How to Make Grants a Better Match for Private Sector Development
Matching grants (MGs) have been implemented by the World Bank for over two decades. They remain a very popular instrument for private sector development interventions, despite often challenging implementation and insufficient evidence of impact. Th...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/693731491973004765/How-to-make-grants-a-better-match-for-private-sector-development http://hdl.handle.net/10986/26434 |
| Summary: | Matching grants (MGs) have been
implemented by the World Bank for over two decades. They
remain a very popular instrument for private sector
development interventions, despite often challenging
implementation and insufficient evidence of impact. The
objective of this study is to synthesize the current
knowledge on MGs and to review the experience with this
instrument, as designed and implemented by the World Bank
from the early 1990s to the present. In doing so, we hope to
equip teams in charge of ongoing and planned MG operations
with a better understanding of the instrument and to help
them choose the design and implementation arrangements that
are best fitted to their objectives. The authors look at
both the ‘why’ and the ‘how’ of MG programs, focusing on
those aiming to foster private sector development and small
and medium enterprises (SMEs) competitiveness primarily
through the use of business development services (BDS). The
authors also look at how success is defined and question the
way the outcome of MG programs is often assessed. While 75
percent of projects in the sample were deemed to have some
degree of success, the definition of success rarely reflects
a measurement of broad and sustainable economic benefits
that will justify the subsidization of private enterprises
with public funds. We argue that this is linked to a common
weakness in identifying a sound economic rationale, such as
a specific market failure to be solved, and in subsequently
not focusing the design and measurement of the MG on the
fund’s additionality beyond the private benefit of
recipients. The authors conclude that a robust definition of
the economic rationale is a critical prerequisite for the
use of MG programs and should include, among others, an
identification of a specific market failure, consideration
of alternative instruments, cost-benefit analysis,
assessment of the potential for additionality and
spillovers, and a realistic exit strategy. The authors
recommend an equally robust monitoring and evaluation
(M&E) system tied directly to the economic rationale,
which is essential for real-time assessment of impact,
potential course correction, and learning, and could be
utilized to gauge additionality and sustainability.
Increased attention to these elements could help teams make
the most of this potentially powerful instrument for private
sector development and competitiveness. |
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