’s pressing machines had become more expensive to use as electricity costs in
Russia rose, increasing the company’s energy costs and, as a result, its production costs.
Through its Russia Sustainable Energy Finance Program, IFC identified Tatfondbank
as an intermediary to provide financing and advice for companies like Adonis that were
looking to reduce costs through energy-efficient modernization. Experts from IFC
and the regional government’s Center for Energy Saving Technologies conducted an
express energy audit at Adonis.
The auditors found that the company could save $50,000 a year in energy costs by transitioning to a centralized,
fully automated steam power system based on gas, and save an additional $7,000 by overhauling its lighting system. In
total, the company’s electricity bills could decrease from around $115,000 to $65,000 a year — a 43 percent reduction.
Creating New Opportunities Through Innovation
Before the energy audit, we never even thought that replacing energy equipment or the lighting system
could save us so much money. But when we saw the auditors’ calculations, we knew we had to do it.
— Rinat Galeyev, director, Adonis
Tatfondbank gave Adonis the financing to modernize both its lighting and steam-generating systems. The
investment for this energy-efficient project amounted to less than $60,000, and the company expects to recoup
that investment in less than two years.
Across Russia, regional banks like Tatfondbank have financed 14 other energy-efficiency projects through IFC’s
program. Reductions in total energy costs per year for SMEs are expected to reach almost $4 million; nonenergy
cost reductions (such as material use cost savings) will amount to an additional $1 million or more per year.
The bank’s program with IFC was a great way for us to optimize our expenses. We are very satisfied with
the results. — Rinat Galeyev, director, Adonis
Creating Opportunities for Small Business 19
Creating New Opportunities
Through Innovation
Sustainable coffee: IFC provided financing to Conservation the poor in hard-to-reach regions and population segments.
International for on-lending to Mexican coffee growers who GBI’s strategy revolves around key areas identified as requiring
meet the international franchise Starbucks’ stringent C.A.F.E. special attention:
(coffee and farmer equity) practices for coffee cultivation. • Strengthen agribusiness and crafts organizations/partnerships,
Starbucks, in turn, signed agreements committing to buy this as these industries are the primary sources of income for many
sustainably grown coffee at a price premium. The farmers of the world’s poor, particularly in rural areas. CraftNetwork
who delivered their coffee to Starbucks earned significantly has been created to facilitate trade, ensure quality, and train
more than conventional growers. crafts retailers in Indonesia and Cambodia. CraftNetwork is
Organic fruit: Symbio Polska is an SME processor and expanding in Asia and is being replicated in Africa.
exporter of organic fruit grown by Polish family farmers • Develop youth and informal enterprise to stimulate local
(themselves SMEs). The IFC loan enabled a gradually increasing economies from the bottom up. The Youth and Informal
credit line from a local bank to Symbio. With this capital, Enterprise Initiative was created to give marginalized
Symbio has quadrupled its sales in the past four years, creating African youth the training, mentoring, and access to
jobs for 700 farmers and 1,500 more people in its supply chain. financing needed to foster viable businesses. Angel Investor
Energy efficiency: IFC has been innovative in the area of Clubs, run by prominent local businesspeople, provide
energy efficiency. Energy efficiency saves costs for businesses, improves financial support to local youths starting new businesses.
performance and profitability, and reduces resource usage and waste, • Build a network of grassroots business organizations to
thereby contributing to the protection of the environment. support collaboration and knowledge sharing for common
initiatives and learning.
2. The Grassroots Business Initiative — extending
the reach to small businesses
In its three years of operation, GBI has produced solid results:
More than 40 projects impacting the lives of nearly 2 million
IFC is looking at innovative ways to help the disadvantaged people living at the bottom of the economic and social pyramid.
even further by strengthening and scaling up grassroots business More than 54,000 jobs have been created and almost $7 million
organizations — that is, commercially oriented organizations disbursed in grants or investments in retail and wholesale projects.
with a marked social mission to create sustainable economic Eighty-five percent of this portfolio has been committed to frontier
opportunities for the poor. This Grassroots Business Initiative countries, with a growing share being devoted to sub-Saharan Africa.
(GBI) works to expand market access and business support to
Creating New Opportunities Through Innovation
Case Study: Community health care in Kenya
Joseph Kariuki is trained as a community health worker and is now an entrepreneur. Joseph
is one of the pioneers of the CFW Kenya Network of microfranchise clinics. A part of
the Sustainable Healthcare Enterprise Foundation, this network offers affordable
quality drugs and basic health care. Franchisees receive training and are required to
carry out preventive outreach in their communities.
In 2002, Kariuki moved to Kibingoti market and opened Joskar Clinic with the
assistance of a nurse. Joskar Clinic has consistently been one of the top performers in the
CFW franchise network. In 2006, Joskar Clinic served more than 17,500 patients.
Thanks to the success of Joskar Clinic, Kariuki generated enough income to pay
for his children’s education through high school.
20 Creating Opportunities for Small Business
Measuring Results
IFC’s commitment to measuring the results of its Continuous Learning and Sharing Knowledge
advisory services and investment projects is driven with Other Development Partners
by its long-standing commitment to continuous IFC uses the findings from its reviews and evaluations
quality improvement. In 2005, IFC launched the to improve future program design. For instance, an
Development Outcome Tracking System (DOTS) to evaluation of two agribusiness projects — a farm
allow regular monitoring of the development results forestry program in India and a seaweed farming
of all ongoing projects and to provide early feedback program in Indonesia — demonstrated the difficulty of
of IFC’s operations and advisory work. changing individual farming practices, as well as the
high costs of discovering specific market information,
DOTS makes it possible to systematically measure job which often cannot be applied across industries and
creation, investment, and increased efficiency and locations, or even from farm to farm. These lessons
productivity results of projects. have since been used to improve these and similar
programs across regions.
