Implementing the Market Approach to Enterprise Support : An Evaluation of Ten Matching Grant Schemes
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 mov...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2001/04/1089564/implementing-market-approach-enterprise-support-evaluation-ten-matching-grant-schemes http://hdl.handle.net/10986/19680 |
| Summary: | 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 goods. Providing technical,
and management know-how can be a public good if it generates
externalities - if, for example, know-how 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 know-how, not for equipment. There may be a
case for unbundling the know-how 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, the author 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. |
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