Title: Issues in Comparing Poverty Trends Over Time in Cote De'Ivoire
Abstract: This evaluation of ten matching grant funds for enterprise development concludes that matching grant funds address the need to build domestic capacity to support businesses. Performance has been mixed, however, and best practice models are needed. Grant funding may be justified for technical knowhow, but support should be temporary and should be phased out as soon as the main objective, market take-off, is achieved. Developing viable new business is critical to recovery and long-term growth, especially in transition economies. There has been a long history of public support of enterprise development, starting with centralized state agency initiatives but moving more recently to decentralized instruments for development of the business services market. The window of time during which the benefits of intervention are likely to be greatest: When a market is in its infancy and its development is constrained by uncertainty and lack of information. Interventions for enterprise support should be demand-responsive and flexibly organized. In some circumstances, centralized assistance may still be effective, but it is generally better to use competitive private service providers responding to enterprises' changing needs. The main task is to stimulate the private services sector, improving its capacity to respond to the demands of new and expanding private enterprises. Support for enterprises has tended to be either free or heavily subsidized. But such subsidies can be justified only if interventions efficiently supply public goods. Providing technical and management knowhow can be a public good if it generates externalities - if, for example, knowhow benefits can be disseminated at proportionately low additional cost. Any subsidy for an intervention should be temporary and should be phased out when the main objective of intervention is achieved - that is, when the market takes off. Grants should generally be for knowhow, not for equipment. There may be a case for unbundling the knowhow component of loans (including feasibility studies and follow-up expert services) for grant funding. A package combining loans and grants - through a single financial institution or through separate institutions - may work, provided safeguards can be put in place to prevent perverse use of grants. The matching grant model, which is used increasingly in the World Bank and elsewhere, is one solution - but it must be justified and carefully designed. After evaluating ten matching grant funds, Phillips concludes that performance is mixed. Best practice models are needed. Ensuring economic benefits requires proactive management with clear objectives of market facilitation (making a market). And it requires a balance between rapid grant approval procedures and careful selection of services for grants. This paper - a product of the Private and Financial Sectors Development Unit, Europe and Central Asia - is part of a larger effort in the region to develop new instruments to support enterprise restructuring and development, especially in former Soviet Union economies.
Publication Year: 1997
Publication Date: 1997-01-31
Language: en
Type: article
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