Enhancing Results Measurement over Time
For both investments and advisory services, IFC is Outside its own programs, IFC facilitates the exchange
working to standardize its performance measures — by of ideas and good practice in the evaluation of
industry for investment projects, and by business line for advisory services among the donor community,
advisory services projects. This standardization will foundations, and multilateral and bilateral agencies.
enable comparisons across projects and aggregation
of results.
Reach indicators show the numbers of people touched
by IFC’s activities.
Investments, 2006 Advisory services, 2003-2006
Hospital patients treated: 4 million Banks: 1,768
Entrepreneurs: 40,000 Microfinance clients: 11.5 million
Electricity customers served: 9.5 million Farmers: 50,000
Water customers served: 15.3 million SMEs: 2.5 million
Creating Opportunities for Small Business 21
Frequently Asked Questions
How does IFC define small and medium Where do I get more information on the
enterprises (SMEs)? SME Toolkit and Business Edge?
SMEs are formal enterprises whose financial needs go Information on the SME Toolkit can be found at
beyond simple microcredit. www.smetoolkit.org.
MICROENTERPRISES Business Edge has been rolled out in the Asian Pacific,
Employ fewer than 10 people Mekong, and Middle East and North Africa regions.
Total assets/turnover less than $100,000 per year For more information, contact your local IFC office or
go to www.ifc.org.
SMALL ENTERPRISES
Employ 10 to 50 people Does IFC provide consulting opportunities for
Total assets and/or annual sales between small businesses?
$100,000 and $3 million IFC uses a combination of in-house expertise and
local and international consultants for its projects.
MEDIUM ENTERPRISES Information on World Bank Group opportunities for
Employ between 50 and 300 people consultants can be found at www.worldbank.org
Total assets and/or annual sales between under Procurement.
$3 million and $15 million
IFC uses the following definition as a proxy for SMEs
when working with financial institutions:
• SMALL ENTERPRISES: loan size of $10,000
to $100,000
• MEDIUM ENTERPRISES: loan size of $100,000 to
$1 million in most countries and $2 million in
more developed countries
Does IFC lend directly to small businesses,
and if so, what criteria does it use?
IFC does not generally lend directly to SMEs. IFC
primarily finances SMEs through financial intermediaries,
including investment funds and local financial
institutions (FIs). Most IFC lending is through FIs, which
consist of commercial banks, microfinance institutions,
and nonbank FIs such as leasing providers. This
approach enables IFC to assist many more businesses
than it could by lending on a one-to-one basis.
22 Creating Opportunities for Small Business
Contact Details
Sub-Saharan Africa East Asia and Pacific
14 Fricker Road 14th Floor, One Pacific Place
Illovo 2196 88 Queensway, Admiralty
Johannesburg Hong Kong
South Africa Tel: (852) 2509 8100
Tel: (27-11) 731-3000 Fax: (852) 2509 9363
AfricaFax: (27-11) 268-0074
Latin America and Caribbean
Middle East and North Africa Rua Redentor, 14-Ipanema
Nile City Towers Rio de Janeiro 22421-030
2005 Corniche El Nil, North Tower, 24th Floor Brazil
Boulac, Cairo Tel: (5521) 2525-5850
Egypt Fax: (5521) 2525-5879
Tel: (20-2) 461-9161/62/63/64/65
Fax: (20-2) 461-9130/60 South Asia
50-M, Shanti Path, Gate no. 3
Europe and Central Asia Niti Marg, Chanakyapuri
Buyukdere Cad. No: 185 New Delhi 110 021
Kanyon Ofis Blogu Kat 10, Tel: (91-11) 4111-1000
Levent, 34394 Fax: (91-11) 4111-1001, 4111 1002
Istanbul, Turkey
Tel: (90-212) 385-3000
Fax: (90-212) 385-3001
Central and Eastern Europe
36, Bldg. 1 Bolshaya Molchanovka Street
3rd Floor, Moscow 121069
Russian Federation
Tel: (7-495) 411-7555
Fax: (7-495) 411-7556
For more information about IFC and its work with SMEs, please e-mail infosme@ifc.org
Creating Opportunities for Small Business 23
Donor Partners
Donors are vital partners for IFC in delivering its broader mission of reducing poverty and improving people’s
lives. The support of donors not only leverages IFC’s own contributions to Advisory Services programs but
also enhances the impact of IFC’s operations through strengthened collaboration.
IFC would like to acknowledge the following donor countries:
• Austrailia • Slovenia
• Austria • South Africa
• Belgium • Spain
• Canada • Sweden
• Cape Verde • Switzerland
• Denmark • United Kingdom
• Finland • United States
• France
• Germany Other Partners
• Greece
• Iceland • GEF
• India • African Development Bank (AfDB)
• Ireland • Asian Development Bank (ADB)
• Israel • European Commission
• Italy • IBM Foundation
• Japan • Inter-American Development (IADB)
• Kuwait • Islamic Development Bank (IDB)
• Luxembourg • KfW Development Bank (KfW)
• The Netherlands • Bill and Melinda Gates Foundation
• New Zealand • The Case Foundation
• Nigeria • Visa International Foundation
• Norway
24 Creating Opportunities for Small Business
